Office 365 subscriptions stall

 

Microsoft campusSoftware King of the world Microsoft said subscriptions to the productivity software had reached nearly 25 million but additions were down 62 percent compared to the year before.

This seems to indicate that Microsoft is finding it difficult to get new sign ups for the subscription based office service.

Satya Nadella touted revenue increases for the Office products aimed at consumers — which include Office 365 — and of the latter said that the company had, “continued to see an increase in … subscriber base.”

But in a filing with the U.S. Securities & Exchange Commission (SEC), Microsoft pegged the number of consumer Office 365 subscriptions in the December quarter at 24.9 million, an increase of 900,000 from the September quarter and 4.3 million more than a year earlier.

Microsoft’s Office 365 started with “Home Premium” — was a five-user deal that cost $100 annually or $10 monthly. Fifteen months later, Microsoft unveiled a one-user subscription called “Personal” for $70 a year or $7 a month. Since then, Microsoft shortened the original subscription’s name to just “Home;” prices have not changed.

Vole has always wanted to shift much of its software business model toward recurring payments rather than one-time purchases of “perpetual” licences.

During the last nine months Office 365 grew by about 900,000 subscribers, the smallest quarterly increase since early 2014. Before that subscribers were signing up at rates two to three times larger per quarter.

Subscriber additions peaked in the first quarter of 2015, at 3.2 million, followed by 3 million in the third quarter, providing a foundation for a record 11.4 million new subscribers during the year.

After Q4 2015, however, the trailing 12-month numbers fell, a decline fuelled by the plateau of 0.9 million each quarter from the second onward. That resulted in a gain of just 4.3 million subscribers throughout 2016, a reduction of 62 percent from the year before.

It does not really mean much to Vole’s bottom line. In fact, revenue from the consumer side of Office with the perpetual licenses sold at retail — was up 22 percent in the December quarter. But it does indicate that there is a pain threshold in the subscriber model. It seems that most people who want Office 365 using this model have it already.