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Office 365 subscriptions account for 25% of suite's U.S. retail sales

Gregg Keizer | April 3, 2013
Office 365 has accounted for about 25% of all Office retail unit sales in the U.S. since its introduction two months ago. But the new "rent-not-own" strategy has not boosted overall sales, an analyst said today.

In the U.S., combined Office 2013 and Office 365 retail sales have been comparable to the same period in 2012, as well as to the first two months after the release of Office 2010 in June 2010.

"The new versions haven't really changed the trajectory of sales," Baker said. "Sales compared to the same weeks in 2012 were pretty flat. But that's understandable when you haven't spent a lot of money on promotion."

Miller pointed out that Office 365's 25% chunk also means that 75% of customers opted for the more familiar perpetual license. "If these numbers are correct, for now, more consumers are interested in perpetually-licensed software rather than subscription, or the benefits that do come with the subscription, such as five transferrable licenses," Miller said in an email reply to questions.

In fact, the jury will be out on Office 365 for nearly a year.

"An interesting trend to watch will be how well the service does on retention when those subscriptions come up for renewal," Miller said. "Does Office 365 become a consumer evergreen product? Time will tell."

In the U.S., Microsoft sells Office 2013 and Office 365 two ways: As a download, and as a Product Key Card (PKC), which ultimately involves a download as well. All that's in the PKC packaging is a 25-character activation code, requiring users to either download the bits or have purchased a new PC with a pre-installed free, time-limited trial of Office. In the latter case, the activation code simply turns the trial into a paid license.

Retailers like Best Buy sell only PKCs of Office 2013 and Office 365, but Microsoft and Amazon offer both on-demand downloads and key cards. (Microsoft sells PKCs at its physical stores, but downloads through its e-store.)

What's missing in the U.S. and most developed markets, is a SKU (stock keeping unit) that includes physical media, like an installation DVD. Office 2010, while available via download, was sold at retail as a PKC and as a box containing a DVD.

But the omission of installation media hasn't hurt sales. "By the end of [Office 2010's sales cycle], key cards were outselling boxed copies with physical media," Baker said of U.S. retail sales. "[The lack of installation media] doesn't seem to have impacted sales for Office 2013."

Only in less-developed markets, locales with "limited Internet access," a Microsoft spokeswoman said today, does Microsoft offer physical media.

Customers can leverage the PKC/download options to save money, at least on Office 2013. Some retailers, notably Amazon, discount PKCs of the suite.

Amazon sells the PKC version of Office Home & Student 2013 for $120, 14% less than the $140 for the download. Similar discounts are available from the giant retailer for the PKCs of Office Home & Business 2013 (14%) and Office Professional 2013 (10%).


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