Satya Nadella, CEO of Microsoft.
Charles Pertwee | Bloomberg | Getty Images
Microsoft said Thursday it will raise the prices of commercial subscriptions to its Microsoft 365 bundles of productivity apps such as Word and Excel, formerly known as Office 365.
The price hikes will boost Microsoft’s total revenue and profit, given the Office line remains the company’s top product in terms of sales, and most Office revenue is tied to business use. While Microsoft still sells licensed versions of Office for use on premises, the company has been getting the majority of commercial Office revenue from subscriptions since 2017.
This marks “the first substantive pricing update since we launched Office 365 a decade ago,” Microsoft 365 corporate vice president Jared Spataro wrote in a blog post. The bundle has expanded to include the Teams communication app, the Whiteboard collaboration app and Power Platform application-development tools for non-developers, among other assets, Spataro wrote.
The changes go into effect on March 1, 2022. Here’s a rundown of the coming changes to the monthly prices:
- Microsoft 365 Business Basic will go up to $6 per user per month from $5
- Microsoft 365 Business Premium will move to $22 from $20
- The Microsoft 365 E3 variant will be $36, compared with $32 today. (Unlike the other products on this list, it includes a version of Windows.)
- Office 365 E1 will be $10 instead of $8
- Office 365 E3 will rise to $23 from $20
- The premium Office 365 E5 tier will cost $38, up from $35
Creating Microsoft 365 with Windows has helped Microsoft sell Office subscriptions for people who aren’t necessarily in front of PCs all day because they hold front-line positions, such as cashiers. That has helped widen the base of Office users, and now there are over 300 million commercial Office 365 paid seats, Spataro wrote.
Increasing the amount of money coming from each Office subscriber is the other way Microsoft expands its Office cloud business. The company is making progress there, too, even leaving aside the coming price increases. The E5 tier represents 8% of the Office 365 installed base among commercial customers, chief financial officer Amy Hood told analysts in July. Office 365 E5 includes features such as cloud-based phones, a Pro version of the Power BI data-visualization software and Teams data-loss prevention.
The company won’t be adjusting the cost of certain Office subscriptions, including Microsoft 365 E5 ($57 per user per month), Microsoft 365 F1 ($2.25) and Microsoft 365 F3 ($8), a spokesperson told CNBC in an email. Consumer and education subscriptions won’t be affected either.