Microsoft to Offer Office Software Subscriptions

SEATTLE – Microsoft Corp. will begin selling its Office programs to consumers on a subscription basis starting mid-July, in a bid to reach thrifty PC buyers who would otherwise pass on productivity software.

The move may also set the stage for Microsoft to offer its consumer-oriented programs as "services" over the Web, by acclimating people now to the new pricing model such a shift could require.

The software bundle, which also includes Microsoft's Live OneCare computer security software, will be sold at nearly 700 Circuit City stores for $70 per year.

• Click here for FOXNews.com's Personal Technology Center.

Bryson Gordon, a group product manager for the Office group, said in an interview that the agreement with Circuit City Stores Inc. is not exclusive, and that the bundle will be available at other retailers and on PCs sold by the likes of Dell Inc. in the future.

Subscription pricing for software has become commonplace in businesses but is a relatively new concept for consumers.

The Microsoft Equipt bundle — formerly code-named "Albany" — includes Word, Excel, PowerPoint and OneNote, plus OneCare and a handful of existing free Windows Live applications.

Buying those programs the traditional way would cost about $200, and then consumers who wanted to replace the software with the next version, "Office 14," rumored to be set for a 2009 release, would have to pay full price.

Under the new subscription model, upgrading to a new version is included in the annual cost.

Gordon said Equipt is aimed at people who wouldn't ordinarily buy Office at the same time they purchase a new computer. Instead, they'd repurpose their old Office disks or pirate a friend's copy, he said.

But those same folks are willing to spend extra on security software, Gordon said, and that's why Equipt's $70 price tag falls between the high and low end of popular security programs from vendors such as McAfee Inc. and Symantec Corp.

Office is a well-established cash cow for Microsoft, but the relatively new OneCare software has been slow to catch on, said Matt Rosoff, an analyst for the independent research group Directions on Microsoft.

If this model succeeds — and Rosoff gives it good odds because of the low price — that might change.

Gordon was adamant that Equipt's purpose is to increase paying Office users. But consumers' response to subscription pricing will also help the company figure out how to negotiate the industry's shift from desktop-only programs to ones that are accessed via the Internet.

While rivals such as Google Inc. have built Web-based word processors and other programs that compete with Microsoft Office, Microsoft has kept its software sequestered on hard drives, with the exception of its bare-bones document-sharing Web site, Office Live Workspace.

But at some point, Microsoft is going to have to change to meet the competitive threat, said Gartner analyst Michael Silver.

"I think this is Microsoft's foray at getting people used to paying an annual fee," Silver said.

Equipt can be installed on up to three computers, as can the traditional packaged version of Office Home and Student 2007.

Small updates to the subscription version will be made automatically, much as regular Office updates are currently, but consumers will have some control over the timing of major upgrades to new versions.