Microsoft Bets Office Subscribers Will Pay 30% More for AI Tools

(Bloomberg) — Microsoft Corp. is raising the price of its package of Office apps for consumers, a bet that subscribers will be willing to cough up more for access to new artificial intelligence tools.

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The Microsoft 365 family subscription, which offers access to Word, Excel and other apps for as many as six people, will now cost $130 a year, a 30% increase, the company said in a blog post Thursday. The version for individuals is rising 43% to $100. The price changes take effect immediately for new subscribers and will affect existing ones when they renew.

The increase is an attempt to wring more revenue from the company’s existing customer base and help justify the tens of billions of dollars it’s spending to develop and operate pricey AI services. The Redmond, Washington-based company, which has partnered with startup OpenAI, is infusing its product lineup with AI tools capable of analyzing documents and generating text and images.

A spokesperson said it was the first price increase for the software bundle – launched as Office 365, but now called Microsoft 365 — in 12 years. “These changes bring the transformative power of AI to the personal productivity tools that millions of people use every day,” Bryan Rognier, a company vice president, said in the blog post.

Rognier said the company has also made “countless enhancements” to the core Office apps and introduced such services as antivirus protection and image- and video-editing tools.

Microsoft previously tested the price hikes in Australia, Singapore and other Southeast Asian markets. They were controversial.

“It’s very annoying, and frankly I’m considering simply canceling entirely and just using Google Docs in the future,” said Daniel Burke, an independent game developer in Australia.

Burke and other users discovered that when they tried to cancel their subscriptions, Microsoft revealed a previously hidden option called Microsoft 365 Classic that rolled back the price increase and new AI features.

Microsoft spokespeople told reporters that the limited rollout gave the company a chance “to listen, learn and improve,” a phrase Rognier repeated in Thursday’s blog post. He said customers in markets now getting the price hike will also be able to opt in to a web- and mobile-based variant, called Basic, or, for a “limited time,” versions of the apps under the Classic brand. Neither option will include the AI services.

“Companies like Microsoft have spent so much on building AI up that now they need to force it on people,” said Kate Littlejohn, an Australian teacher and university tutor who requires the Office apps for her job. “I’m relieved that I found a way to opt out, but it shouldn’t be so difficult.”

John Bennetts, an Australian retiree who uses Office for email, word processing and the occasional spreadsheet, paid up.

“Habit makes me pay up and stay,” he said. “So I keep paying Microsoft and others, though I probably should not.”

–With assistance from Dina Bass.

(Updates with price increase criticism beginning in the seventh paragraph.)