Microsoft bets Office subscribers will pay 30% more for AI tools

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

Most read on Bloomberg

The Microsoft 365 Family subscription, which provides access to Word, Excel and other apps for up to six people, will now cost $130 a year, a 30% increase, the company announced in a post Thursday of blog. The version for individuals is up 43% to $100. Price changes are effective immediately for new subscribers and will affect existing subscribers upon renewal.

The increase is aimed at drawing more revenue from the company’s existing customer base and justifying the tens of billions of dollars it is spending to develop and operate expensive AI services. The Redmond, Washington-based company, which has partnered with startup OpenAI, is expanding its product line with AI tools that can analyze documents and generate text and images.

A spokesperson said it was the first price increase for the software package – 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, vice president of the company, said in the blog.

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

Microsoft has already tested the price increases in Australia, Singapore and other Southeast Asian markets. They were controversial.

“It’s very annoying and frankly I’m considering just canceling completely 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, which reversed 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 currently benefiting from the price increase will also be able to opt for 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 AI services.

The story continues