Apple gets 30 percent cut of Office 365 subscriptions if made within Office for iPad apps

Microsoft and Apple's CEOs were congratulating each other Thursday, via Twitter, on the launch of Office for iPad, and now we know why Apple's leader Tim Cook might be very happy Microsoft brought Word, Excel and PowerPoint to their tens of millions of tablets. Re/code has confirmed with Apple that they will get a 30 percent cut of any revenues generated from Office 365 subscriptions if they are made within the iPad apps.

Considering that there may be a lot of iPad owners who have yet to sign up for Office 365, that could represent not just a new revenue stream for Microsoft but also a significant boost for Apple's bottom line as well. Of course, people who already have Office 365 subscriptions, like the 3.5 million people who already signed up for the Home Premium version, won't see any of their money going to Apple.

All in all, this deal sounds like a "win-win" for both parties. Microsoft gets to see full Office apps and Office 365 expand well beyond just the Windows and Mac markets and Apple stands to make tons of money if enough people pay for Office 365 from within the iPad apps.

​Source: Re/code

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I bet ipad sale will rise dramatically. good for them. beyond doubt ipad is the most elegant tablet in the market. (its also the first one of its kind)

It's the official office suite for ipad, if it means taking a loss on the product most likely one time it is worth it, there is no easy pirating of office 365

In other news, Apple takes a 30% cut of all purchases and in-app purchases of any item sold through their platform... why would Microsoft be any different?

Based on the reaction on Mac orientated websites, it may not do as well as people think. I for one am content with the Apple alternatives and iCloud... though i'm sure it's a blessing for Windows based users with iPads.

Either way it's good news and a great deal

And the apple fanboys reactions surprised you? Show me one comment from a apple fan-site(like m-rumors) that's positive towards Microsoft.

Wall-swe said,
And the apple fanboys reactions surprised you? Show me one comment from a apple fan-site(like m-rumors) that's positive towards Microsoft.

Originally Posted by ashwin4
I think "everyone" is a bit hyperbolic! Office 365 is excellent value for small businesses - I use it for my company and it is very cost effective.

I happen to like the subscription model. $99/year includes installs on up to five computers (Mac and PC), so it's a pretty good value for a small business. Upgrades are included, so that makes it even sweeter. As much as I love iWork (a lot), so much of my workflow with clients relies on MS Office.

Courtesy of MacRumors.

Thanks, but are those "real" ifans?
Now give us a taste of how the other 429 comments sound. When I read them, the majority sounded like little kids whining.

"Based on the reaction on Mac orientated websites, it may not do as well as people think."

And ONE DAY after the release, Word, Powerpoint and Excel TOPS the iPad Appstore!
That would be evidence, that you cant trust comments on apple fansites, which claimed people would stick with iNote.

Edited by Wall-swe, Mar 29 2014, 8:46am :

Yeah, it is ofcourse win-win for Apple and MS but the only looser will be consumer who buy in to these subscription models. Buying once and using it for next 5 years is much better proposition than paying every year $100. There is no guarantee either that MS will not increase the future price of their product or stop perpetual version once they got enough fools to join subscription model. Majority of people do not use more than 5% of features on either word or excel or powerpoint. The issue is not many people do cost benefit analysis before buying any product and end up paying much more than what they can get by. Telcom companies comes in to mind which is another area many are getting ripped off because they can't resist low ball handset price.

It's $100 a year for 5 devices. Most people have a PC and at least one or two mobile devices, so it's not a bad deal at all. I'd rather pay the $100 a year than buy Office for my desktop, another copy for my Surface, another copy for my laptop, and another for the iMac in the kitchen.

I agree. At least to me, $100 is too much. I still have a very old version of office installed on my laptop. For the work I do (resume, budget sheets, presentation) it's enough. I'm sticking with iWork on my iPad.

Enron said,
It's $100 a year for 5 devices. Most people have a PC and at least one or two mobile devices, so it's not a bad deal at all. I'd rather pay the $100 a year than buy Office for my desktop, another copy for my Surface, another copy for my laptop, and another for the iMac in the kitchen.

I don't know how often you buy a new device (with a new OS) but for most people it certainly isnt cheaper to pay 100 dollar each year. Most people bought a version for Office once and sticked with it. They dont use enough features, or use it often enough, to validate purchasing a new version. They just transfer the license from their old PC to their laptop or tablet.

Microsoft knows this, which is why they created Office 365. Most companies stick to one version of Office for a long time as well. So instead of selling a product they started offering a service. Its a common trick used by companies. I've also been in a project team that transformed a product into a service for our most valued customers.

It can indeed be a win-win situation but in this case I doubt that is true for regular customers. Companies might benefit from the 365 service but like I said a regular customer don't use it enough. But the great thing about iPad (for Microsoft and Apple) is that they have no choice. If they want Office on iPad they need to go sign up for a service.

I'm really curious to see how many consumers will sign up for 365 via iPad. Millions of iPad loving students out there who want to participate in their project groups, who are creating a paper in Office.. They may just sign up for it. Where previously they only got a 20 dollar office license via some university student deal and kept it for decades. Or worse got it illegally, which is easy on Windows. And now 100 dollar a year. You can do the math.

Enron said,
It's $100 a year for 5 devices. Most people have a PC and at least one or two mobile devices, so it's not a bad deal at all.
Slight correction, it's $100/yr for 5 PCs plus 5 tablets.

Auditor said,
Yeah, it is ofcourse win-win for Apple and MS but the only looser will be consumer who buy in to these subscription models. Buying once and using it for next 5 years is much better proposition than paying every year $100. There is no guarantee either that MS will not increase the future price of their product or stop perpetual version once they got enough fools to join subscription model. Majority of people do not use more than 5% of features on either word or excel or powerpoint. The issue is not many people do cost benefit analysis before buying any product and end up paying much more than what they can get by. Telcom companies comes in to mind which is another area many are getting ripped off because they can't resist low ball handset price.

nobody forces you to buy the subsciption, only if you want to get the work done and edit documents you may buy it. plus, its a really good deal. 8 dollors a month for office on 5 PCs and MACs plus 5 tablets and phones. really good deal. also there is no sign of them increasing the subscription as the more consumer hop in they keep lowering the price.

Romero said,
Slight correction, it's $100/yr for 5 PCs plus 5 tablets.

I am curious about what "Tablet" means: for example I have a Convertible Tablet, is it considered a PC or a Tablet?

Cosmocronos said,

I am curious about what "Tablet" means: for example I have a Convertible Tablet, is it considered a PC or a Tablet?
Store says "iPads or Windows tablets" and directs to office.com/information for applicable devices. That page in turn directs to office.com/mobile for information about tablets and smartphones, which doesn't mention hybrids anywhere that I can see. I think a convertible tablet is still classified under the tablet category.

stevan said,
I agree. At least to me, $100 is too much.

Same here. $100 p.a. is far too expensive for this. Plus, I like to buy my software, not rent it. If MS won't give me that option, then that's their loss.

trojan_market said,
as the more consumer hop in they keep lowering the price.

Yeah, right...

Romero said,
Store says "iPads or Windows tablets" and directs to office.com/information for applicable devices. That page in turn directs to office.com/mobile for information about tablets and smartphones, which doesn't mention hybrids anywhere that I can see. I think a convertible tablet is still classified under the tablet category.

Same path I followed... and same conclusions. :-) Not a big deal because I have just three devices using the subscription.

CJEric said,

Same here. $100 p.a. is far too expensive for this. Plus, I like to buy my software, not rent it. If MS won't give me that option, then that's their loss.


Yeah, right...


You are aware that you don't own a single sofware product you ever purchased right? (unless of course, you bought up the rights to software). But generally all you ever do with purchasing software or games, is buying a usage license.

Shadowzz said,

You are aware that you don't own a single sofware product you ever purchased right? (unless of course, you bought up the rights to software). But generally all you ever do with purchasing software or games, is buying a usage license.

You also realize that usage license is unlimited without having any restriction of paying it in perpetuity. Question over here is not about whether we are buying source code of the software but about subscription model.

Shadowzz said,
Which is the same with Office 2013. Buy it once, use it into the 3rd millennium if you wish.

Subscription pricing of 2013 is a water testing model and once enough fools join this bandwagon MS will scrap perpetual license forever. By the way, I am not interested in cloud infested, Ugly flat interface of 2013 as I am content with Kingsoft Office and Office 2010 for fall back.

Armchair critics always seem to know everything about MS' future plans somehow - they will scrap perpetual license forever, they will remove the desktop from Windows... If you're content with Kingsoft Office how does it even affect you? Just stick with what you're using if it's so great.

Auditor said,

Subscription pricing of 2013 is a water testing model and once enough fools join this bandwagon MS will scrap perpetual license forever. By the way, I am not interested in cloud infested, Ugly flat interface of 2013 as I am content with Kingsoft Office and Office 2010 for fall back.


I personally like the 2013 interface.
And if it ever goes, then start complaining. Don't complain about something that might possibly ever maybe perhaps change.
Office 2013 has pretty much the same licensing compared to previous. Pay once, use it forever and ever.

Romero said,
Armchair critics always seem to know everything about MS' future plans somehow - they will scrap perpetual license forever, they will remove the desktop from Windows... If you're content with Kingsoft Office how does it even affect you? Just stick with what you're using if it's so great.

There is something which is common sense and blatant obvious. Subscription model is much beneficial to MS rather than perpetual one as it gives them guaranteed stream of revenue. It will make much financial sense for MS to move to subscription model completely than giving option of perpetual version. This is not a rocket science to fathom the direction MS is trying to be heading.

Anyway, yes it does not affect me personally as I am completely content with Kingsoft so it is not about me but my concern is for other people who might be genuinely affected by this subscription model.

Your concern for Office users is so nice. :rolleyes: We'll see if your prediction comes true, and believe me, if most people don't like the retail single-purchase model being done away with entirely they'll raise such a hue and cry that Microsoft will be forced to retract. They cannot afford to bleed users by the droves to free and paid alternatives. Personally I don't think either the retail model or the desktop will be entirely nixed any time soon, and the former will remain available as an option.

I have no faith in MS and the buffoons running this company. They can try to make any stupid decision at any time without caring or listening to their customers. They will try to back paddle after much hue and cry but things won't be the same to begin with. Windows 8 fiasco, Xbone mandatory internet requirement and various other stupid decisions make be believe in my apprehensions.

Can't say about Nadella's leadership yet but If MS goes the path of nixing the retail model of Office, it won't surprise me a bit.

We all know how you feel regarding their supposed "fiascos" but anyway it shouldn't matter to you if you're no longer using any of their products (at least that's what I expect is the case given your frequently articulated disdain for them). We users will vote with our wallets and keep them on the straight and narrow, don't you worry.

Yes, it's actually not that bad. It's made to be competitive, otherwise Apple would be shooting themselves in their feet. I heard that profits are cut even more if going through a traditional retail channel from all the middle men and stores wanting to make a profit.

I think the unique aspect about digital app stores is not that the company behind them get a huge cut, but that 100% of the cut goes to them, so it ends up being a very profitable business model. But not because the company selling apps are losing more on the deal than they'd otherwise do.

Maybe Microsoft suspects consumers aren't likely to sign up to Office 365 anyway. It's a rather expensive service that most consumers dont need. But some love their iPad so much that they'd pay a big sum just to use their iPad for productivity. I imagine Microsoft doesnt mind paying Apple a bit of money for that level of brainwashing. Afterall it costs Apple billions to build up that kind of fanbase.

My manager is one of those as well. He refuses to take his laptop along to meetings. On his laptop he could run the company programs. Instead he takes screenshots of what he needs for the meeting and displays them on his iPad. Naturally he is also advocating the purchase of Windows software that has an app in the appstore as well. He would personally get a 365 subscribtion if the company doesnt go for it. Although they probably will since he isnt the only iPad crazy manager around.

Now companies that subcribe to 365 (or will subscribe to 365 due to the iPad app) will likely do so outside the app. I'm not even sure the app can sign up a whole company. So Apple will see none of that revenue while the iPad app is the reason why people will subscribe.

How is it expensive? Have you not seen the new Office 365 Personal subscription plan? That's a freakin' bargain!

j2006 said,
How is it expensive? Have you not seen the new Office 365 Personal subscription plan? That's a freakin' bargain!

A bargain compared to what? Certainly not compared to buying a new version of Office every decade. Which is what most consumers to right now*.

*Excluding pirating ;)

It really makes no difference to the end user who gets a cut of their hard earned cash. But if you look past the end user there is a whole lot going on. 30% is steep for any developer, especially for book publishers. Apple never cared about the app developers or their customers (That don't pay for an Apple Care Plan or are out of warranty), they just make good products and watch the cash flow in. The only time they pay attention to a developer is if the developer's app becomes extremely popular. Then Apple buys them out. So that 30% cute to me is GREED. I don't support GREED. So Apple can kiss my Ars.

jesseinsf said,
It really makes no difference to the end user who gets a cut of their hard earned cash. But if you look past the end user there is a whole lot going on. 30% is steep for any developer, especially for book publishers. Apple never cared about the app developers or their customers (That don't pay for an Apple Care Plan or are out of warranty), they just make good products and watch the cash flow in. The only time they pay attention to a developer is if the developer's app becomes extremely popular. Then Apple buys them out. So that 30% cute to me is GREED. I don't support GREED. So Apple can kiss my Ars.

Hahahaha what?

jesseinsf said,
So that 30% cute to me is GREED. I don't support GREED. So Apple can kiss my Ars.

I assume you also oppose Microsoft for doing the same with the Windows Store?

theyarecomingforyou said,

I assume you also oppose Microsoft for doing the same with the Windows Store?


30% is fairly steep. Microsoft's cut in the Windows Store is much lower.

theyarecomingforyou said,

I assume you also oppose Microsoft for doing the same with the Windows Store?


Or Google and Android, or Valve and Steam. 30% seems to be the de facto standard rate. Its not like retail is any better, since you've got the stores cut and the distributor's cut, plus the upfront risk of manufacture and need to repeat runs if you sell out.

j2006 said,

30% is fairly steep. Microsoft's cut in the Windows Store is much lower.

Nope.

Obviously, apps can be free or paid. Paid apps can be priced in the range of $1.49 up to $999.99, with the company taking a 30 percent cut of each sale, although that percentage will be lowered to 20 percent if the app reaches $25,000 in sales. We're guessing that Microsoft's just not a fan of the $.99 standard that Apple's set.

j2006 said,
30% is fairly steep. Microsoft's cut in the Windows Store is much lower.

Microsoft's cut is also 30%, though it drops to 20% once it reaches a certain threshold. If Microsoft could get away with charging more I'm sure it would but the Windows Store simply isn't as popular.

Chikairo said,
Or Google and Android, or Valve and Steam. 30% seems to be the de facto standard rate.

The difference with Google Play and Steam is that they aren't mandatory, unlike the Apple App Store or the Windows Store.

theyarecomingforyou said,

The difference with Google Play and Steam is that they aren't mandatory, unlike the Apple App Store or the Windows Store.


While true, Origin, Impulse, etc., still take the same cut. Moreover, they are providing a service, especially for smaller devs, by handling distribution, hosting, etc. Do you want to make apps or deal with running the business? Likewise, going through established digital distributors gives consumers more confidence in buying. A large company can set up their own shop, sure, but I've often passed by games and such because I don't want some random company handling my payment/contact info. I'd rather buy from an established DD venue.

YMMV, of course. And, given how computer illiterate and unsavvy the average user are, I'm of the opinion that walled gardens are better for them, too. The fact you're here on Neowin means you're NOT the average user, so its understandable you'd want more options and I can reasonably assume you can handle them.

Edited by Chikairo, Mar 28 2014, 6:53pm :

That said, its interesting how the open competition markets aren't trying to compete via lower cuts, or the closed ones raising their share. There are some special deals out there (Origin offering 90 days free for KS projects, and MS's lower rate for highly successful titles), but on the whole... 30% seems the industry accepted norm.

jesseinsf said,
It really makes no difference to the end user who gets a cut of their hard earned cash. But if you look past the end user there is a whole lot going on. 30% is steep for any developer, especially for book publishers. Apple never cared about the app developers or their customers (That don't pay for an Apple Care Plan or are out of warranty), they just make good products and watch the cash flow in. The only time they pay attention to a developer is if the developer's app becomes extremely popular. Then Apple buys them out. So that 30% cute to me is GREED. I don't support GREED. So Apple can kiss my Ars.

So you don't use MS or Google store either? Or are you a fanboy so for MS (or Google, whichever one make u wet), it is OK, but Apple is pure evil and can kiss your ars? Lol. These comments crack me up. Keep rolling with the anti-Apple war, noble crusader!

I agree, but at the same time the user experience becomes a bit annoying that way... its' more fluid if it's native. I guess they're willing to take the hit.

They could provide a link to their own website if they also had an in-app purchase option. One of the more bullish rules Apple has is that iOS apps can't have links to buy services that enrich the app unless there is also an option for an inapp purchase.

Amazon's approach with their Kindle app has been to remove the link. Additionally, I don't think they are allowed to even give directions on how to get content in the Kindle app from within the app. Amazon is in a bit of a better position since "Kindle" is so well established, as is their own marketplace. Most people come to the Kindle app expecting to consume product that they purchased through Amazon.

I agree with j2006 - It ends up hurting the experience especially for non-tech savvy users (i.e., probably the vast majority of users). Microsoft probably considered this and decided they would lose money and weren't going to do that over principle. Microsoft does not have the same luxury as Amazon because the whole Office 365 subscription concept is relatively new and something current Office users will not be used to.

seebaran said,
Couldn't they just push the users to the mobile web to sign-up to avoid Apple's 30% cut?

It's been done before. Apple will revoke or outright not approve your app if you try to bypass the usual mechanisms.

Audien said,
It's been done before. Apple will revoke or outright not approve your app if you try to bypass the usual mechanisms.

So apple think they deserve 30% of the price for doing NOTHING?

I can understand how they get away with that for small/unknown developers/apps, but Microsoft Office will sell itself. 30% is an unbelievable ripoff.

On the plus side, I suspect sales will be minimal anyway, people will take the "free" version to display content, not the "paid" version to develop content. People are going to use traditional PCs with full screens/keyboards/mouses to actually create the content.

dvb2000 said,

So apple think they deserve 30% of the price for doing NOTHING?

I can understand how they get away with that for small/unknown developers/apps, but Microsoft Office will sell itself. 30% is an unbelievable ripoff.

On the plus side, I suspect sales will be minimal anyway, people will take the "free" version to display content, not the "paid" version to develop content. People are going to use traditional PCs with full screens/keyboards/mouses to actually create the content.

Yes, that is their position. They built the platform, whether we agree with their stance or not, it's within their rights to demand that.

dvb2000 said,

So apple think they deserve 30% of the price for doing NOTHING?

I can understand how they get away with that for small/unknown developers/apps, but Microsoft Office will sell itself. 30% is an unbelievable ripoff.

On the plus side, I suspect sales will be minimal anyway, people will take the "free" version to display content, not the "paid" version to develop content. People are going to use traditional PCs with full screens/keyboards/mouses to actually create the content.

They don't do 'nothing', they handle billing and all billing support.

Shadrack said,
They don't do 'nothing', they handle billing and all billing support.

So you think its justified for them to charge 30% of the price, to do nothing other than an electronic billing of the charge (i.e. practically "nothing")?

dvb2000 said,

So you think its justified for them to charge 30% of the price, to do nothing other than an electronic billing of the charge (i.e. practically "nothing")?

I'm not sure if that justifies the 30% charge (some other things might). They also have to handle phone support for all billing related questions. There will be people calling Apple (not Microsoft) when they have billing questions. That is something, not nothing.

You guys act like Google and Microsoft don't take similar % cut off their online stores.

MS will make profits in the form of Office 365 subscription from this. Regardless of what the fanboys (and Apple trolls) here think: MS is the one making the decisions and they see $$$ for them by supporting the iPad platform. MS is much more level headed then their fanbase.

Edited by Shadrack, Mar 31 2014, 3:40pm :

Apple also handles the billing for MS and (more importantly and costly), billing support.

Apple has made inapp subscriptions so painless to disable auto-renewal. If buying through Apple is an option, I will go that route simply because it is so easy to unsubscribe.