Office 2010 belly flops in early retail sales dive

Saturation and Sales Tell a Sobering Story

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"Lifetime sales for Office 2007 at retail exceeded $1.5 billion for the 3.5 years it was on the shelf," Baker informs. "A sales level that equated to approximately 10 million new copies of Office into the market in addition to the sales of PCs with Office pre-installed and the existing versions."

By my interpretation, those numbers simply aren't good. They work out to about $150 per retail unit, which, not coincidentally, is the price of consumer edition Office Home and Student. As I previously reported, Home and Student, like predecessor Student and Teacher Edition, accounts for about 85 percent of US Office retail sales. For that 150 bucks, consumers get three licenses, not the one that comes with more expensive Office business editions. So what then is the value of Office to most consumers or small businesses -- as much as $50 per copy.

Baker rightly identifies a problem Microsoft won't easily escape:

With the release of 2010 Microsoft has to confront the success of its retail strategy head-on. Selling such a heavily used product into a base that has already been upgrading at a very high rate is an enormous challenge. While Office 2010 has many compelling new features, it is always an uphill battle to sell a high installed base product based on new features alone.

I agree, and I warned about this problem in January 2008 blog post "Office 2007: One Hit Wonder?" I acknowledged that Office 2007 was unquestionably a sales hit, but warned:

With software, like movies or music, a big hit can be really tough to follow. Office 2007 raises the bar high indeed for Microsoft's productivity suite. There is a long history of technology products reaching sales growth plateaus...Office 2007's new user interface pushes past the good enough barrier, in part because of the new user interface. Office 2007 looks different from its predecessors, and -- in my testing, anyway -- there are some real productivity usage gains over Office 2003 or XP. But I really wonder: Is Office 2007 so good that good enough may be too good? Yes, would be my answer.

That's partly the scenario playing out now, as Baker astutely identifies.

Many Consumers Don't Need a Productivity Suite

However, there are other good reasons for why consumers aren't rushing out to buy Office 2010. In January, I posted the controversial "Microsoft Office is obsolete, or soon will be." The analysis mostly focused on retail sales to consumer and small businesses, for which -- six months later -- slow retail Office 2010 sales are a proof point. I identified several trends indicating that Office was losing its appeal to consumers and small businesses. Among them: