Microsoft bundles Office AI features into Microsoft 365 and raises prices

Microsoft is bundling its AI-powered Office features into Microsoft 365 Personal and Home subscriptions, but it’s also raising prices as a result. Previously, Microsoft 365 subscribers had to pay an extra $20 per month to get Copilot inside Office apps like Word, Excel, and PowerPoint as part of a Copilot Pro subscription, but Microsoft is now adding these AI features to Microsoft 365 apps for an extra $3 per month. Existing subscribers can opt out of the AI features and not suffer the price increase, though.

Microsoft has been testing adding AI-powered Office apps, the most important feature of Copilot Pro, into the Microsoft 365 subscriptions in recent months. What was previously only available in Australia, New Zealand, and a number of countries across Asia is now expanding to most markets worldwide.

While it feels like Microsoft is admitting that people aren’t willing to pay an extra $20 a month for AI-powered Office features, Microsoft argues it has always wanted to bring AI features to more users.

“We know that people are willing to pay for the integration into Microsoft 365,” says Gareth Oystryk, senior director of marketing for Copilot Pro and Microsoft 365, in an interview with The Verge. “Copilot Pro is an opportunity to learn from our power users and early adopters. Our plan all along has been how do we bring this value to as many subscribers as possible in a way that works for them and for us.”

Image: Microsoft

Copilot Pro isn’t going away, and Microsoft isn’t reducing its $20 monthly pricing, either. It will remain for power users who want priority access to the latest AI models, along with early access to new AI features. “We definitely have a place for Copilot Pro,” says Oystryk. “There is still a group of folks that enjoy the power use of Copilot Pro.”

Microsoft is raising the price of Microsoft 365 Personal and Family subscriptions by $3 per month in the US to bring these AI-powered Office features to all subscribers. “We are raising the prices of Microsoft 365 Personal and Family for the first time in 12 years,” says Oystryk. “We’ve never actually raised the price in the US and we’re raising it by $3 a month, along with similar amounts in other markets.”

Nobody likes price increases, and consumers are especially sensitive to being asked to pay more for AI features right now. If you don’t want to pay extra for these AI features, then Microsoft will have plans for existing subscribers to remain at the same price point without Copilot in Office apps.

“We’ve created two new plans that are really only going to be available for the next year, Personal Classic and Family Classic,” explains Oystryk. “They’ll be available as folks go through the renewal cycle. If they go to cancel they’ll have the opportunity to pick one of these Personal Classic or Family Classic plans.”

Image: Microsoft

These plans will only be available to existing Microsoft 365 subscribers, and new subscribers will get AI-powered Office features by default with the new pricing changes. It sounds like the classic plans won’t get any of Microsoft’s big new features, though. “They’ll continue to get security updates and minor feature updates, but any new additional innovations that we deliver in the future won’t be included in those plans,” says Oystryk.

Microsoft is also introducing a new AI credits system today, alongside its Microsoft 365 subscription changes. It’s a new system that works across most of Microsoft’s AI-powered consumer experiences, including Word, Excel, PowerPoint, Outlook, and OneNote. You’ll get a monthly allotment of credits within Microsoft 365 Personal and Family to use on things like image generation in the Designer app or in apps on Windows like Paint, Photos, and Notepad. Copilot Pro essentially includes unlimited usage of all of these AI features, based on a fair usage policy.

Microsoft is also making it easy to turn off Copilot in Office apps if you simply don’t want the AI assistant or you’re a student and your school has policies against using AI. “The most interesting piece of feedback we learned is that there are times where our users want to turn off Copilot,” says Oystryk. “We’ve been working to add new settings to some of our key apps that allow people to toggle off Copilot.” This is coming to Word first today and then Excel and PowerPoint in the coming weeks.