Baby Steps (Premium)

Everything changed last week, and for the better. Google and Microsoft both made their respective productivity AIs broadly available to customers. Google went all-in and discontinued its paid Gemini Advanced add-ons. Microsoft strove for more of a middle ground in retaining its paid Microsoft 365 Copilot (commercial) and Copilot Pro (consumer) add-ons while bringing all their constituents features to Microsoft 365 subscribers with a monthly-based usage limit.

This wasn’t a surprise: Microsoft had previously made this change in select markets, and Microsoft 365 subscribers were already seeing mentions of “AI credits”–the “currency” one pays toward their monthly usage limit–in AI-powered Windows 11 apps and web apps like Designer. In this sense, stories claiming that Microsoft somehow “followed” Google are incorrect, but also unimportant. To me, the big news is that the way we pay for AI functionality in mainstream productivity products and services changed forever last week, mirroring the I Will Not Pay for AI (Premium) editorial I had written last year. To me, this makes more sense than the expensive paid add-on model that goth companies previously used exclusively.

I wrote about this shift twice last week, first when Google announced its shift and then again when Microsoft completed its shift. But it quickly became clear that some of the fine print on the Microsoft side of this change would result in questions and consternation. That is, the change Microsoft was making wasn’t necessarily as good as originally believed. And customers quickly started demanding more.

The most obvious issue is that only the person who pays for Microsoft 365 Family gets AI credits each month. The other 5 users on this plan do not. And there’s no way for the original/paying user to “gift” AI credits to others or more generally share them within the family group. Microsoft’s response? Any other users in a Microsoft 365 Family group who want to use what used to be Copilot Pro features exclusively can simply pay for Copilot Pro. This would be reasonable if Copilot Pro was affordable. But Copilot Pro costs an additional $20 per user month. That’s an additional $240 per year, far more than the cost of the base Microsoft 365 Family subscription for all six users despite delivering an order of magnitude less functionality.

Given this, the complaint is legitimate. I still feel that Microsoft 365 Family is a no-brainer given the generous nature of the offering: Full access to Office desktop apps, full functionality in Office mobile, no ads in Outlook, 1 TB of OneDrive storage, and so on, and for all six users. But the incommensurate cost of AI remains troubling and a real pain point for customers. It feels unfair.

But questions remain. The most obvious being, what could Microsoft do to make this right?

This is a consumer offering, so introducing some kind of management portal through which the subscription owner somehow allots AI credits to other users is a non-starter. That’s far too much to ask. It makes no sense.

I do like the idea of all subscribers in a Family group being able to access the AI credits, but there are problems with this plan, too. Most obviously that you just can’t trust some people. As we experienced when my wife and kids shared a cellular plan in the dark usage-restricted days of yore, our son would routinely use up all the available bandwidth each month, triggering additional fees that my wife resented. But, there’s no way to “top up” AI credits with Microsoft 365 Family today, and maybe there never will be.

But that issue hints at what I think is the most reasonable compromise here. Something that sits between AI credits being limited only to a single person and a ridiculously expensive Copilot Pro subscription. It’s also a proven business model that should be fair for both Microsoft and its customers. It’s something I’ve experienced all over the place, everywhere from Duolingo–for which we also pay for what’s called (terribly) a Super Duolingo subscription–to the eSIMs I buy when in Mexico and elsewhere. It’s a basic pay as you go plan. You just pay for what you use. Those who don’t use these features do not pay. Those who do can pay extra as needed.

Arriving at a price that makes this reasonable for both parties will be tricky. But I also think that this plan–or some other change that brings AI credits to more users–is inevitable. And in that sense, one might view where we are today as an interim step to a more equitable future. One that is more equitable to the situation we had for the previous year, when the only option was an expensive per-user, per month Copilot Pro subscription. AI is evolving rapidly, as we all know, but it’s not just the functionality that’s evolving. It’s the business model and the associated costs that drive the other changes.

In other words, baby steps.

One year ago, I had a Microsoft 365 Family subscription that cost $99 per year. Me, my wife, our two kids, and my wife’s father are all members of that group, with each receiving all the perks and using them however they wish. I subscribed to Copilot Pro to 2 or 3 months in early 2023 to experience it, but when Microsoft moved Designer–which I use to create images for the site–to the AI credits system, I stopped paying for Copilot Pro. And while I never knew how many credits I got each month, or how much each thing I did “cost,” I never hit the limit. This made sense for me, but my wife and the others never experienced Copilot Pro. Of that group, I suspect only my wife would have been interested in the first place.

(Apparently, I get 60 AI credits each month. It’s January 20, and I’ve used one. You can see this information on the Microsoft account website, on your Microsoft 365 subscription page.)

Flash forward one year. Microsoft 365 Family now costs $129 per year. The same group of people is using it with the same perks, but with one exception: Now I, as the subscription purchaser, get some limited access to Copilot Pro features each month. I will or will not use those features, and if I do, I will or will not run into the usage limits. That’s an unknown, literally: Microsoft has never communicated how many credits one gets or what the AI task costs are. (This is true of the free tier of GitHub Copilot, from what I can tell. I’ve been using it a lot over the past week or two.) So the value here is somewhat unknown.

Or not. This is the first price hike in the subscription’s history, and $30 per year is almost certainly reasonable given the $20 per month per user cost of Copilot Pro. And simple math points to what I believe will be the next baby step. One that hopefully occurs in a year or less.

It goes like this: Allow any member of a Microsoft 365 Family subscription to get limited access to Copilot Pro features every month, with AI credits, for $30 per user per year. Simple.

The issue, of course, is that this might not make business sense for Microsoft. The cost of providing this functionality is going down over time, but it’s still expensive and the cost is completely unknowable on the outside. But you have to think that will change over time. And I do believe that letting people experience these features is smart. So Microsoft could also let subscribers “top up” when they hit the AI credit limit on the fly. Some months, they won’t. Some months, they will. Those who use it a lot could simply subscribe to Copilot Pro. Or not. I feel like that subscription either disappears or becomes dramatically less expensive than it is right now.

And that, I think, is the nexus of this discussion. We can’t know the costs involved, the points at which these offerings, real or imagined by me, make any business sense for Microsoft. But there is a very common dynamic with subscription services by which you pay less if you pay for more time upfront. This is how monthly AI credit top-ups and Copilot Pro should work. Copilot Pro should be annual and less expensive than a year of monthly top-ups. Or whatever.

Thinking about this, it occurs that my inability as the subscription owner to top-up should I exceed my monthly AI limit is also a problem. Look at it this way: I should be able to pay $20 on the fly if and when I exceed this limit and just get unlimited access to the features for the rest of that month. Next month, I’d go back to the AI credits plan. This feels like common sense to me. But again, I’m not privy to the costs. No one is. (Thinking back on I Will Not Pay for AI, I am now dealing with the contradiction and hypocrisy of calling on Microsoft to give me the ability to pay on-the-go for more AI. But this is more about the broader user base than it is about me personally.)

The simple version of this story is that the Microsoft 365 consumer price hikes are likely reasonable given the (for now unknowable) monthly AI usage and that this is the first time Microsoft ever raised prices. Microsoft 365 Family is still a no-brainer, regardless. But it could, of course, be better. My expectation is that it will get better, in a year or less. And that the changes we’ll see, guided by our feedback, of course, will map somewhat closely to at least some of the ideas mentioned above. AI is moving rapidly. So, too, are the ways we can consume and, optionally, pay for those capabilities. Say what you will, but Microsoft has been notably nimble in that regard, at least.

To the people complaining about the price hike and the various monthly limits, I will just say this. Keep complaining. Microsoft is probably constrained somewhat by its costs, for now, but it does listen to feedback from paying customers and acts accordingly. (Contrast this with Windows 11, where no individuals really pay for this product directly or at all and of the commensurate response Microsoft provides to those complaints.) This will change, and for the better. Your feedback will help that happen, and it may even make it happen more quickly.

Nothing is ever perfect. But we’re in a good place.