Put Up or Shut Up (Premium)

We've long known that 2024 was the year in which Microsoft would need to deliver on its AI promises. But it's only mid-January, for crying out loud, and no one expected the software giant to suddenly release a comprehensive set of paid AI services for both consumers and commercial customers just two weeks into the New Year. This is both exciting and scary. And not just for Microsoft's customers.

There are so many things to discuss with Copilot Pro and Copilot for Microsoft 365, but the core issue, I think, is tied to that old classic, cost and value.

So let's step back a bit. We all know that AI is both resource-intensive and prohibitively expensive, and that this reality is why only a handful of the world's most powerful Big Tech companies have the capacity and desire to even do so. And we'll all remember 2023 as the year when Microsoft got its groove back, moving decisively and aggressively to establish itself as both a leader and a first-mover in this suddenly emergent new market.

But as 2023, wound down, I was impressed by other less obvious signs that today's Microsoft was different from its predecessors in ways that I think are important. The Microsoft of the past would have allowed its initial branding mistakes, in particular around its use of Bing for its first go-to-market AI offerings in 2023, to stand, not just for months, but for years. But this Microsoft can be a splendid thoroughbred when it needs to be, and it rebranded and recalibrated its offering several times since then. And among the best changes is that Bing today has been largely exorcised from the discussion. Yes, you can access what's now called Microsoft Copilot from Bing. But Bing is not where you go to access these capabilities, and certainly not exclusively. The normal order of things has been restored, and we can all continue to ignore Bing just as we've done for the past many years.

Branding is important, and let's never forget that Microsoft's past is littered with many defeats thanks to brands both good (Skype) and bad (Zune). But with its AI branding issues behind it---Copilot is curiously perfect from a branding perspective---Microsoft still ended 2023 in a precarious state: This AI explosion has cost the company roughly $10 billion to $15 billion per quarter so far, but those costs are only going to go up as it continues building out the required infrastructure. And while it has successfully kept the lights on using the profits it makes from other parts of the company, AI has to pay for itself before it can drive its own explosive growth. And it's not clear at all whether Microsoft is delivering enough value to justify the expense to customers.

Part of the problem, of course, is that Microsoft's first productivity-focused paid AI service, Copilot for Microsoft 365, limped into its November 1 launch date with the double whammy of expensive pricing ($30 extra per month per user) and restrictive licensing terms---at least 300 users, only for t...