Yeah, I have a hard time believing the 365 subscription will really take off for home users.
IME, home users buy Office to have be able to work with documents from the office or school - there's little "passion" for Office amongst consumers, it's just something you'll likely need - eventually.
That doesn't translate into "Ooo! The new version's out!" excitement, so for many people, $99 a year isa massive price increase, as most people I know - consumers and corporate users - are perpetually 1-2 (most likely 2) versions behind. They find the improvements made in the current 2-3 year upgrade cycle are dubious enough to hold out for an upgrade, so I don't see how promising a continual cycle of yearly improvements will really be viable. Hell, most might see automatic upgrade as a negative, if they don't like the changes...well, tough.
Sure, in some scenario's it is a decent deal - you have 5 PC's and need cloud storage, in such a situation it makes sense, and that scenario will become far more prevalent if they release an Android/iOS version which will count as one of those 5 devices. But compared to previous deals (which they of course nix when 365 comes out) - especially if you just needed Word/Excel and were fine with the starter editions (which is also axed - jesus!) - you're definitely paying more.
I agree with the OP, it's weird - MS has more competition than ever before in an environment where software and hardware prices are cheaper than they're even been, and it seems their response is to double-down and act as if their position is more unassailable than ever.
I mean cripes, the biggest problem with Ultrabooks is their price - so just as they're starting to get into ~$700 territory, Win8 comes out and now MS is complaining that its supposedly lackluster launch is their fault, as they didn't build enough compelling new devices for it. The OEM's shoot back that by following MS's design recommendations, they would price themselves out of the market, and I believe they're right.
Really doesn't look good when the brand your own company creates to push the idealized version of what a Windows8 tabtop should be receives such strong criticism. My feeling is that it's inevitable - you build your hardware foundation on an OS that tries to straddle two worlds, and you get exactly what you'd expect - a device that tries to straddle two worlds and isn't particularly best of class in either of them.
If MS thinks Surface is going to spur OEM's to create $1,000 hybrid laptops in their image...uh, yeah - good luck with that.