When buying Windows or Office, you will come across terms such as OEM, consumer licence, volume licence or subscription. This guide explains the most important software licence types in plain language, shows the difference between a licence, a product key and a digital licence, and names criteria by which you can recognise a transparent offer.
Key points at a glance
- The licence is the right of use; the product key is the code you use to activate the software.
- OEM licences are tied to one device. Under Microsoft's licence terms, consumer licences can generally be transferred to another PC.
- Volume licences are aimed at organisations. Subscriptions such as Microsoft 365 only work as long as you pay.
- The licence terms of the respective product determine which rights apply in each individual case.
Licence, product key, activation: the basic terms
A licence is the right to use software under certain conditions. These conditions are set out in the Microsoft Software License Terms, which you accept during installation. They govern, for example, how many devices you may use the software on.
The product key is a 25-character code in the format XXXXX-XXXXX-XXXXX-XXXXX-XXXXX. It determines which product and which edition is unlocked. The key is therefore not the licence itself, but its technical means of access.
During activation, Microsoft checks the key over the internet or by telephone and links the activation to your device. Only then is the software available without restrictions.
Software licence types at a glance
Microsoft distributes its software through various channels. Each channel has its own rules for binding, transfer and activation.
| Licence type | Binding and transfer | Typical users | Activation |
|---|---|---|---|
| OEM | Tied to the first device | PC manufacturers, system builders | Preinstalled or via key |
| Consumer licence | Generally transferable | Home users, small businesses | Product key |
| Volume licence | Tied to an organisation | Companies, public authorities, schools | MAK or KMS |
| Subscription | Tied to an account, for the term | Home and business | Sign-in with account |
OEM licence: tied to the device
The abbreviation OEM refers to the device manufacturer. OEM licences are intended for manufacturers and system builders who supply Windows preinstalled on a new PC. Under the licence terms, such a licence is tied to the device on which it was first installed.
With current pre-built PCs and laptops, the key is usually stored in the motherboard firmware. If you reinstall Windows, it therefore generally activates itself. You can display the stored key using built-in tools, as our guide Finding your Windows product key shows.
If you replace the motherboard, the PC is usually treated as a new device as far as activation is concerned. Smaller changes such as a new SSD or more memory, on the other hand, are generally not a problem.
Consumer licence: the classic one-off purchase
The consumer licence (Retail) is the one-off purchase version for end customers. It used to come as a box in a shop; today you usually receive a product key by email and download the software. Under Microsoft's licence terms, you may generally transfer it to another PC if you remove it from the previous device.
For one-off purchase versions of Office, the usual rule is one licence for one PC. If you need Office on several devices at the same time, you need several licences or a subscription. With Windows, the key also determines the edition. A Home key activates Windows Home, a Pro key activates Windows Pro. Our comparison Windows 11 Home or Pro explains which edition suits you.
Volume licence: for companies and organisations
Companies, public authorities and educational institutions acquire volume licences through special Microsoft programmes for organisations. They are intended for the central management of many workstations and are usually set up by the IT department.
Activation takes place either with a Multiple Activation Key (MAK), which allows a set number of activations, or via a KMS service on the company network, with which the computers check in regularly. These procedures are not intended for home users.
If Windows on a private PC reports that no KMS host can be reached, the device is still set to volume activation, for example because it was previously used in a company. Our guide Activating Windows explains how to enter your own key in that case.
Subscription: software for a limited time
With a subscription, you pay a monthly or annual fee and use the software as long as the subscription is active. The best-known example is Microsoft 365 in its Personal, Family and Business variants. You sign in with your Microsoft account instead of entering a key.
The advantages are an always up-to-date version, use on several devices including Mac and smartphone, and cloud storage. When the subscription ends, the Office apps switch to a reduced functionality mode in which you can essentially only view and print documents.
Digital licence for Windows
In addition to the product key, Windows 10 and 11 also have the digital licence. Microsoft stores the activation for your PC's hardware, for example after the free upgrade from Windows 10 to Windows 11 or after activation with a key. If you reinstall Windows on the same PC, it activates automatically without you having to enter the key again.
If you link your Microsoft account to the digital licence, you can reactivate Windows after a major hardware change using the troubleshooter in the activation settings. Microsoft describes the details on the page Activate Windows. You can see the current status under Settings → System → Activation.
Purchased licence or subscription: which suits whom?
For home users and small businesses, the decision usually comes down to a purchased licence or a subscription. The following table shows the most important differences, using Office as an example.
| Criterion | Purchased licence | Subscription |
|---|---|---|
| Costs | One-off | Ongoing |
| Version | Fixed, e.g. Office 2024 | Always up to date |
| Devices | One PC | Several devices |
| Updates | Security updates until end of support | Feature and security updates |
| After it ends | Software keeps running | Reduced functionality mode |
| Cloud storage | Not included | Included |
The purchased licence suits fixed workstations and anyone who does not want ongoing costs. A subscription is worthwhile if you use several devices, a Mac or cloud storage. You will find a detailed comparison in our guide Office 2024 or Microsoft 365. Incidentally, Windows Home and Pro are purchased licences whose annual feature updates are free of charge.
How to recognise a transparent software purchase
Regardless of the licence type, a few criteria help when choosing a seller. They say nothing about individual licences, but they show whether an offer is transparent.
- Invoice: You receive an invoice showing VAT.
- Legal notice: The seller gives their full name, address and contact details.
- Support: Customer service can be reached, even after the purchase.
- Instructions: Download, installation and activation are clearly described.
- Clear product details: Product, edition, version and number of devices are clearly stated, for example Windows 11 Pro for one PC.
Avoid activation tools and cracks from the internet. They breach the licence terms and often contain malware that puts your data at risk.
Matching licence
Conclusion
The licence type determines to whom or what the software is tied and how you activate it. OEM licences belong to a device, consumer licences are generally transferable, volume licences are aimed at organisations and subscriptions only run for the period paid for.
For home users and small businesses, the question is usually just whether to choose a purchased licence or a subscription. Before buying, check which edition you need, how many devices you want to use the software on and whether the seller provides an invoice, instructions and support. The licence terms of the respective product are always binding.
Frequently asked questions
Is a product key the same as a licence?
No. The licence is the right of use under the licence terms. The product key is the 25-character code you use to activate the software and which determines the edition.
Can I take an OEM licence with me to a new PC?
Under Microsoft's licence terms, an OEM licence is tied to the device on which it was first installed. For a new PC, you therefore generally need a new licence.
What is the difference between a digital licence and a product key?
The product key is a code that you enter. The digital licence is the stored activation for your hardware, which Windows automatically recognises when you reinstall on the same PC.
Which licence type is suitable for home users?
For a single PC, a purchased licence is usually the simplest solution. If you need several devices, a Mac or cloud storage, you are often better off with a subscription.
What does "for one PC" mean?
You may install and activate the software on one device. For each additional PC, you need a separate licence.