Because the price is the same as buying it outright in the long run (assuming you use the newer versions as most do), its at least as good a deal as the outright purchase. For things that create value over the term of ownership, a subscription makes a lot more sense than a large up front cost. We do this model, but with more middlemen & machinations, for just about everything nowadays (houses, cars, student loans, etc.). The only difference is Microsoft isn't screwing you.
The value-add here is that Office comes with cloud storage, really great built-in sync, and a continuous stream of improvement. Amazingly, Office is still getting better, but now improvements are released by the month, not every 3-4 years.
It's more expensive to get the subscription even if you do upgrade regularly. And I don't think most people buy the latest version of Office with every release. And what "monthly improvements" are even needed? Office seems pretty feature complete for most use cases.
You also get several installs, cloud storage, and the IOS apps. I would buy it outright for home but for my users in the office the subscription model works great.
The value-add here is that Office comes with cloud storage, really great built-in sync, and a continuous stream of improvement. Amazingly, Office is still getting better, but now improvements are released by the month, not every 3-4 years.