If updates have a cost, it wouldn't be Microsoft "dropping the ball" but rather enhancing their bottom line as grelber earlier opined. And, if that's the case, it may or may not be an issue if the charge is small.
You've already posted "The applications are not automatically updated; to get the latest version,
you must purchase Office again when the new version becomes available."
That's NOT a small charge!
Nah, I'll stick with my guess. (Again, just plain lousy nomenclature on Microsoft's part.)