February 29, 2024

Big Tech’s trend of the week is the incessant talk about AI subscriptions. Silicon Valley cannot stop throwing money into AI, but they’re a bit stuck figuring out how AI will throw money back at them. Now, Big Tech thinks it found a solution: they’re betting you will pay a monthly subscription for their AI service. And, oh boy, there’s already a lot of them.

It’s like streaming all over again: the product is expensive to make, no one wants ads in there (yet), and there are a ton of services costing $10 to $20 a month. So, are you ready to pay for a portfolio of AI services like you do for streaming?

Just One More Subscription

OpenAI was the first to launch its subscription AI, roughly a year ago, with ChatGPT Plus at $20 a month. The service gives users the latest features, faster response times, and access to ChatGPT during peak times. OpenAI is doubling down on pleasing its subscribers this month, by only allowing paid users access to their new GPT Store.

This week, Amazon jumped on the bandwagon of AI subscriptions as well. The company is reportedly launching an AI-supercharged Alexa with a monthly subscription. The service is tentatively named “Alexa Plus”, and has a launch date set for June. Apparently, Amazon employees expressed concerns that people won’t pay for it. Same here, Amazon employees, same here.

Samsung also quietly announced it would start charging users for its now free AI service, Galaxy AI, by 2026. Users will likely have to pay for the most complex AI services, like image generation, which have to be run via the cloud on an expensive, remote server.

This doesn’t even mention Elon Musk’s Grok ($16/month), Midjourney ($10/month), Perplexity ($20/month), or the litany of other subscription services available for AI.

Why It Matters

Silicon Valley has really only figured out two ways to make money on the internet. You can pay a subscription, or inject ads into it. Right now, OpenAI can’t put ads into ChatGPT because that would take away from their user-centric, humanity-saving vision for the company. But these AI products need to start generating revenue, so a subscription model is the only real solution for now.

Ads will likely be a part of AI soon enough, and streaming is a good example to look back at. Netflix sold its subscription models as a utopian solution to overcommercialized TV. This empowered users to buy a good product, rather than become a product for advertisers. But Netflix and every other streaming service have ads now because subscriptions are far less profitable than advertising.

There are, however, problems to overcome with AI advertising. Just like advertisers fled X because of unpredictable content, most brands don’t want to put their name next to whatever an AI chatbot spits out. Also, just like Google Search, it’s difficult to incorporate ads without degrading the quality of information altogether.

The real question is whether users will pay for subscriptions in the short term. Most people can probably agree that ChatGPT is cool, but maybe not “$20 a month” cool. That price is steep for an internet service, especially one that doesn’t have a ton of practical use cases yet. Despite that, Big Tech is hoping you’ll pay for not just one, but multiple AI subscriptions.