Apple may not be the industry leader in generative AI, but thanks to its monopoly on the app market, it is able to profit from others’ successes.
An iPhone app for ChatGPT that was released by OpenAI, swiftly rose to the top of the App Store. In the free app category, ChatGPT was at the top. Apple was marketing it as a “must-have” app under the “Essentials” sub-category.
Users of the app have the option to upgrade to ChatGPT Plus. The subscription costs $20 a month and grants priority access to new features and faster response times. OpenAI uses Apple’s in-app purchase system rather than directing people to a website where they may subscribe, thus Apple is getting its customary 30% cut.
“Apple is getting their 30% tax,” as Bernstein tech analysts put it in a note to investors.
Is there a greater example of a technological monopoly? Apple is falling behind in AI and has made virtually little in the way of contributions to the field’s open research. And yet, Apple will passively earn hundreds of millions of dollars a year from this technology.
ChatGPT Plus will generate additional $1.2 billion in annual income if it managed to sell 5 million iOS apps. By taking 30% of that, Apple would earn $360 million annually from the development of OpenAI.
Earnings Call
On Apple’s most recent earnings call, Tim Cook stated that the business will “weave” AI into its devices, but he also stressed that it would be “deliberate and thoughtful” in how it did so. He continued, “There are a number of concerns that need to be resolved. Apple has further instructed its staff members to use ChatGPT sparingly. This is due to the concern that it will gather private data, according to The Wall Street Journal.
However, that doesn’t prevents Apple from making money off subscription sales to consumers through its App Store. The iPhone sales have slowed in recent years. However the Apple’s services division, which includes revenue from App Store subscriptions, has been a new growth engine. A record was set in the most recent quarter’s revenue from services, which accounts for some of Apple’s highest profit margins.
Lawsuits Filed
Epic Games, the creator of Fortnite, recently filed an antitrust lawsuit against Apple. They have alleged that Apple was breaking the law by restricting app distribution on iOS devices and mandating developers to use its own payment processor, which charges a commission on purchases. Apple just won the case. The decision was a disappointment for developers community. They had anticipated that the court would compel Apple to allow third-party app shops on its devices. But in the European Union, it’s a different story. Here new regulations aim to level the playing field for developers. Apple will allegedly soon start assisting independent app stores in Europe.
Nevertheless, the judge in that case did declare that developers might direct customers to a web browser to complete transactions and avoid Apple’s charge. Perhaps because it is a little more laborious than using Apple’s built-in payment processor, OpenAI is not currently doing that.
It does, however, imply that Apple can profit handsomely from OpenAI while also warning about the potential privacy consequences – and utilizing the money to develop its own models.
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