Apple and OpenAI ChatGPT Partnership Won't Include Cash Payments For Now, But Does It Mean You Will Need To Cough Up For A Subscription Later?

On Monday, at the WWDC 2024, Apple Inc. AAPL unveiled a collaboration with OpenAI to incorporate the AI chatbot, ChatGPT, into its devices. However, a new report suggests that the partnership is unlikely to generate significant revenue for either party, at least initially.

What Happened: Under the terms of the agreement, Apple will not be making any cash payments to OpenAI. Instead, the tech behemoth believes that the exposure of OpenAI’s brand and technology to its extensive user base is of equal or greater value than monetary transactions, reported Bloomberg, citing people briefed on the matter.

The collaboration, which is part of Apple’s wider push into AI, will see ChatGPT integrated into Siri and new writing tools. This initiative is expected to offer an advanced chatbot to consumers, potentially enticing users to spend more time on Apple devices or even upgrade.

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While ChatGPT will be available for free on Apple's products, remuneration could come into play later. OpenAI and Apple can potentially earn revenue by converting free users to paid subscriptions. Currently, the Sam Altman-led company offers subscription plans beginning at $20 per month.

When a user subscribes to OpenAI through the ChatGPT app on an Apple device, the transaction is processed via the tech giant’s payment platform, which typically entitles Cupertino to a share of the revenue.

Ultimately, Apple plans to profit from AI through revenue-sharing agreements, where it receives a portion of the earnings from AI partners that monetize chatbot interactions on its platforms, said the people.

Apple and OpenAI did not immediately respond to Benzinga’s request for comments.

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Why It Matters: Apple’s deal with OpenAI is not exclusive. The iPhone maker is already in talks to offer Google’s Gemini chatbot as an additional option later this year. Apple is also in discussions with Anthropic as a potential chatbot partner.

The tech giant’s partnership with OpenAI has received major criticism from Tesla and SpaceX CEO Elon Musk. Previously, the tech billionaire threatened to prohibit Apple devices from his companies if Apple integrates OpenAI at the operating system level, calling it an “unacceptable security violation.”

After Musk and some other people raised such concerns, Apple announced that it will allow users to have the option to opt out of this integration. OpenAI's Mira Murati also responded to Musk's criticism saying, “We care deeply about the privacy of our users and the safety of our products.”

Meanwhile, on Wednesday, in an all-hands meeting, the OpenAI CEO informed the company’s staff, that the startup is projected to reach $3.4 billion in annual revenue, according to another Bloomberg report, which cited a source familiar with the situation. OpenAI’s annualized revenue reportedly stood at $1.6 billion in late 2023.

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Disclaimer: This content was partially produced with the help of Benzinga Neuro and was reviewed and published by Benzinga editors.