How Apple Turns AI into Profit with No Direct Costs

Frederick Nyame

November 10, 2024

Apple Intelligence launched recently, and more exciting features are set to arrive in iOS 18.2 next month, all free of charge. While some analysts wonder if AI might boost iPhone 16 sales, this week’s beta release hints at how Apple may profit from AI without directly charging users.

The Role of Services Revenue

Apple has focused on growing its services revenue as hardware upgrade cycles have lengthened. This shift suggests Apple could use Apple Intelligence to increase its already strong services sector, much like how other tech companies have added paid AI products.

While Apple may eventually offer paid artificial intelligence features, the iOS 18.2 beta reveals Apple’s indirect approach. Rather than charging directly, Apple promotes a third-party subscription from OpenAI, where it likely receives a portion of each subscription.

Apple and Third-Party AI Partnerships

The ChatGPT integration with Siri and Apple’s writing tools is a powerful addition in iOS 18.2, available at no extra cost. However, Apple also lets users upgrade to ChatGPT Plus, generating revenue without making Apple Intelligence itself a paid service.

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In the future, Apple could expand this model by adding more AI options, such as Google Gemini, as hinted by the company. iOS 18.2 places ChatGPT in a new ‘Extensions’ section, suggesting Apple plans to add multiple AI providers. With Gemini, Apple could offer a premium upgrade for advanced features, further expanding the range of AI choices available to users.

Apple’s Win-Win Revenue Model

For each AI service added, Apple can earn a share of the subscription revenue from third-party providers. Apple’s approach could work like this:

– Third-party AI providers offer paid plans
– Apple profits by keeping Apple Intelligence free while promoting upgrades

This way, users can enjoy Apple Intelligence without fees. If upgrades require a subscription, Apple benefits if users opt in, but users who decline won’t feel pressured.

In this model, Apple maintains its image as the provider of free artificial intelligence options, while new services revenue gradually benefits its bottom line.

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Source/VIA :

9to5Mac