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Apple Plans to Pay OpenAI for ChatGPT Through Distribution

Apple Plans to Pay OpenAI for ChatGPT Through Distribution
Apple ditches the cash method and plans to pay OpenAI for ChatGPT through distribution. Credit: Focal Foto / Flickr / CC BY-NC 2.0

Apple and OpenAI’s recent partnership, as reported by Bloomberg News on June 12th, won’t immediately generate profits for either company. Earlier, Apple announced plans to incorporate OpenAI’s model, ChatGPT, into its Siri digital assistant. This integration, including ChatGPT-4o on iOS, macOS, and iPadOS, aims to enhance Siri’s capabilities.

Sources familiar with the situation shared with Bloomberg that instead of a monetary transaction, Apple sees significant value in exposing OpenAI’s brand and product to millions of devices. This strategic move is perceived as potentially more valuable than a traditional financial deal.

OpenAI’s expenses may increase significantly

Apple stands to benefit by offering an advanced chatbot through its Siri integration, potentially increasing user engagement and encouraging device upgrades.

However, the partnership poses financial challenges for OpenAI. Currently, OpenAI pays Microsoft to host ChatGPT on its cloud network. As ChatGPT gains more users, OpenAI’s expenses could increase significantly, especially with its integration into iPhones, potentially straining its computing budget.

Apple to ‘pay’ OpenAI for ChatGPT through distribution, not cash#Apple #OpenAI #ChatGPT #AI #TechAI #LearningAI #GenerativeAI #DeepbrainAI #ArtificialIntelligence pic.twitter.com/9vQDKEojk6

— TechAI (@Tech_AI_Tech) June 14, 2024

Despite ChatGPT being free on Apple products, there’s still a revenue opportunity. The report suggests that converting free users to paying subscribers could generate income for both companies.

Subscriptions made through the ChatGPT app on Apple devices would involve transactions via Apple’s payment platform, allowing Apple to take a percentage of the revenue.

Partnership seems like that of banks and FinTech firms

Earlier this week, PYMNTS highlighted that the partnership between Apple and OpenAI mirrors those seen between banks and FinTech firms. This situation reflects a longstanding business dilemma. This is about whether to develop an in-house solution, purchase a ready-made product, or partner with others to integrate new technologies.

Recently, the trend of partnering with third-party vendors has gained prominence, driven by the rapid evolution of technology and increasing consumer expectations.

“The fast-paced evolution of technology and the rising complexity of consumer expectations adds layers of intricacy to this decision,” wrote PYMNTS.

Additionally, PYMNTS discussed Apple’s Private Cloud Compute service, part of its AI ecosystem, with industry experts. Yannik Schrade, CEO and co-founder of computing startup Arcium, described the service as a positive move for Apple. He noted, however, that it is only the beginning of their efforts in this area.

“Trusted hardware-based confidential computing has been around for quite some time and is a field that, due to the complexity of ensuring actual hardware-based security, has in itself seen a lot of exploits, vulnerabilities and data breaches,” he noted. “Those systems still require trust in third parties, which, in the ideal case, would not be required from users.”

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