Sam Altman, CEO of OpenAI, recently revealed that the $200 a month ChatGPT Pro plan loses OpenAI money. Built on the plan introduced late last year, the new plan grants users access to a more advanced version called OpenAI ‘o1 reasoning’ AI model, full Pro mode access, and lifted rate limits on products like the Sora video generator. Its popularity has been high, however, its more than hoped for usage has placed a financial strain.
Altman, who determined the pricing himself, claimed in a series of X (formerly Twitter) posts that he thought the Pro plan would make money. However, Reality is different. The open source version of the game, GPT-4, is free to download, while openai which has raised nearly $20 billion since its creation is still unprofitable. For 2023, the company lost $5 billion against $3.7 billion in revenue. These losses are due to massive expenditures (AI training infrastructure, staffing, office rent,) among others. To make ChatGPT profitable, it meant that Open AI was paying an estimated $700,000 per day.
OpenAI secures additional investments while the financial challenges appear. It admitted it ‘needs more capital than it thought’ and is going through a corporate reorganisation to get it. To end its financial black hole, OpenAI is considering raising prices on each of its subscription tiers.
However, OpenAI is hopeful about the future. By 2029 the company could see annual sales reach $100 billion – the same as Nestlé has now. To achieve such ambitious targets, large growth in user base and such continued innovation in AI technology will be required.
The company is now engaged in the balancing act between customer needs and operational costs in seeking a lasting business model in such a rapidly developing AI environment.