Generative AI services struggle with pricing model

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Software makers are struggling to figure out how to price AI services that cost money each time users submit a prompt. This is because AI requires advanced hardware and runs it at capacity, which is more expensive than the relatively modest server bills associated with most software-as-a-service products.

In the past, software companies have made money by writing code once and then making big profits from each new incremental user. But this model is being disrupted by the dynamics of AI.

Some companies, like Microsoft, are charging for their AI-assisted copilots, such as those in Office and GitHub. Microsoft’s prices range from $5 to $40 per user per month. Other companies, like Box, are including AI features as part of their existing subscription plans. Box users on the Enterprise Plus tier and above will have access to 20 AI queries per month, with an additional 2,000 queries available for companies as a whole. Additional usage will require further payment.

Adobe is taking a different approach. It is including a varying number of “generative credits” with its various free and paid plans for Creative Cloud, Express, and Firefly. Starting in November 2023, Adobe will offer additional credits via subscription, with plans starting at $4.99 per month for 100 credits.

Box CEO Aaron Levie said he wanted to ensure that customers could experience the new AI features without having to pay extra. “We’re really happy about this model,” Levie said. Microsoft, on the other hand will start selling a Microsoft 365 copilot for Office on November 1.

The sources for this piece include an article in Axios.

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