A recent report from the Wall Street Journal has revealed the immense expenses big tech companies incur while providing AI services to their customers. Surprisingly, it appears that even their paid offerings are running at a deficit.
While GitHub Copilot costs individuals $10 per month, insiders have revealed to WSJ that the service incurs an average loss of $20 per user per month, with certain users causing Microsoft to lose as much as $80 per month. This is likely a factor influencing the company’s decision to substantially increase the pricing for the forthcoming AI capabilities in Microsoft 365 Copilot.
The upcoming service will come with a cost of $30 per user per month, in addition to the regular monthly subscription fee for Microsoft 365 (which varies depending on the tier). It’s worth noting that Google will also implement a similar per-user fee of the same amount for its Duet AI offering.
According to WSJ, “Microsoft used AI from its partner OpenAI to launch GitHub Copilot, a service that helps programmers create, fix, and translate code. It has been popular with coders—more than 1.5 million people have used it and it is helping build nearly half of Copilot users’ code – because it slashes the time and effort needed to program. It has also been a money loser because it is so expensive to run.”
Cost-cutting alternatives
The high costs associated with AI have prompted Microsoft to develop its own AI chipsets for deployment in its data centres. Also, the Windows company is advocating for the adoption of NPUs, or Neural Processing Units, which can accelerate AI operations independently of the CPU.
This development aligns with the vision recently discussed by HP, where future PCs will have the capability to offload certain AI tasks from the cloud and handle them locally, potentially reducing expenses on the backend.
Software company Adobe, known for charging Creative Cloud customers significant monthly fees for its suite of creative tools, seems to have addressed this challenge successfully with its Firefly generative AI tools, which have since proven to be profitable.
Adobe employs a strategy of slowing down the service’s performance for individual users once they exceed their monthly credit allocation, which is likely determined based on their monthly subscription price. This approach serves to safeguard the company against escalating costs, as confirmed by Adobe CEO Shantanu Narayen in a conversation with the WSJ.
Isa Muhammad is a writer and video game journalist covering many aspects of entertainment media including the film industry. He's steadily writing his way to the sharp end of journalism and enjoys staying informed. If he's not reading, playing video games or catching up on his favourite TV series, then he's probably writing about them.
