By most measurements, ChatGPT has been an enormous success, taking the world by storm since launching in November 2022 with the GPT-3.5 model.
But like many big names in tech, one measurement where it’s still not a runaway success is in terms of profitability, as a new report from the New York Times highlights.
As the headline explains, ChatGPT’s owner OpenAI is “Burning Through Piles of Money,” and that means that multiple price hikes of the paid ChatGPT Plus service are in the cards over the next five years.
According to documents for investors seen by the paper, OpenAI seeks to “aggressively” raise subscriber prices from the current $20-per-month fee to $44 over the next five years in an attempt to hit $100 billion in annual revenue in 2029. That will start with a relatively modest $2 increase by the end of the year, the piece explains.
At the moment, the paid version of ChatGPT offers access to higher-end models, reduces the limitations of the free version, and grants access to the image generation tool DALL-E. Though it’s possible that more features will be added to make the price more appealing, of course.
The need for the price hikes is pretty clear. While the documents show OpenAI expecting to hit a healthy $3.7 billion in annual sales this year ($2.7 billion from ChatGPT Plus and $1 billion from other tech companies using its products), it still expects overall losses of around $5 billion thanks to staff costs, rent and, above all, the sky-high cost of running its services.
Even ChatGPT evangelists may balk at the idea of paying $44 a month for the service, but it’s important to remember that this is the projected price for 2029. Given the incredible advances AI has made in the past two years, it’s fair to assume that ChatGPT will be wholly unrecognizable in five. It may well prove to be indispensable for its users by that point.
But it’s undoubtedly a balancing act, and OpenAI’s pricing will ultimately be dependent on what the market will bear: doubling the cost of a product doesn’t automatically equate to doubling the revenue. To put it bluntly, higher subscription costs wouldn’t plug the financial gap if the number of subscribers plummets as a result of high pricing. In other words, the ambition may be to hit $44 a month by 2029, but OpenAI may be forced to settle for less.
Despite the losses, the investment documents are as bullish about OpenAI’s prospects as you would expect. With 1,700% monthly revenue growth between the start of 2023 and August, the documents predict a tripling of revenue to $11.6 billion next year and $100 billion by 2029 — a figure that would put it on par with the likes of Nestlé and Target today. The current search for funding is seeking to raise up to $7 billion — a figure that would put OpenAI’s value at $150 billion.
For regular users, ChatGPT continues to get new features quite regularly. Just this week, Advanced Voice Mode rolled out to paid subscribers, which combines text, vision and audio processing for faster and more efficient responses.
