Apple-OpenAI Partnership: ChatGPT Integration Without Payment

Apple announced on Monday the integration of OpenAI’s ChatGPT into upcoming versions of iPhone, iPad, and Mac operating systems. This marks a significant step towards future third-party AI model integrations. Unlike Google’s multi-billion-dollar deal with Apple for preferential web search, the ChatGPT integration has sparked curiosity about the financial aspects of the partnership. According to a Bloomberg report published Wednesday, Apple is not paying OpenAI for this integration.

“Apple isn’t paying OpenAI as part of the partnership,” reports Bloomberg’s Mark Gurman, citing anonymous sources. “Instead, Apple considers promoting OpenAI’s brand and technology across its vast user base as a fair exchange of value.”

The report highlights that both companies do not anticipate substantial revenue from the deal in the short term. In fact, OpenAI might incur additional costs as it pays Microsoft to host ChatGPT on Azure. However, OpenAI stands to gain by potentially converting free users to paid subscriptions, while Apple benefits from providing built-in access to ChatGPT as it continues developing its own large language models (LLMs).

There is also a potential financial angle for Apple. OpenAI offers various subscription plans (ChatGPT Plus, Enterprise, Team) with enhanced features. If users subscribe via the ChatGPT app on an Apple device, Apple’s payment platform will handle the transactions, likely earning Apple a significant revenue share. Apple aims to negotiate similar revenue-sharing agreements with other AI vendors in the future.

Why OpenAI?

Over the past 18 months, ChatGPT’s popularity has positioned OpenAI as a major tech player. OpenAI has secured deals with publishers for AI training content and sustained support from Microsoft, trading funding and computational resources for access to OpenAI’s LLM technology like GPT-4.

Apple’s decision to integrate ChatGPT as its first external AI has raised questions, especially since it downplayed its own in-house LLM technology powering the new “Apple Intelligence” platform. Apple CEO Tim Cook told The Washington Post that OpenAI was chosen because it currently leads in LLM technology. “I think they’re a pioneer in the area, and today they have the best model,” Cook said. “We’re integrating with other people as well. But they’re first, and I think today it’s because they’re best.”

However, this choice comes with risks. OpenAI has faced controversies, including a recent accusation by actress Scarlett Johansson regarding voice imitation, key resignations, restrictive NDAs, and allegations against CEO Sam Altman. Critics, including Elon Musk, have expressed concerns about data privacy and the potential exposure of personal data through the Apple-OpenAI partnership, though both companies have denied such risks.

Looking ahead, Apple’s agreement with OpenAI is non-exclusive. The company is already in discussions to integrate Google’s Gemini chatbot and has reportedly considered Anthropic’s Claude 3 as another potential AI partner. This strategy indicates Apple’s intent to offer users a variety of AI services, similar to the multiple search engine options available in Safari.