Apple’s tax on AI inventions has begun. It will cost OpenAI and others hundreds of millions of dollars a year. Apple’s tax on AI inventions has begun. It will cost OpenAI and others hundreds of millions of dollars a year.
  • On Thursday, OpenAI launched an iPhone app for the wildly popular ChatGPT.
  • The app quickly rocketed up to the top of the iOS App Store charts. 
  • New subscriptions to the app made through iOS will garner Apple its customary 30% cut.

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Apple may not be a leader in generative AI, but the company’s grip on the app market means it can ride the coattails of others’ success.

Last week, OpenAI launched an iPhone app for ChatGPT that quickly shot to the top of the App Store. As of Friday, ChatGPT was the number one in the category for free apps, and Apple was promoting it as a “must-have” app under its “Essentials” category. 

From within the app, users can subscribe to ChatGPT Plus, a premium version that costs $20 per month and offers faster response times and priority access to new features. Because OpenAI does not redirect users to a website where they subscribe but uses Apple’s in-app purchasing system, Cupertino is taking it’s usual 30% cut.

“Apple is getting their 30% tax,” as Bernstein tech analysts put it in a note to investors. 

Is there a better illustration of a tech monopoly? Apple is behind in AI, and the company has contributed very little to public research in the field. And yet, it will likely make hundreds of millions of dollars a year from this technology, while basically doing nothing. 

Consider a hypothetical scenario, if ChatGPT Plus were to add 5 million new subscribers on iOS, that would equate to roughly $1.2 billion in annual revenue. Taking 30% of that, Apple would collect $360 million a year from OpenAI’s creation.

Tim Cook said on Apple’s recent earnings call that the company will “weave” AI into its products, but cautioned that it would be “deliberate and thoughtful” in how it does so. “There’s a number of issues that need to be sorted,” he added. Apple has also told employees to limit their use of ChatGPT out of fear it will collect confidential information, The Wall Street Journal reported.

None of that is stopping Apple from offering the service to users through its App Store and reaping a profit on subscription sales. Apple’s services business, which includes revenue from App Store subscriptions, has been a major growth driver for the company in recent years as iPhone sales have slowed. In the most recent quarter, revenue from services topped $20 billion, a record for a category that produces some of Apple’s best profit margins. 

Apple recently won an antitrust case filed by Fortnite developer Epic Games, which alleged that Apple was acting unlawfully by restricting app distribution on iOS devices and requiring developers to use its own payment processor through which it takes a commission on sales. The ruling was a setback for developers who hoped a ruling would force Apple to open its devices to third-party app stores. The company will reportedly soon begin supporting third-party app stores in the European Union, however, where new laws are intended to level the playing field for developers. 

The judge in that case did rule that developers can send users to a web browser to make purchases and bypass Apple’s commission, however. OpenAI is not doing that, perhaps because the process is a bit more clunky than using Apple’s built-in payment processor.

Nonetheless, it means that Apple can make a lot of money from OpenAI while still cautioning about the privacy implications — and using the proceeds to build its own models. 

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