ChatGPT deal is impressive negotiating by Apple – and an interesting gamble by OpenAI

Yesterday brought a surprise report that Apple isn’t paying OpenAI for the ChatGPT deal, which will bring the chatbot to Apple devices later in the year.

It’s an impressive piece of negotiating by Apple, which would have been expected to have to pay a significant fee for all the server access provided, and an interesting gamble by OpenAI …

Apple’s ChatGPT deal

The core of the iPhone maker’s move into AI is Apple Intelligence. This operates on-device for many tasks, and uses Apple’s own cloud service Private Cloud Compute for more complex requests.

But if neither the device nor PCC can handle the request, then users are asked for permission to use ChatGPT. Those ChatGPT calls are handled by OpenAI’s servers, so tens of millions of iPhone users are going to be using the AI company’s resources.

You would have expected Apple to be paying for the privilege, but Bloomberg says that isn’t the case.

Apple isn’t paying OpenAI as part of the partnership, said the people, who asked not to be identified because the deal terms are private. Instead, Apple believes pushing OpenAI’s brand and technology to hundreds of millions of its devices is of equal or greater value than monetary payments, these people said.

This is impressive negotiating by Apple

There’s a common complaint by creative professionals that they will sometimes be rudely asked to carry out a project without pay “for the exposure.”

In other words, a company argues that the world will see their work, and the association with the brand, and that this has value. The classic response to that by creatives is they’ll agree just as soon as mortgage companies and grocery stores start accepting “exposure” as a payment method.

Yet this is exactly the deal Apple has pulled off here: It’s persuaded OpenAI to work for exposure.

It’s an interesting gamble by OpenAI

So what does OpenAI get out of it? Two potential things.

First, well, exposure. While you and I might think that ChatGPT is already a household name, most of us live in a tech bubble. There are plenty of normal folk who either haven’t heard of it at all, or know only that it’s some kind of AI thing which they’ve never used.

Because Apple is very carefully controlling the AI tasks its own devices and PCC will handle, a lot of Siri requests are going to get handed off to ChatGPT.

And because Apple is being equally careful to seek permission to pass requests to ChatGPT (to protect its own reputation against AI hallucinations), then every Apple user with a compatible device is going to start seeing that name on a daily basis.

Second, while we don’t know the exact details yet, it does seem that Apple users will be subject to ChatGPT usage limits in a similar way to free direct users. That will certainly include the version used, and perhaps also include a limit to the number of requests they can make.

OpenAI will therefore be hoping to upsell some of us to its premium plans.

Will the gamble pay off? Maybe – but I know I’d be very much happier to be on Apple’s end of that deal!

Photo by Solen Feyissa on Unsplash