Apple is rumored to pay ChatGPT collaboration fees through distribution instead of cash

According to the information obtained by Zhitong Finance and Economics APP, Apple (AAPL.US) CEO Cook announced a milestone agreement with OpenAI this week, integrating ChatGPT into iPhone, iPad, and Mac, but they remain silent on the financial terms.

This leaves the market with a question: as part of the close collaboration, which company will pay the other, and this cooperation may bring lasting economic benefits to both parties. However, it is expected that this collaboration will not bring substantial income to either party, at least initially.

The collaboration between the two parties includes integrating ChatGPT (a digital assistant that responds to information requests in simple language) into Apple's Siri and new writing tools. Sources familiar with the matter stated that Apple did not pay a cooperation fee to OpenAI. Instead, these sources indicated that Apple believes that promoting OpenAI's brand and technology to hundreds of millions of devices is valued as much as or even more than monetary payment.

Meanwhile, thanks to OpenAI, Apple has gained the benefit of providing advanced chatbots to consumers, which may attract users to spend more time on their devices and even spend money on device upgrades.

Representatives from Apple and OpenAI declined to comment.

The agreement with OpenAI is part of Apple's broader push into the field of artificial intelligence. The iPhone maker outlined these plans in the keynote address at its annual Worldwide Developers Conference, showcasing the artificial intelligence capabilities of the iPhone, iPad, and Mac. Non-ChatGPT features—referred to as Apple Intelligence—are designed internally by the company.

However, even if money is not the primary factor in the Apple-OpenAI deal, compensation may play a role in the future.

In the current structure, this collaborative relationship may come at a high cost for OpenAI, as OpenAI needs to pay Microsoft (MSFT.US) to host ChatGPT on Microsoft's Azure cloud computing system. The more people use ChatGPT, the higher the cost for OpenAI. Integrating with Apple devices—although users can opt for others, but limited to the company's recent products—could significantly increase the computing budget.

ChatGPT will be provided for free on Apple's products, but OpenAI and Apple can still earn revenue by converting free users into paid accounts. OpenAI's subscription plan starts at $20 per month—this fee includes additional features such as data analysis and the ability to generate more types of images.

Now, if users subscribe to OpenAI on Apple devices through the ChatGPT application, the process will use Apple's payment platform, traditionally benefiting the iPhone maker.

Apple's agreement with OpenAI is not exclusive, as the iPhone maker has been in discussions to offer Google's (GOOGL.US) Gemini chatbot as an additional option The agreement is expected to be reached later this year.

Sources familiar with the matter earlier this year said that Apple was also in negotiations with Anthropic for a potential chatbot partnership. The idea is to ultimately provide users with a range of artificial intelligence services, similar to how Apple offers different search engine options in the Safari browser.

According to sources, Apple's ultimate goal is to generate revenue through revenue-sharing agreements with AI partners, who will monetize chatbot achievements on the Apple platform. The company believes that artificial intelligence could erode the billions of dollars it receives from Google search deals, as users may prefer chatbots and other tools over search engines. Apple will need to establish new agreements to make up for this gap.

Additionally, the cost of Apple's own artificial intelligence services will not be too high, as most of their services are processed on devices rather than through cloud computing. Nevertheless, the company is still strengthening its data center business to support new online artificial intelligence services that handle more advanced tasks.

To make Apple Intelligence successful, the company also needs to expand it to other languages and countries. This may be a challenge in China, as it is one of Apple's largest overseas markets, and services like ChatGPT and Gemini are currently banned in China.

Sources said that the company has not yet reached an agreement with a local Chinese supplier to handle chatbot functions, but has been considering agreements with companies like Baidu (09888) and Alibaba Group (09988). Currently, Apple Intelligence only offers an American English version, but the company plans to support more languages next year