OpenAI Loses Millions as Apple Takes 30% Chunk of Innovation

Updated: 26 May 2023

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Apple quietly raked in profits as the AI revolution surges, with OpenAI’s ChatGPT app captivating the crowd.

Amidst the cheers and applause, the tech giant stood out, not at the forefront of generative AI, but still taking a substantial share of the AI pie.

OpenAI Thrives on App Store Charts Amidst Apple’s “Apple Tax” Controversy

OpenAI’s venture gained momentum by introducing an iPhone app for ChatGPT, propelling it to the top of the App Store charts. In a matter of days, the app secured the number one spot in the free apps category, with Apple endorsing it as a “must-have” app under its “Essentials” category.

Introducing the ChatGPT app for iOS! We’re live in the US and will expand to additional countries in the coming weeks. Android is next! https://t.co/p3PfTtxL9i

— OpenAI (@OpenAI) May 18, 2023

Apple imposes a 30% cut, known as the “Apple Tax,” on all new subscriptions made through iOS, which has garnered criticism, particularly from crypto users who find in-app NFT purchases costly. Despite this, OpenAI complied with Apple’s terms and use its native in-app purchasing system rather than establish a separate subscription website. Consequently, for every ChatGPT Plus subscription purchased by iOS users for $20 per month, Apple keeps $6.

Apple’s CEO, Tim Cook, emphasizes integrating AI into Apple’s products while maintaining a focus on profitability. Data privacy concerns persist, but ChatGPT remains available on the App Store, contributing to Apple’s record-breaking service revenue of $20.8 billion in the latest quarter.

The 30% fee imposed by Apple has sparked controversy, leading to a U.S. federal appeals court ruling that Apple violated California’s Unfair Competition Law by prohibiting alternative payment methods. Nevertheless, OpenAI seems to continue with Apple’s payment processor, possibly because of its user-friendly interface.

Apple triumphs in an antitrust case against Epic Games but faces pressure to allow third-party app stores in the EU under the new legislation. The situation highlights the complex relationship between AI pioneers, big tech, and regulators, with Apple benefiting from others’ innovations while facing ongoing controversies. The AI revolution is in its early stages, fueling a race to capitalize on its potential.

Apple Victorious in Epic Games Antitrust Case, Retains Control Over App Distribution

Apple recently emerged victorious in an antitrust case filed against it by Epic Games, the developer of Fortnite. Epic Games had accused Apple of engaging in unlawful practices by imposing restrictions on app distribution on iOS devices and mandating the use of its own payment processor, which entails a commission on sales.

The ruling delivered a blow to developers who had hoped for a decision that would compel Apple to allow third-party app stores on its devices. Nonetheless, there are reports that Apple will soon introduce support for third-party app stores in the European Union, where new regulations aim to create a fairer environment for developers.

Apple prevailed at the 9th Circuit Court. Though the court upheld the ruling that Apple’s restraints have “a substantial anticompetitive effect that harms consumers”, they found we didn’t prove our Sherman Act case.

— Tim Sweeney (@TimSweeneyEpic) April 24, 2023

In the case, the judge did rule in favor of developers being able to redirect users to a web browser for making purchases, thus bypassing Apple’s commission. OpenAI, however, has not opted for this approach, possibly because of the perceived inconvenience associated with using an external payment processor as opposed to leveraging Apple’s integrated system.