> We are slowly inching closer to the point where AI and AI products will be billed for what they cost.

I suspect the API prices are already served with profitable unit economics. The SOTA API prices are much higher than the costs for other providers to run very large open weight models.

The monthly subscription plans were being offered at a discount to generate interest in these models.

We're not entering a period of billing AI at cost. We're entering a period of exploring how how the prices can go before losing too many customers.

Products and services aren't sold at cost. They're sold at the price the market will bear. It takes some experimentation to find that equilibrium point where you make more profit per customer but don't lose too many customers.

I called this last year: https://digitalseams.com/blog/the-ai-lifestyle-subsidy-is-go... .

I see it as no different from the previous generation of consumer startups burning money - as Derek Thompson wrote,

> ...if you woke up on a Casper mattress, worked out with a Peloton, Ubered to a WeWork, ordered on DoorDash for lunch, took a Lyft home, and ordered dinner through Postmates only to realize your partner had already started on a Blue Apron meal, your household had, in one day, interacted with eight unprofitable companies that collectively lost about $15 billion in one year.

This is already happening. For new Anthropic enterprise accounts you are billed at api token prices (maybe with a small volume discount). Anthropic makes a profit on those tokens. (Sure, that profit does not cover the model training costs, but that’s a separate issue.) It’s the subscriptions for individuals (e.g. Claude Max) that are still subsidized below cost.

> I wonder if managers will be as excited about AI when the prices go up.

Companies are willing to pay the api pricing. Engineering time is very expensive and AI coding agents actually work now since December and are actually showing measurable productivity gains, finally. It’s a good deal to make (obviously, with caveats: you need to make sure your tokens are going on productive tasks that will actually grow revenue) and anyone who penny-pinches is making a strategic mistake.

It is already bafflingly expensive. I interviewed at a place recently where they said the average dev was hitting $2k/mo in Claude code costs.

That is no longer a helpful tool... it costs like ~15% of an actual dev.

Even if it is helping, is it actually... making things better or building anything truly important? The issue seems way too nuanced to spend $2k/mo. Not to mention the entire tech industry floats on hype and imaginary goal posts so now what? Devs can hurdle towards those faster and more mindlessly?

Slowly inching? GitHub Copilot announced 600%+ price increases for many workflows, with others being potentially 100x more expensive due to the change from request to token based billing.

That's what the cloud AI industry is banking on. Pushing hard to get AI into workflows at a critical position, then raising the cost to turn the screws, hoping that companies would rather pay than pivot again

It's humorous to me that I can do the work of an AI with nothing but a coffee and an occasional sandwich and yet they talk about AI as if it's some sort of magic hack to productivity.

What they don't like is paying money for the work, that's all that matters to them.

run local models

But with new hardware comping out, and maybe models being smart enough to help with optimizing them and reducing inference costs even more, I think we should still expect the costs to go down.