I’m not convinced that these price increases represent an attempt to squeeze more profit out of a saturated market.
To me they look an awful lot like people realising that the sheer compute cost associated with modern models makes the historical zero-marginal cost model of software impossible. API calls to LLM models have far more in common with making calls to EC2 or Lambda for compute, than they do a standard API calls for SaSS.
A lot of early LLM based business models seemed to assume that the historical near zero-marginal cost of delivery for software would somehow apply to hosted LLM models which clearly isn’t the case.
You mix that in with rising datacenter costs, driven by lack of available electricity infrastructure to meet their demands, plus everyone trying to grab as much LLM land as possible, which requires more datacenters, more faster. And the result is rapidly increasing base costs for compute. Which we’re now seeing reflected in LLM pricing.
For me the thing that stands out about LLMs, is that their compute costs are easily 100-10000x greater per API call than a traditional SaSS API call. That fact alone should be enough for people to realise that the historically bottomless VC money that normal funds this stuff, isn’t quite a bottomless as it needs to be to meaningfully subsidise consumer pricing.