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Comment by Gigachad | Hacker News Reader

This stuff is all done on highly subsidized subscription plans. I suspect Antropic is quite happy to sell these people $100k of compute for $4k because it boosts their growth numbers and they can tell investors once they stop subsidizing, this will grow to $100k. Despite the fact that most of this stuff simply wouldn't be done without the subsidization.

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the exact same arguments were said about uber's business at the start.

Yet, it is now profitable.

The bet is that people realize how valuable these services are, and despite complaining, they still would pay the higher price. This realization would not happen without this initial subsidy from investors.

It isn't too different from drug dealer's first sample free...

Uber business model wasn't a subscription "for 10 bucks you can travel 900 lightyears a week"

There’s also examples where this didn’t work. Moviepass for example.

Taxis were an established profitable business model and the uber subsidisation wasn’t anywhere near as much as AI subsidies.

Disagree with your second paragraph. Uber/lyft subsidized into deep negative margin territory around ~2015 or so. Anthropic (and OpenAI) are subsidizing but not losing money on these consumer plans.

> subsidizing but not losing money

????

It's profitable if you don't count the expenses.

I think you're joking but that's Amodei & co are claiming with a straight face.

The claim is that uber and lyft lost money on each ride but that openai and anthropic make money on inference. Just not enough to pay the cost of developing the models. The difference is that uber and lyft had to change their pricing (or payment) models to make money, where anthropic or openai could just sell enough inference (at some level of sales).

to clarify, I mean that the big model companies are charging consumers much less than equivalent API pricing but they're not actually losing money so its more of a steep at-cost discount for inference. It likely does not fully cover amortized R&D just like the other reply stated but it does still cover marginal inference cost (GPU/power/etc)

Uber and Lyft were paying drivers $X but charging users way less than $X so they were literally burning investor money to get market share.

> It likely does not fully cover amortized R&D just like the other reply stated but it does still cover marginal inference cost (GPU/power/etc)

Why does this point come up over and over again, pretending that you can truly separate training and inference costs. Yes, they are separate things but the value OpenAI and Anthropic are presenting to the world is "we're the absolute best, no one else comes close." Well, to keep that up you can't just not train for extended periods of time. You have to keep that engine going non-stop when there's free Chinese models nipping at your heels. You can be profitable on "just inference" all you want but if training expenses dwarf that, you're not going to be profitable overall, and that's the bottom line.

> does still cover marginal inference cost Simply comparing to the larger models on OpenRouter implies that the pure hosting costs (equipment + power + minimal overhead) still exceed plan pricing if we assume all users always use their full weekly allowance.

So my conclusion is that it only works because the majority of users doen't fully utilize their allowance. Last month I used almost nothing of my Claude 20x plan (did use Codex though).

Moviepass failed because they thought it's going to be like Gym membership - people buy and don't go, but guess what? People love going to movie theaters. On its own its not bad, see AMC Stubs, but AMC owns the theater, they sell you popcorn and soda. OpenAI an Anthropic is closer to AMC than Moviepass.

> Moviepass failed because they thought it's going to be like Gym membership - people buy and don't go, but guess what? People love going to movie theaters.

You think developers won't/don't stretch subscriptions to the absolute limit? The AI subscription model is like the gym model except a large percentage of the customers work out 24/7/365.

You're missing a piece: MoviePass was selling subscriptions while buying tickets from theaters at retail prices. That's why I mentioned AMC A-List, their subscription model works pretty well for them because they control per ticket and subscription price.

The price these companies charge per token is irrelevant to a discussion about subscriptions. You're comparing two selling prices, when what matters is the actual cost. It's like those ads saying, “Normally $20 million, but today it's only $99!” for something that costs $10 to make.

Sure, they're losing money now. But the question is whether the tokens you use through your subscription will eventually cost them less to generate than you pay for that subscription. Their per-token selling price doesn't tell you that.

Last I checked, Uber underperformed the S&P index since its IPO. Even Softbank didn't make a great return on its investment. The growth story was definitely oversold.

Also, Uber was peak ZIRP + COVID, money was cheap and growth was easy. I think the mountain to climb is a lot steeper now.

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