OpenAI Starts Selling ChatGPT at a Discount, Hurting Microsoft
The Takeaway
• OpenAI discounted ChatGPT Enterprise 10% to 20% for customers buying additional products
• The company has projected nearly $15 billion in annual revenue from ChatGPT business customers by 2030
• Microsoft salespeople lost deals because they couldn’t match OpenAI’s discounts
OpenAI has started discounting enterprise subscriptions to its ChatGPT app when customers agree to spend money on additional AI products, according to an OpenAI spokesperson and two executives at large firms that have spoken to the startup in recent weeks.
The move has frustrated salespeople at Microsoft, OpenAI’s biggest business partner, which sells competing apps and models and doesn’t typically discount them as much.
The discounting suggests OpenAI’s pricing power may not be as strong with enterprises as it is with consumers, who make up the vast majority of its revenue. It also may reflect how AI firms are trying to pass some savings to large customers after finding ways to lower the cost of running models in data centers.
Discounts on OpenAI’s ChatGPT can range from 10% to 20% when the customers sign a multiyear agreement to buy other OpenAI tools, including a bespoke version of its Deep Research agent, which can produce full-fledged reports, and its Codex coding agent, which can autonomously debug code or rewrite applications. Customers can also get a discount if they commit to spending a certain amount on OpenAI’s application programming interface to access its models, these people said.
The discounting could further inflame an already difficult relationship between OpenAI and Microsoft, which uses OpenAI technology in its AI products but is locked in tense negotiations over OpenAI’s plan to restructure its for-profit unit.
OpenAI’s price drop has caused problems for salespeople at Microsoft, whose Copilot chatbot competes directly with ChatGPT Enterprise and starts at a similar $30 per user per month. Microsoft also resells OpenAI’s models and prices them similarly to OpenAI, which sells those models on its own.
Microsoft salespeople in recent weeks have fielded inquiries from customers asking if the company can match OpenAI’s discounts. The salespeople have lost some deals because they didn’t get approval to match the OpenAI prices, according to two Microsoft employees.
A Microsoft spokesperson said that the company offers “competitive pricing” that sometimes matches or exceeds OpenAI’s discounting, and that Azure’s security and compliance guarantees make it “distinct” from OpenAI’s direct sales of AI models.
In some ways, OpenAI’s discounts can be seen as returning a favor to Microsoft. In 2023, Microsoft steered some business away from OpenAI by giving discounts on customers’ Azure cloud server bills, including customers’ use of OpenAI models.
These days, companies are increasingly turning to AI to power business functions such as customer support chatbots or internal productivity tools in an effort to save costs and in some cases replace employees.
OpenAI was an early mover in the field after striking gold with ChatGPT subscriptions for consumers and professionals.
Earlier this year, OpenAI told investors it had generated $100 million in revenue last year from ChatGPT Enterprise, which is geared toward larger companies with more than 100 employees. That’s about 3% to 4% of its total revenue from ChatGPT. Earlier this year, the company projected $400 million in revenue from the Enterprise product in 2025 with 2 million subscribers, $1 billion in revenue next year with 4 million subscribers, and $6.2 billion in revenue for 2030 with 16 million subscribers.
In recent months, OpenAI told investors that ChatGPT Teams, which smaller companies use, generated roughly $200 million last year from about 1 million subscribers. The company projected ChatGPT Teams to generate $800 million by the end of this year from 4 million subscribers, and $8.5 billion by the end of 2030 from 22 million subscribers.
By 2030, OpenAI expects both Teams and Enterprise to have 38 million subscribers and generate $14.7 billion in revenue, or about a quarter of the $62 billion in revenue OpenAI projected to get from ChatGPT that year.
Ahead of Schedule
But OpenAI’s enterprise business may be running ahead of schedule, and its fast growth is in line with the booming growth of ChatGPT’s consumer version and the products sold by some of OpenAI’s biggest competitors.
OpenAI recently said that there were more than 3 million paid users of ChatGPT Enterprise, Teams or subscriptions purchased by a university, up from 2 million in February and 1 million in September last year.
An OpenAI spokesperson said that in the past two weeks, the company made ChatGPT Enterprise subscriptions cheaper for firms that agreed to spend additional money on newer “advanced features and models.”
Microsoft salespeople asked the company’s finance department if they could match the OpenAI discount but were rebuffed. As a result, the customer told Microsoft it was choosing to buy the models through OpenAI instead.
The discounts customers get on ChatGPT Enterprise are proportional to the amount they agree to spend on other features, the spokesperson said.
In some cases, those discounts effectively lowered the price of ChatGPT Enterprise from $30 to around $25 per user per month, according to the two people who spoke to the company.
Separately, OpenAI has also offered some firms similar discounts on prices of its AI models if they agree to spend several million dollars over more than a year, one of the people said.
That move is less surprising, as the price of AI models sold through APIs has rapidly fallen across the industry due to fierce competition. OpenAI, Anthropic and other firms have cut the price of cutting-edge models more than 90% over the past year.
OpenAI Chief Commercial Officer Giancarlo Lionetti declined to comment on specific discounts but said OpenAI has been steadily making its models more efficient and “we want to pass on savings to our customers.”
He added that large enterprises were choosing OpenAI over competitors for reasons other than discounts, such as “visibility into our product road map” and early access to new tools such as Codex.
Customers such as Notion and Salesforce have opted to buy AI models from OpenAI directly rather than from Microsoft because of the access they gain to OpenAI engineers. Firms such as Intuit and Fidelity have chosen Microsoft because they have existing cloud contracts with the company.
Undercutting Microsoft
More recently, a software company that had purchased OpenAI models through Microsoft over the past year was in talks to sign a new agreement to spend $8 million on the models over the next three years, according to a Microsoft salesperson involved in the talks. But that firm notified Microsoft that OpenAI had offered it a 20% discount on the same models, reducing the cost over three years by around $1 million, this person said.
Microsoft salespeople asked the company’s finance department if they could match the discount but were rebuffed, this person said. As a result, the firm told Microsoft it was choosing to buy the models through OpenAI instead, according to this person.
In another recent case, a private equity firm told Microsoft salespeople it was considering purchasing around 3,000 seats of Microsoft 365 Copilot, according to a different Microsoft salesperson, which would cost over $1 million annually without any discounts.
But the firm told the Microsoft salespeople it had an offer from OpenAI to get the same number of ChatGPT Enterprise seats at a 20% discount, which would have brought the total annual cost down to around $800,000. In that case, Microsoft couldn’t match OpenAI’s discounted rate, this person said. The private equity firm hasn’t made a final decision on which vendor to select, this person said.
Microsoft typically offers discounts to its largest customers when they buy software and cloud services in bulk for a commitment of at least several million dollars a year, in what are known as consumption agreements, according to Microsoft employees and executives at large corporate customers. Even then, Microsoft will typically only offer around 5% to 10% off the sticker price, these people said.
A Microsoft spokesperson did not have a comment.