We’re Slowly Moving to a Subscription-Based Phones, Thanks to AI

AI has firmly established itself, but what price are you willing to pay for its integration?

In the realm of smartphones, AI is undeniably becoming the linchpin for future innovation. With the likes of Google’s Pixel 8 and Samsung’s Galaxy S24 series already integrating various AI capabilities, the race is on for Android brands, and even Apple, to elevate their devices to true “smart” status. As manufacturers shower us with a barrage of features during this period of rapid growth, the looming question remains: Will consumers be willing to invest extra for AI in the long run?

The signs are pointing towards at least some mobile AI features transitioning behind paywalls. Samsung has assured users that Galaxy AI will remain free until 2025, but the possibility of more advanced AI functionalities becoming exclusive to paid subscribers is on the horizon. Similarly, Google has introduced premium charges for certain AI features, like Video Boost, which is reserved for the higher-priced Pixel 8 Pro due to data center expenses. Given the costs associated with cloud-based processing, it’s inevitable that an “AI subscription” model will emerge as a means of sustaining these advancements.

Do AI capabilities justify a monthly expense equivalent to has of a Netflix or Spotify subscription?

Google’s Gemini offers a peek into the future of AI subscriptions. While the basic AI assistant remains free, advanced features like Help Me Write, spanning across Docs, Gmail, Sheets, and more, are now part of the new $19.99 per month Google One AI Premium plan. This plan includes the 2TB storage and other perks of the traditional $9.99 Premium option, effectively valuing Gemini Advanced and its integrations at $10 a month.

At $10 a month, it’s not overly pricey, but it may not seem like a bargain either, especially for those primarily using it for composing emails. The critical question for AI subscriptions is whether they can deliver equivalent value and everyday usefulness compared to multimedia and other monthly fees that customers willingly pay. Whether text editing or enhanced web search alone would be compelling enough to entice many to subscribe remains uncertain.

Google’s bundled service approach appears to hold promise. Providers offering AI capabilities across various domains such as documents, email, messaging, search, photos, videos, and more are likely to attract subscribers seeking comprehensive solutions. It wouldn’t be surprising if Samsung, Apple, and other industry players are eyeing similar strategies.

Why limit ourselves to software alone? The current plateau in hardware innovation and the shift towards extended software support suggest it’s time to reconsider smartphones-as-a-service. Paying around $35 monthly for both hardware and software could be more appealing than purchasing a $1,000 phone with an additional AI subscription. This model seems promising, particularly if it ensures a consistent feature set and includes future advancements. However, its success ultimately hinges on whether AI evolves into the indispensable tool many envision.

To win over consumers, AI subscriptions must exceed mere fundamentals.

An alternative approach is to execute AI capabilities locally whenever feasible, cutting down on long-term server expenses and providing users with some control over the features they’ve invested in. However, there are limitations, both in terms of mobile hardware capabilities and the scale of models required for highly advanced AI processing. Moreover, the ubiquity and versatility of cloud computing make it a more accessible option for companies to reach a broader consumer base.

Regardless of the chosen path, introducing subscriptions for supplementary services differs significantly from charging consumers to retain access to a phone’s initially advertised features. Transitioning from included features like Galaxy AI or Video Boost to a subscription model could severely impact consumer trust and erode incentives for future device purchases based on software advancements. Those venturing into the early stages of AI integration need to approach this terrain with caution.