Will Apple Change Its iPhone 16 Feature Price Decision?

This story was updated on August 12th with new details about Apple Intelligence.

Apple is clear about the price of its Apple Intelligence AI features that will debut on the iPhone 16: they’re free. How long they’re free for, or if free comes with an asterisk, remains to be seen.

Neil Shah, partner at Counterpoint Research, told CNBC that Apple could charge between $10 and $20 monthly for Apple Intelligence, potentially as part of the Apple One subscription service.

“Software and services make it more lucrative for Apple to pass it on with the Apple One subscription model,” Shah explained.

AI is expensive to develop and maintain, while Shah correctly says that subscription revenue is far too lucrative for tech companies to pass up. Google already charges $19.99 monthly for access to its Google One AI Premium plan, which bundles Gemini Advanced with 2TB of cloud storage. U.K. subscribers also get free access to Nest Aware and Fitbit Premium.

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ChatGPT has a premium tier and Samsung has repeatedly warned users that Galaxy AI will only be free until 2025. The infrastructure is there for these companies to charge for access to their most advanced software. Considering the billions already spent on building these language models and the ongoing cost to maintain them, money has to be recouped.

But the question for these companies is whether the current crop of AI tools are impressive enough to be locked behind a paywall? Looking at the current lineup of AI tools, across all major smartphone makers, I don’t think they are.

There isn’t a compelling case to pay extra for Writing Tools, Genmoji, audio transcription, web page summaries, or a smarter Siri. It’s the same with Galaxy AI and Gemini, which are useful and enhance the smartphone experience. I frequently ask Gemini for a helping hand and I am often impressed by generative image editing and call transcription.

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But they are not worth adding another direct debit to my current stack. I am comfortable and experienced with non-AI-enabled smartphones enough to work through the FOMO.

This is why I don’t think Apple will change its decision on charging for Apple Intelligence any time soon, there isn’t a compelling case to do so. AI is the shiny new trend, but there are signs people are losing trust in the technology. Charging for previously free features could mean alienating people even further from the tech they were already souring on.

There’s also the game of chicken between Samsung, Google and Apple on AI tools. Whoever decides to put up the paywall first may may face a public backlash, which will inform the decisions of rival companies. These AI features are also quite similar, so why would iPhone users pay to transcribe their calls when Samsung users don’t have to?

Google has provided free AI tools via its Pixel Feature Drop program since 2019 and I don’t think that will change any time soon. Its paid tier of AI tech is for a very specific version of the Gemini language model that is more advanced. Or it will cost you extra if you want to save more Magic Editor cloud saves outside of the designed 10-per-month allowance.

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But day-to-day AI-powered Pixel features have remained free. Above all else, skills like Call Screen and Photomoji may be AI-influenced but they’re ultimately just more smartphone features.

Where will the line be drawn between a regular feature upgrade in a new OS update, and what is paywalled because it’s ‘AI’? And how can that be done without alienating users who have already paid hundreds, or thousands, for top-end hardware? Alongside existing subscriptions they already have with that company.

Paywalled AI tools may make financial sense because it costs billions to build and maintain this technology, but the implementation of that plan is complex. There will need to be a lot of development work to make these tools worth paying extra for and then some persuasive arguments about why they shouldn’t be free.

There are several hurdles to leap before a paid AI feature set becomes a reality. for that reason Apple Intelligence, Galaxy AI and Google AI will likely stay mostly free for the foreseeable future.

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August 12th update: Bloomberg’s Mark Gurman claims that Apple will make Apple Intelligence a key marketing point when the iPhone 16 launches. All iPhone 16 models will run the company’s AI toolset, which will also work on the iPhone 15 Pro versions. Apple spending its marketing budget on promoting AI isn’t a surprise considering its the buzzword of the year and rivals have made the exact same move.

Samsung lead with Galaxy AI when the Galaxy S24 launched this year. Google is also teasing that its AI features will play a huge role in the upcoming Pixel 9’s usability.

Samsung has built up some goodwill by rolling out Galaxy AI to older handsets, going as far back as the Galaxy S22. Bloomberg says that Apple will do the same by releasing AI tools to select handsets from 2023, but there’s no mention of older devices reciving the same treatment.

In fact, Bloomberg claims that at least 8GB of memory is needed to run Apple Intelligence, which rules out anything below the iPhone 15 Pro. That may change if less demanding features can be run on lower specification hardware. Samsung released select AI tools to phones that can run them, for example the Galaxy S21 series only got Circle to Search. The Galaxy S22 lineup got almost all AI tools save for Instant Slow Mo, which requires more onboard processing power. Apple could follow a similar route if Apple Intelligence proves to be popular.