OpenAI, Microsoft Agree to Cut Microsoft's Revenue Share to 8% by 2030

OpenAI and Microsoft have reached a new agreement that significantly reduces Microsoft's share of OpenAI's revenue. OpenAI has informed some of its shareholders that the revenue share it pays to Microsoft will decrease from the current near 20% to approximately 8% by 2030. This adjustment means that by 2030, OpenAI will be able to retain an additional 500 billion dollars in revenue.

The negotiations between the two companies extend beyond just the revenue share. Key issues such as the future of their collaboration once OpenAI achieves Artificial General Intelligence (AGI) and the cost of OpenAI leasing servers from Microsoft are still under discussion. The initial agreement stipulated that Microsoft would have the right to 20% of OpenAI's revenue until 2030. However, the new 8% revenue share means that by 2030, OpenAI is expected to share around 560 billion dollars of its revenue with Microsoft and other partners, significantly lower than the previously estimated 740 billion dollars.

The reasons behind OpenAI's expectation that its revenue share with Microsoft will be lower than the original 20% agreement are not yet clear. However, some OpenAI executives had previously hoped that Microsoft would exclude certain future products, such as the 20,000 dollar monthly fee for a doctoral-level AI agent, from the existing revenue-sharing agreement. Notably, the 8% target is more aggressive than the 10% revenue share with partners that OpenAI had predicted earlier this year. The high 20% revenue share this year might reflect OpenAI's support for some Siri queries on Apple devices, although this collaboration does not seem to have significantly contributed to OpenAI's subscription sales.

The companies are also negotiating the arrangements for when OpenAI achieves AGI. AGI refers to artificial intelligence that reaches the same level of intelligence as humans. The current contract states that once OpenAI demonstrates its technology can achieve AGI, Microsoft will lose its exclusive access to OpenAI's technology. However, Microsoft is trying to modify or completely remove this AGI clause. Both parties are also discussing how many server resources OpenAI will lease from Microsoft.

While many aspects of the agreement are still being discussed, some arrangements have been largely finalized. Under the new corporate structure, OpenAI's non-profit organization and Microsoft are expected to each hold about one-third of the shares. Currently, OpenAI allows employees to sell shares at a valuation of 500 billion dollars. It is unclear whether the new non-binding cooperation agreement announced by Microsoft and OpenAI on Thursday includes the latest changes to the revenue-sharing plan shared with investors.

Over the past few weeks, both companies have been engaged in intense negotiations. The chief financial officers of OpenAI and Microsoft, along with their respective teams, have been meeting weekly to finalize the details of the reorganization. This new agreement marks a significant shift in the financial dynamics between the two companies, potentially allowing OpenAI to retain more of its revenue while still benefiting from Microsoft's technological and financial support. The outcome of these negotiations will likely have a profound impact on the future of AI development and the competitive landscape in the tech industry.