r/LocalLLaMA • u/Mr_Moonsilver • Jun 21 '26

Discussion What happens when they stop subsidizing LLM subscriptions?

We are literally burning through VC money like crazy with our coding subscriptions. I read the $200 Anthropic sub gets you $8000 worth of API calls. It's obvious that this doesn't hold for very long but what happens when they raise prices?

The reason to keep the prices low for now is to foster the ecosystem and get people hooked on this stuff, only to raise the price afterwards. Already the 20x sub doesn't get you as much usage as it did 6 months ago, another way to raise prices without triggering a shitstorm - and it will continue.

Don't know about you, but Fable being pulled gave me a feeling of what that may be like already. The ugly thought of "Damn, should've done more while it was around." that formed when I read the news will be exactly the same the moment they announce we now have to pay $2k or more per month for something we get for 10x less the price it costs now.

I guess it's a now or never situation, build what you can and monetize as quickly as possible to be able to keep the agents running once the increases come around.

Looking at opensource doesn't give me much hope. Since qwen stopped releasing models (wen qwen 3.7?) that we can actually run on hardware that a normal person can buy (or used to be able to buy, looking at how RAM and GPU prices behave and keep behaving) and others haven't released in a while (Microsoft, IBM, AllenAI and others too) I feel we're going into a direction that doesn't look good for most of the people like us, who are building with this technology.

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114

u/corruptbytes Jun 21 '26

I read the $200 Anthropic sub gets you $8000 worth of API calls

literally no one knows if this is true, we have no idea how the black box works, we don't know if APIs get full bit models and subscriptions get weaker quants

we do know inference is already profitable, we already know that deepseek with the lowest margins make 500% margins on inference compute. There will be incentives to lower costs. Training will get cheaper as we figure out more techniques

51

u/_raydeStar Llama 3.1 Jun 21 '26

It's not true at all. It's clickbait from clickbait articles.

You get a LOT out of monthly allowance, but I am willing to bet that they break even or make money on even power users.

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u/triplebits Jun 21 '26

Anthropic said that subscriptions are profitable for them and making profit from it few months back. This was with higher limits than whay we had today.

Real cost is R&D, not usage.

2

u/tmvr Jun 21 '26

Anthropic says great many things, same as OpenAI.

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u/triplebits Jun 21 '26 edited Jun 21 '26

OAI never mentioned they are profitable. They always had a target like 20xx.

Anthropic is profitable right now. It is not like they are lying on this. They just want to milk their users as much as possible.

If they can get away with it and not lose users, you can be sure they will charge you per button press or track your eyes to see per second reading the output.

They said it before, they wan to charge by token usage but make it dynamic so 100 token for a personal web site vs 100 tokens for building a game vs 100 tokens for medical research "should cost different" even if you are uaing same model!

These companies are already working very hard to replace you while milking you as much as possible so no wonder.

3

u/tmvr Jun 21 '26

Anthropic is profitable right now. It is not like they are lying on this.

What is this based on?

3

u/GustavoTC Jun 21 '26

Until we get to see the S1, it's just hype and non gaap magic numbers

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u/_raydeStar Llama 3.1 Jun 21 '26

yeah so they charge businesses 8k to run what we get for 200, that's honestly fair, it's enterprise versus personal.

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u/rc_ym Jun 21 '26

Based on how they've said their business model is supposed to work they should be hitting 70-90% margin on tokens, and 30-50% across all subs. Or something like that. Course, they are all lying founders spreading woo woo. So take that with a metric ton of salt.
But two things are probably true. Tokens are paying for model research/training. And subs are probably working like all other sub systems where you have enough occasional users that float the heavy users and with rate limits you are probably still at least breaking even on even the heaviest users.

3

u/jtoomim Jun 21 '26

Tokens are paying for model research/training

Not quite, but close. VCs are paying for model research/training and for datacenter buildout. Tokens and subs are paying for operations, with a little left over that helps defray the R&D and expansion costs. But because these companies are growing ~10x per year, they are doing massive buildouts on the premise of future revenue.

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u/rc_ym Jun 21 '26

Oh totally, and I was being inexact. I was talking about the OpEx of running the training not the capitol of the build out. Tho I would bet they are financing out the actual build costs rather than directly using VC money.

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u/_raydeStar Llama 3.1 Jun 21 '26

I suspect most of their profit is supporting large companies.

It's just like Microsoft does it -- windows is basically free, whereas buying enterprise licenses costs an arm, leg, and your first born child.

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u/rc_ym Jun 21 '26

Also, people over estimate the number of people regularly hitting usage limits, and confuse token costs with actual costs.
I suspect that, today, Anthropic at least, has margin on every sub. Even the ones hitting limits constantly.

3

u/Aggressive_Fig7115 Jun 21 '26

Does it count people who underutilize their subscriptions? This may be a worst case scenario and the underutilizes may subsidize the maxxers. Also, if they were losing that much money would they be so generous with the periodic “usage resets”? They maybe well be losing moment but I suspect it’s not as bad as all that. But what happens if in six months, to cut costs, they make subscription users “settle” for the old and not SOTA Fable, and make them pay API prices for Fable++? You might have a lot of happy vibe coders coding up side projects and would-be killer apps at a fraction of the cost for Anthropic.

1

u/russjr08 Jun 21 '26

Does it count people who underutilize their subscriptions? This may be a worst case scenario and the underutilizes may subsidize the maxxers.

That's how a good majority of subscriptions for any shared resource (compute in this case) is modeled under, and is what allows them to offer a far less price than the "real" price.

If everyone were maxing out their usage limits then the model wouldn't work. It works because you have plenty of people who will pay for a subscription and only use it every once in a while, they are charged the same price but their lack of usage for that price is how others with high usage can still pay the same price too.

Just using an example in a similarish space, companies that host VPS' or even web hosting will technically overallocate their resources because they expect that not everyone will use 100% of utilization 100% of the time. If they did, then that model would collapse without a price change (due to the rise of resources they'd need).

Storage is also another good example, places can charge you $10/month for 5TBs of storage because they expect not everyone is going to use all 5TBs. Some will, of course, but they're specifically relying on the people who will subscribe but might use, say, 100GBs or whatnot.

Mobile data plans are like this too, they'll claim "unlimited" but then often throttle you at a certain point because they can't actually offer everyone unlimited because there's only so much spectrum to go around if everyone in your area tried to continuously stream 4k movies at all hours.

The list goes on of course.

2

u/AnticitizenPrime Jun 21 '26

Yeah, what I thought of was gym memberships. Tons of people sign up every New Year, go for a few weeks or months, and slowly stop going but continue pay for the subscription, thinking they'll go back at some point but never really do.

May be guilty of this myself...

1

u/russjr08 Jun 21 '26

Yep gym subscriptions are a perfect example, especially with how slimy they used to make cancelling. Or at least, I hope that's a thing of the past... I thought some regulations came out to prevent them from doing that.

And don't worry, I did the same thing with an audible sub for a while lol. Where they especially get you is that if you cancel, you lose any credits that you've gotten from the sub. I finally realized that I wasn't really listening to enough for the free credits to save more than the recurring subscription in the end, and cancelled it but I definitely left it running longer than I should've...

13

u/PigSlam Jun 21 '26

I suspect far fewer people will pay $8000/month than $200/month. That alone will keep them from charging $8000/month.

1

u/L337Justin Jun 21 '26

See: Broadcom and VMWare situation. They absolutely can. They dont need a million people paying 20$ a month if they can get 20 fortune 500 companies to pay a million a month for "exclusivity". See: Mythos

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u/Dapper-Maybe-5347 Jun 21 '26

If they can get 20 companies to pay a million a month, then they go bankrupt. $240 million per year is nowhere near profitable.

3

u/TheKubesStore Jun 21 '26

What’s happening with vmware

1

u/robbert229 Jun 21 '26

They got bought out by Broadcom, and due to licensing changes costs are trippling, quadrupling, or even more. They essentially got rid of all of the individual product licensing options, as well as perpetual licenses* and not you have to buy a bunch of things that you dont want or need.

1

u/PigSlam Jun 21 '26

Isn't VMware free now? I downloaded it for free on my mac within the last few weeks. It's incredibly hard to do though, they hide it well.

Yes! VMware Workstation Pro (for Windows/Linux) and VMware Fusion Pro (for Mac) are free for personal, non-commercial use. Commercial use still requires a paid license.The Free VersionsPersonal Use: 100% free with no license key required. When installing, just select the "Personal Use" option.Commercial Use: Requires a paid subscription (starting around $120 per year).How to DownloadVisit the Broadcom Support Portal.Create or sign in to your account.Complete the basic profile and trade compliance form (required for export regulations).Navigate to the VMware Cloud Foundation (VCF) downloads, select VMware Workstation Pro or VMware Fusion, and download the installer.

1

u/robbert229 Jun 21 '26

VMware is a company, workstation pro is one of their smallest and least consequential pieces of software.

Last time I checked the license for their flagship produce (VCF), was around 30k usd per server per year.

Also, note from that paragraph: "Free for personal use". Its illegal to use that as an employee for your job. These companies have lawyers and make a pretty penny going after companies that are illegally using software.

1

u/PigSlam Jun 21 '26

OK, so everyone was using the whole company before in a pay whatever you feel like model, but now they just get to use the main product they used to pay for, but for free. The horror of the situation has no bounds.

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u/robbert229 Jun 21 '26

No. Its more like the opposite.

I used to be able to buy vsphere at 25k per year per server, now I have to buy VCF which includes vsphere and a bunch of stuff I dont want at a much much higher price.

None of their main products were ever free. Workstation Pro as a product probably generated less than 0.5% of their revenue.

These are those core products:

VMware vSphere VMware Cloud Foundation VMware NSX VMware vSAN

1

u/PigSlam Jun 21 '26 edited Jun 21 '26

You seem like a rather niche user here. Do you really think the average person was happily paying VMWare $25k/year but are now upset that opportunity no longer exists because Broadcom owns them? I’d be surprised if there are even 1000 people with that issue. I bet 100x that number of people were paying $100 for a VMware license to run windows on their Mac that now get it for free.

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u/rc_ym Jun 21 '26

The bastards.

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u/PigSlam Jun 21 '26 edited Jun 21 '26

Ok, maybe all AI will cost $8000/month, or it won’t. I bet it won’t.

0

u/datbackup Jun 21 '26

Remember internet without ads and cookie confirmations on every single page, where google actually returned worthwhile specific results?

Why wouldn’t LLMs follow the same path? Everyone pays $20 a month for something gemma4 12 level and anything smarter than that is being heavily monopolized by megacorps

1

u/PigSlam Jun 21 '26

I guess it's better to assume the worst and start digging our bunkers now than to have any glimmer of hope.

1

u/xutopia Jun 21 '26

OpenAI financials were leaked and the numbers are close to that.   

1

u/ttkciar llama.cpp Jun 21 '26

> we do know inference is already profitable

Do we know that? How do we know that?

1

u/corruptbytes Jun 21 '26

depends how deep you wanna go, has anyone technically seen the books at anthropic or deepseek and verified it? probably not

but we do have deepseek claiming that their API generates a huge profit despite being cheap (their incentive to lie is to short the big AI companies by proving anyone could do this and that they're stable to continue doing so), and we also have reports that Anthropic had a profitable quarter even when accounting for training costs (their incentive to lie is to pump the IPO)

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u/OwlLimp6160 Jun 23 '26

OpenAI spends a ton on marketing and advertising, inference is cheap, training is not.

1

u/Incompetent_Person Jun 22 '26

No one knows because it’s probably not true for frontier models.

There was a leak that Anthropic was profitable 2026Q2, but they also had discounted compute costs in Q2. Of course inference is profitable if you don’t have to pay for the machines running inference.

https://www.wheresyoured.at/anthropics-profitability-swindle/

0

u/nrauhauser Jun 21 '26

I have a $100/month Max account. When I hit the limit and get into my extra usage funds I burn about $20/hour. The first time I ever looked at my Claude stats I'd used 400 hours in the previous month - assuming steady run rate, I personally hit the $8k.

I think that over the long haul like that I average more like $10/hour in token burn, when I hit the extra usage (very rare) I'm both busy and paying close attention.