Amazon has been dropping hints that it may eventually start charging a fee to use Alexa – or at least some form of the digital assistant.
It’s a radical idea considering Alexa has been free since the first Echo speaker debuted in 2004. Since then, Amazon has firmly entrenched itself in the smart speaker market it created, and Alexa has established a presence in millions of homes around the world. Adults ask it for weather information or to play music, and kids ask it silly questions.
But are those capabilities worth paying a fee? Probably not, but Amazon has shown off new capabilities it hopes might change people’s minds. Dave Limp, the outgoing head of devices and services, said he “absolutely thinks” about charging for Alexa. In a follow-up email, Amazon told Cord Cutters News that Alexa will eventually offer enough value to justify paying.
“Over time, we certainly think there’ll be enough value in the experience that customers would pay for it,” said a company spokeswoman. “It’s early, but you’re already seeing this happen with other generative AI experiences focused on productivity, or with chatbots on the web—they all seem to have found that customers are willing to pay for the service if they find enough value.”
Limp suggested as much during last week’s Fall device event, when he said the smarter, more human Alexa would arrive as a “free trial,” suggesting that a charge would come down the line.
But how might Amazon go about charging a fee, given the big risk of a public backlash? Let’s put on our prognosticating hat and lay out a few scenarios.
Amazon charges a fee
This is the simplest scenario. Amazon showed off the expanded capabilities of Alexa at its event, including its ability to have a back-and-forth conversation with Limp, a conversation that went from his favorite college football team that shifted to what food to make when hosting friends for a game.
The company also showed off, in a pretaped video, the ability for you to ask it to tell you a made-up bedtime story, or interact with it like a person, including interrupting and asking questions in a natural way.
“Consumers will undoubtedly balk at paying a fee for existing Alexa features on devices they’ve already purchased, especially for basic assistive AI tasks like setting timers and weather forecasts,” said Avi Greengart, an analyst with Techsponential. But he saw potential if Alexa has additional AI features inline with something like ChatGPT.
There is precedent, with ChatGPT able to charge $20 a month for ChatGPT Plus, which provides priority access to the AI, faster response times and access to the latest features.
“It’s early, but you’re already seeing this happen with other generative AI experiences focused on productivity, or with chatbots on the web—they all seem to have found that customers are willing to pay for the service if they find enough value.”
The company noted that it won’t charge for the current version of Alexa.
Amazon Bundles it With Prime
An easier transition would be to restrict access to the enhanced Alexa to just Prime members, giving them an extra perk and reason to stay with its premium service. The company could even point to it as a justification for future price increases to Prime services.
While this would help with retention and customer loyalty, it wouldn’t generate as much revenue.
Amazon Bundles it With Other Services
The company could charge a fee that’s separate from Prime, but bundle the AI capabilities with other services that customers pay for. For instance, it could be part of a package that includes access to Amazon Music, or for larger cloud storage.
The company last said it would start adding advertisements to its Prime Video service. It could bundle an ad-free version with Music and a smarter Alexa for an additional fee, softening the blow since you’re getting more bang for your buck.
Greengart said the company could identify ways that a generative AI system might deliver more video for some of its other existing services, such as home automation or home security, or offering a more conversational AI for kids to interact with.
“It is just the beginning, and it’ll get better over time,” Limp said.
Given the number of new subscription services introduced by Amazon, and the general financial pressure facing all industries, it’s clear they’re focusing more on profitability than ever before. That’s a break from tradition, as Amazon has famously sold many of its devices at or near cost to seed the market with its assistant and services.
Adding Alexa to that mix makes sense given the company’s trajectory.
“None of these moves would be popular, but Alexa costs Amazon money to provide, and Amazon isn’t recouping that cost today directly,” Greengart said.