Since the launch of ChatGPT, AI has promised to be the next Gold Rush. Companies can’t stop talking about it, investing in it, and dreaming about how it’s going to revolutionize their industries. Fast forward to today, and it turns out that while generative AI is undeniably powerful, it’s also insanely expensive to build, run, and scale.

The dream of printing profits? Still a work in progress.

So while for most companies, making money from AI seems more like a pipe dream. Well, unless you’re part of this one industry that’s thriving thanks to generative AI.

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Who’s Getting Rich from GenAI?

OpenAI was expected to lose almost $5 billion last year. Heck, even their $200/mo Pro plan is losing money right now. 

Anthropic, their not-so-distant cousin in the AI world, isn’t doing much better either. They were also expected to burn through $2.7 billion in 2024. And these are just examples of the big guns in the AI world.

There are countless more AI startups that are losing TONs of dollars in the hope that venture subsidized capital can yield juicy profits down the line.

However, there is one industry where everyone is making money from genAI. Care to take a wild guess?

Management Consultants - of course!

How Much Money Are We Talking?

I’m not talking small boy money here. Consulting firms are making a huge BANK via Generative AI. Here are some quick stats:

• Accenture reported $1 billion in genAI bookings in just the last quarter alone with their total revenue attributed to genAI reaching $4.2 billion. 

•  Boston Consulting Group, which had $12.3 billion in 2023 revenue, projected that 20% of its 2024 revenue and 40% of its 2026 revenue would come from AI integration projects

Now, if you step back and think for a moment, it actually doesn’t look too crazy that consulting firms have been the big winners so far. The current AI marketplace looks something like this: 

1. Everyone thinks that AI is the next big thing.

2. These same companies cannot figure out how to profitably leverage genAI.

Cue: Management Consultants - who are now making more money than the genAI startups by charging companies hefty fees to help them figure out how to make use of genAI. 

This next big boom in tech is a long-awaited gift for consultants. From BCG, McKinsey and Accenture, sales are growing and hiring is on the rise because companies are in desperate need of technology sherpas who can help them figure out what genAI means and how it can help their businesses. 

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Premium Keeps the Lights On at Spotify

Spotify’s free tier is just the icing on a very large, increasingly profitable, premium cake.

Remember all that noise last summer when Spotify hiked its prices for the first time ever?

Well, it turns out, premium users didn't really care. Despite having to cough up more for their music, Spotify’s premium subscriber numbers are at a record 246 million.

And what happens when you charge MORE money to MORE users?

A boatload of MORE money. Spotify makes more than $3 billion in ARR just from their premium users.

CAN Watch Ads; CAN’T Hear ‘Em

I’ve covered many times how ingrained the ads model is in every industry. And video streaming is having its moment with ads. 

Many people seem increasingly willing to live with constant ad interruptions - especially if it means you’ll have to pay less for the platform.

Netflix, Amazon Prime and their buddies have jumped on the ad train, offering cheap plans plastered with ad interruptions.

Music might be a different story though. While people are alright paying less to binge their favorite shows WITH ads, they DON’T want ads to breakup their favorite playlist and are ready to pay the premium.

Spotify’s numbers reflect this aversion. While premium subscribers make up only 40% of the total subscribers, premium revenue is the real MVP, accounting for ~90% of the total dough.

Since ads don’t really move the needle that much for Spotify, the company is doubling down on paid plans with another recent price hike and plans to launch a Supremium tier later this year.

How can Spotify raise prices and still possibly get away with it?

Well, Spotify currently boasts one of the lowest monthly user churn rates among major video and audio services.

Audio streaming in general enjoys a lower churn than video streaming. Customers switch between audio services about 1/4th as often as they switch between video services.

Why? Because video streaming is all about exclusive content. Viewers switch based on where their favorite shows and movies are. Because content is a real moat in video streaming.

Audio services are pretty similar when it comes to their content offering. Millions of songs, podcasts, and albums all available on every platform makes it less about the songs and more about things outside of the songs that decides a person’s streaming platform of choice.

This makes the initial customer acquisition more challenging but once someone is in, audio streaming customers are much more stickier. While people will sign up and cancel a video service based on what is available, most people only use one audio service and rarely switch.

But not all audio services are created equal. Spotify has amassed a massive subscriber base of 600M+ users keeping their growth and cancellation rates much better than their peers by winning at personalizing the music experience better than anyone else.

You see, music is deeply personal. Sure, video platforms have recommendations and playlists, but they’re nothing compared to the curated experience of audio services. People don’t usually re-watch video playlists repeatedly, but they do have multiple playlists they return to over and over.

Spotify’s standout personalization features like Daily Mix, Discover Weekly, and the beloved Spotify Wrapped create a unique experience for each user, cementing loyalty and reducing the temptation to switch. So, while others may dabble, Spotify’s users stick around, making it the top dawg in the audio streaming arena.

☄️ Asteroids ☄️ 

Perplexity AI has submitted a revised proposal to merge with TikTok, in an arrangement that would give the U.S. government up to 50 percent ownership of the new entity.

Chinese AI company DeepSeek’s open-source reasoning model R1 is shaking up the AI world with its low training costs, innovation under sanctions, and benchmark success.

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