Comment by _jab
21 hours ago
This agreement feels so friendly towards OpenAI that it's not obvious to me why Microsoft accepted this. I guess Microsoft just realized that the previous agreement was kneecapping OpenAI so much that the investment was at risk, especially with serious competition now coming from Anthropic?
Microsoft is a major shareholder of OpenAI, they don't want their investment to go to 0. You don't just take a loss on a multiple-digit billion investment.
I think you’re right about this deal. But it’s kind of funny to think back and realize that Microsoft actually has just written off multi-billion-dollar deals, several times in fact.
One (1) year after M$ bought Nokia they wrote it off for $7.6 Billion.
There’s no upper limit to their financial stupidity.
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OpenAI found a way to circumvent the exclusivity. The deal was poorly defined by Microsoft. OpenAI had started selling a service on AWS that had a stateful component to it, not purely an API. Obviously Microsoft didn’t like that and confronted Altman, and this is the settlement of that confrontation, OpenAI doesn’t need to do workarounds, Microsoft won’t sue to enforce exclusivity, and Microsoft doesn’t have to pay dev share to OpenAI. AWS is a much bigger market so OpenAI doesn’t care.
Probably more that they are compute constrained. In his latest post Ben Thompson talks about how Microsoft had to use their own infrastructure and supplant outside users in the process so this is probably to free up compute.
I think it's this. They sell a crap ton of b2b inference through Azure and I'm sure this competes with resources needed for training.
1- Getting OpenAI's models in Azure with no license fee is pretty nice. 2- Microsoft owns ~15-27% of OpenAI, if the agreement was hurting OpenAI more than it was helping Microsoft, seems reasonable to change the terms.
> Microsoft will no longer pay a revenue share to OpenAI.
I feel this looks like a nice thing to have given they remain the primary cloud provider. If Azure improves it's overall quality then I don't see why this ends up as a money printing press as long as OpenAI brings good models?
OpenAI was also threatening to accuse "Microsoft of anticompetitive behavior during their partnership," an "effort [which] could involve seeking federal regulatory review of the terms of the contract for potential violations of antitrust law, as well as a public campaign" [1].
[1] https://www.wsj.com/tech/ai/openai-and-microsoft-tensions-ar...
Pot? Meet Kettle.
Does this mean Microsoft gets OpenAI's models for "free" without having to pay them a dime until 2032?
And on top of that, OpenAI still has to pay Microsoft a share of their revenue made on AWS/Google/anywhere until 2030?
And Microsoft owns 27% of OpenAI, period?
That's a damn good deal for Microsoft. Likely the investment that will keep Microsoft's stock relevant for years.
own 27%. but are entitled to OpenAI profits of 49% for eternity (if OpenAI is profitable or government steps in)
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Does anyone expect azure quality to improve? Has it improved at all in the last 3 years? Does leadership at MS think it needs to improve?
I doubt it
No and at this point tying yourself to azure is a strategic passive and anyone making such decisions should be held responsible for any service outage or degradation.
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MS incentivizes feature quantity, and the leadership are employees like any other. Product improvements are not on the table unless the company starts promoting people based on it. Doesn't look this will start happening any time soon.
Don’t worry I’m sure there’s a few products without copilot integration still. They’ll get to them before too long.
This is probably a delayed outgrowth of the negotiations last year, where Microsoft started trading weird revenue shares and exclusivity for 27% of the company.
I think MS wants OpenAI to fail so it can absorb it
MS put 10B for 50% if I remember correctly. OpenAI is worth many multiples of that.
> OpenAI is worth many multiples of that
valued at --which I'd say is a reasonable distinction to make right about now
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When they put 10B in, they got weird tiered revenue shares and other rights. That has been simplified to 27% of OpenAI today. I don't know what that meant their 10B would be worth before dilution in later rounds.
> OpenAI is worth many multiples of that.
How?
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$250b committed to azure helps. especially when some of that is your own investment coming back.
What aspects of the deal do you think kneecapped OpenAI the most?