LDN - Business

Amazon mulls $5 to $10 monthly price tag for unprofitable Alexa service, AI revamp

[June 21, 2024] By Greg Bensinger

SAN FRANCISCO (Reuters) - Amazon is planning a major revamp of its decade-old money-losing Alexa service to include a conversational generative AI with two tiers of service and has considered a monthly fee of around $5 to access the superior version, according to people with direct knowledge of the company's plans.

Known internally as “Banyan,” a reference to the sprawling ficus trees, the project would represent the first major overhaul of the voice assistant since it was introduced in 2014 along with the Echo line of speakers. Amazon has dubbed the new voice assistant "Remarkable Alexa," the people said.

The sources include eight current and former employees who worked on Alexa and who spoke on the condition of anonymity because they were not authorized to discuss confidential projects.

Amazon has pushed workers towards a deadline of August to prepare the newest version of Alexa, three of the people said, noting that CEO Andy Jassy has taken a personal interest in seeing Alexa reinvigorated. In an April letter to shareholders, Jassy promised a “more intelligent and capable Alexa,” without providing additional details.

The company's plans for Alexa including pricing and release dates could be altered or canceled depending on the progress of Project Banyan, the people cautioned.

"We have already integrated generative AI into different components of Alexa, and are working hard on implementation at scale—in the over half a billion ambient, Alexa-enabled devices already in homes around the world—to enable even more proactive, personal, and trusted assistance for our customers," said an Amazon spokeswoman in a statement.

The service -- which provides spoken answers to user queries, like the local weather, and can serve as a hub to control home appliances – was a pet project of Amazon founder Jeff Bezos who envisioned a technology that could emulate the fictional voice computer portrayed on television’s Star Trek series.

For Amazon, keeping up with rivals in generative AI is critical as Google, Microsoft and OpenAI have garnered more favorable attention for their so-called chatbots that can respond almost instantaneously with full sentences to complicated prompts or queries.

The release of ChatGPT in late 2022 set off a frenzy of investing in AI firms and has pushed chipmaker Nvidia past Amazon and others by market capitalization, briefly becoming the world’s second-most valuable company.

Apple too is pushing ahead with its own AI strategy, including updating its Siri voice activated software embedded in iPhones to include more conversational answers.

Some of the Amazon employees who have worked on the project say Banyan represents a “desperate attempt” to revitalize the service, which has never turned a profit, and was caught flatfooted amid the rise of competitive generative AI products over the past 18 months. Those people said they have been told by senior management that this year is a critical one for the service to finally demonstrate it can generate meaningful sales for Amazon.

Accessed primarily through Amazon TVs and Echo speaker devices, Alexa is popular mostly for setting timers, quickly accessing the weather, playing songs or answering simple questions. Amazon’s hopes for goosing sales in its e-commerce operation through the service have fallen flat, mostly because users like to first see the products they are buying for easy comparison.

The Seattle retailer cut thousands of jobs in the unit in late 2023, part of a major restructuring after a pandemic-fueled e-commerce surge lost steam.

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Prompts on how to use Amazon's Alexa personal assistant are seen alongside an Amazon Echo in an Amazon "experience center" in Vallejo, California, U.S., May 8, 2018. Picture taken on May 8, 2018. REUTERS/Elijah Nouvelage/File Photo

'MUST WIN'

With an embedded AI, Amazon expects Alexa customers will ask it for shopping advice like which gloves and hat to purchase for a mountain climbing trip, the people said, similar to a text-based service on its website known as Rufus that Amazon rolled out earlier this year.

Some said they’ve been told by senior management that 2024 represents a “must win” year for Alexa, which along with the Prime membership and Kindle and Fire devices are the brands most closely associated with Amazon.

But an AI-powered version of the service demonstrated in September has yet to be released to the broader public while competitors have pushed out multiple updates to their chatbots. In the demonstration, Alexa lost its robotic tone and answered questions like the start time for a football game. "You can now have a near-human-like conversations with Alexa," promised Dave Limp, Amazon's hardware chief at the time, who has since left the company.

Amazon is working to replace what it refers to internally as “Classic Alexa,” the current free version, with an AI-powered one and yet another tier that uses more powerful AI software for more complicated queries and prompts that people would have to pay at least $5 per month to access, some of the people said. Amazon has also considered a roughly $10-per-month price, they said.

There is no tie-in with Amazon's $139-per-year Prime membership being considered, the people said.

As envisioned, the paid version could perform more intricate tasks such as composing a brief email, sending it and ordering dinner for delivery from Uber Eats, all from a single prompt, some of the people said. It could also eliminate the need to repeatedly say "Alexa" during a conversation with the software and offer more personalization, they said.

But the people said they struggled to see why customers would be willing to pay for a service, even a revamped one, that is offered for free today.

Amazon has also been plagued by false starts in developing the AI and other challenges such as hallucinations – when software produces false or misleading information – and poor employee morale in the division.

Some of Amazon’s plans for the service were previously reported by Business Insider, including its struggles with the performance of the underlying AI and its hopes for a paid service, however Reuters is first to report the tiered pricing, internal deadline and potential monthly fee.

Amazon is also aiming to supercharge the home automation offered through Alexa, the people said. Alexa now can wirelessly connect to so-called smart devices so that they can be controlled by voice, allowing a user to, for example, turn the porch lights on every day at 8 pm.

But Remarkable Alexa could learn from users so that it powers on the television for a favorite weekly program or turns on a user's coffee pot after a morning alarm goes off, which is possible today through prompts that Amazon calls Routines.

Some of the people noted that for such a service to work properly it will require customers to buy additional Alexa-enabled devices.

The company had been working on devices last year to get the service into more rooms of the house, such as Alexa-enabled home energy consumption trackers and a carbon monoxide detector, people familiar with the matter previously told Reuters.

(Reporting by Greg Bensinger; editing by Kenneth Li and Nick Zieminski)

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