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  • Darshan Pareek

Amazon plans to charge subscription for revamped Alexa as losses mount

Beset with mounting losses, Amazon is gearing up to introduce a paid subscription tier for its voice assistant, Alexa, called "Alexa Plus," if reports are to be believed.

The speculation comes amid the company facing the challenge of convincing users to embrace the paid subscription model, as well as internal disagreements and uncertainties about its market reception.

The Worldwide Digital group, which includes the Alexa division, reported a staggering $3 billion loss in the first quarter of 2022, with most of the losses attributed to Alexa.

The loss is double that of any other division within Amazon, and the hardware team is projected to incur a $10 billion loss for the year.

The problem seems to stem from Alexa's inability to create a sustainable income stream. Despite being among the best-selling items on Amazon,

most Echo devices are sold at cost. The original plan to make money through device usage rather than device sales did not materialise as expected.

Alexa's frequent interactions, reaching a billion a week by the fourth year of the experiment, mainly consisted of trivial commands for tasks like playing music or checking the weather, which proved challenging to monetise.

One of the strategies to generate revenue for Alexa involved encouraging users to make purchases on Amazon using voice commands. However, it has proven to be far from successful.

Various attempts at monetising Alexa, such as partnering with companies for voice-enabled services like ordering pizza or calling an Uber, did not yield the desired results. Sales targets were abandoned by 2020 due to low use.

As it happens, the upgraded version, internally dubbed "Remarkable Alexa," is designed to offer users more personalised and conversational AI technology.

The voice assistant will be powered by the latest speech-to-speech LLM model from Amazon, making it sound more human-like compared to the current version.

The company has conducted tests with around 15,000 customers, aiming to release the subscription model on June 30. However, sources suggest that internal conflicts might delay the launch.

An improved version of Alexa was showcased last year at Amazon's hardware event by Dave Limp, the former hardware head at the firm.

Despite the promising presentation, a limited preview with external customers revealed shortcomings. Testers found inaccuracies in information and a lack of improvement in response quality compared to the current Alexa version.

Dissatisfied with the results, Amazon is working to overhaul Alexa's technology stack to meet the high standards set for Alexa Plus, leading to internal conflicts within the company.

Limp said that Echo users will have a "free preview" of the new features, but in an interview with Bloomberg, he confirmed that Amazon intends to charge an additional fee for the premium version of Alexa.



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