Exclusive: Amazon Plans $5 to $10 Monthly Fee for Upgraded Alexa Service with AI Enhancements

Amazon  is considering a significant overhaul of its decade-old Alexa service, integrating advanced conversational AI and introducing a two-tier subscription model. According to insiders, the superior tier may cost around $5 monthly.

Internally referred to as “Banyan,” after the expansive ficus trees, this project marks the first major revamp of Alexa since its 2014 debut with the Echo speakers. The revamped voice assistant is dubbed “Remarkable Alexa.”

Sources, including eight current and former Alexa employees who requested anonymity, revealed that Amazon aims to launch the new version by August, with CEO Andy Jassy personally overseeing its development. Jassy hinted at a “more intelligent and capable Alexa” in his April letter to shareholders, though details were sparse.

The pricing and release timeline for Alexa’s new features could change based on the progress of Project Banyan. An Amazon spokeswoman confirmed the integration of generative AI into Alexa, aiming for enhanced, personalized assistance across over half a billion Alexa-enabled devices globally.

As AI competition intensifies, with Google, Microsoft, and OpenAI leading the charge, Amazon’s need to innovate has become urgent.

Since the release of ChatGPT in late 2022, AI investments have surged, with Nvidia briefly surpassing Amazon in market value. Apple is also advancing its AI strategy, updating Siri to be more conversational.

Some Amazon insiders view Project Banyan as a critical effort to rejuvenate Alexa, which has yet to turn a profit and struggled to keep pace with AI developments. Senior management has labeled this year as crucial for proving Alexa’s revenue potential.

Despite Alexa’s popularity for simple tasks like setting timers and playing music, it has not significantly boosted Amazon’s e-commerce sales, as users prefer to see products before purchasing. The Alexa division faced major job cuts in late 2023 during a company-wide restructuring post-pandemic.

Future Prospects and Features

Amazon envisions an AI-enhanced Alexa providing more comprehensive shopping advice, similar to its Rufus text-based service. For example, Alexa could recommend specific gear for mountain climbing trips. Some insiders believe 2024 is a “must-win” year for Alexa, a key brand alongside Prime, Kindle, and Fire devices.

In a recent demonstration, an AI-powered Alexa exhibited near-human-like conversational abilities, moving beyond its traditional robotic tone. The upgraded service is expected to replace the current free “Classic Alexa” with a paid version, costing $5 to $10 monthly, for more complex tasks like sending emails and ordering food from Uber Eats with a single prompt. This version will also offer enhanced personalization and eliminate the need to repeatedly say “Alexa.”

However, there is skepticism about whether users will pay for features currently available for free. Amazon faces challenges with AI development, such as dealing with hallucinations (incorrect outputs) and improving employee morale in the Alexa division.

Some of Amazon’s future plans include enhancing home automation through Alexa. The new service could learn user habits to automate tasks like turning on the TV for a favorite show or starting a coffee pot after an alarm. These features might require additional Alexa-enabled devices, such as home energy trackers and carbon monoxide detectors, which Amazon has been developing.