Understanding AI

AI Pricing in Plain English

Why you pay £20 a month while one company paid half a billion — and how to make sure your business never gets caught by the meter

The Two Worlds

AI is sold two completely different ways, and almost every business only knows about one of them.

Per seat is the world you know. Twenty odd quid a month per person for ChatGPT, Claude or Copilot. It works like a salary — a flat cost, and whether that person works flat out or barely at all, the price doesn't move.

Per token is the world the scary headlines come from. No flat fee, just a meter that runs every time the AI does anything at all — and it's where every serious AI bill lives.

What a Token Actually Is

AI doesn't read words the way you do — it reads tokens, and a token is somewhere between a part of a word and a whole word. One ordinary word is usually one or two of them.

understandingunderstandingone word, three tokens

In the metered world you pay for every single one, in both directions. Every word you send in, every word it sends back — and the bit nobody tells you — every word it uses privately to think about your answer before it replies. All of it is on the meter.

The way I think about it, a metered AI is a lawyer on the clock. You're billed for the time they spend talking to you, the time they spend reading your emails, and the time they spend thinking it all over on their daily stroll. Nothing is free, including the mulling.

Your Plan Is Massively Subsidised

Your monthly subscription hides all of that behind a flat fee — and the flat fee is nowhere near what the usage is worth. I did the maths on my own account last month. The meter behind my subscription read about £2,500 in credits. I paid £90.

That gap is deliberate. The AI companies absorb the difference because they want you using this every day. Which is lovely — right up until your business steps somewhere the subsidy doesn't cover.

The Two Ways a Business Ends Up on the Meter

You get big

The flat fee plans don't scale forever. Past a certain company size — usage limits, seat counts, enterprise agreements — the pricing conversation moves onto metered or usage based terms, and the per person subscription you knew stops being the deal on the table. The subsidy is for individuals and small teams, not for a whole enterprise leaning on it.

You build something

The moment you make an AI tool of your own — something your team or your customers use, with an AI model working in the background via an API — there is no subscription for that. It runs on the meter from day one, and if it runs while nobody's watching, it spends while nobody's watching.

And that's how you get the horror story. In May, Axios reported that one company — never named, and the story was never independently confirmed — ran up roughly half a billion dollars of AI usage in a single month. The reported cause wasn't some exotic technology. They handed AI licences across the business and nobody put a spending cap on the meter.

The Honest Bit

Token pricing isn't a rip off — it's arguably the fairest pricing in software, because you pay for exactly what you use. The catch is simply that nobody caps it for you. A gym membership can't surprise you; a taxi meter can. Neither is dishonest, but only one of them needs watching.

The other honest note is on the subsidy itself. It exists because the AI companies are fighting for users, and subsidies that exist for strategic reasons can shrink. Enjoy it — I do, my £90 buys £2,500 of work — but don't build a business plan on it lasting forever.

The One Question That Protects You

Whichever way your business meets AI — buying it or building it — the question is the same. Ask it before anything is signed or switched on.

"Is this priced per seat, or per token?"

per seat  -> a capped cost. Relax.
per token -> do the maths, set the cap, THEN roll it out.

If you're also choosing which model to run — because bigger models cost more per token but often finish the job cheaper — that logic lives in Which Model For Which Job. And if you're on a flat plan and want more from the limit you've already paid for, The Effort Dial is the control most people never touch.