For credits to not be considered a money substitute, they must be non-transferable, non-refundable, and have an expiration date. Without an expiration date, unused credits cannot be accounted for as revenue, but as a liquid asset similar to cash.
Best practice is to set a long expiration date, such as 1-2 years. There are different regulations about it in different states. After that unused credits can be accounted as breakage revenue.
If a company treats credits as money, it will have to comply with numerous financial regulations. For example, if a company compensates for SLA breaches with cash rather than credits, this could be considered insurance.
> This drives up the "real" price of these purchases because of the time constraint.
I'd say you answered your own question.
> telco's tend to be oligopolies and tend to also do some form of price collusion among themselves, it was generally accepted as "just how things were"
So are LLM companies, at this stage
> Am I missing something?
Not really
> Is this really how things should be?
No, this is how thing are. I'm more than interested in ways to change the status quo, though.
My guess is this is so OpenAI can treat it as annual recurring revenue which helps with their stock valuation. I've seen non-LLM API vendors do this with their credits as well.
> - Provides stable pricing in shorter term while accommodating price changes over longer term
How? If you pre-pay $5, your account is credited by $5, and when you make an API request you get charged at whatever the rate is for the model you called at the time you used it. You aren't buying some virtual currency or locking in a specific price.
> - Excites engagement
More accurately, irritates customers by keeping their money without providing any service in return.
For accounting it's better to give things an expiring date. Perhaps 5 year would have been better than 1 to keep people happy, but I don't know why they decided 1 year (or whatever is the exact number).
I suppose I can understand for accounting purposes to some extent. Once a purchase is done, they receive their cash immediately but perhaps actual revenue is deferred until actual usage since that will end up leading to the "actual" rendering of service by openai. Makes accounting sense.
Even though it gives me the vibes of something the fictional " Sirius Cybernetics Corporation", would do.
This is a complete nonsense given I have video games with virtual currencies in them that I've purchased for real money and the currency is still sitting there well over a decade later.
I'm not accountant, but I read that explanation a lot of time.
I guess in the game, you already bought the fake-gold-coins and you can "enjoy" having them even before exchanging them for fake-bread or fake-swords or fake-whatever.
I'm not an accountant either, that also makes sense.
If instead the exchange had been of real world money for N months of prepaid subscription, that was consumed after N months had passed, that'd be a little different but also presumably quite acceptable to accountants.
Suppose the exchange had been of real world money for N months of prepaid subscription credits that could be stored indefinitely and only consumed if the player chose to actively play during a month. That might turn into an accounting nightmare if those subscription credits didn't expire (maybe cannot recognise the revenue while they are unused, becomes liability on the balance sheet).
I wonder how the accounting rules work for stuff like Eve online where there is an game consumable item (PLEX) that when consumed extends your subscription, can be traded inside the game's economy, and can be purchased with real world money
Just guessing but probably to bring it up to par with a coin operated car wash to get more monies.
- Insert Duckets [1]
- Start Washing Car
- Insert More Duckets to Rinse Car.
[1] - slang, Items of a lootable nature, usually looted off fools.
That, or they don't want criminals building up a cache of credits from stolen credit cards, stolen accounts and reselling the credits / accounts but I prefer to think it's to be a car wash.
For credits to not be considered a money substitute, they must be non-transferable, non-refundable, and have an expiration date. Without an expiration date, unused credits cannot be accounted for as revenue, but as a liquid asset similar to cash.
Best practice is to set a long expiration date, such as 1-2 years. There are different regulations about it in different states. After that unused credits can be accounted as breakage revenue.
If a company treats credits as money, it will have to comply with numerous financial regulations. For example, if a company compensates for SLA breaches with cash rather than credits, this could be considered insurance.
> This drives up the "real" price of these purchases because of the time constraint.
I'd say you answered your own question.
> telco's tend to be oligopolies and tend to also do some form of price collusion among themselves, it was generally accepted as "just how things were"
So are LLM companies, at this stage
> Am I missing something?
Not really
> Is this really how things should be?
No, this is how thing are. I'm more than interested in ways to change the status quo, though.
My guess is this is so OpenAI can treat it as annual recurring revenue which helps with their stock valuation. I've seen non-LLM API vendors do this with their credits as well.
- Skirts credit speculation and arbitrage
- Prevents hoarding
- Allows freedom for sales promotions while controlling service commitments
- Marginally increases revenue per unit of service
- Provides stable pricing in shorter term while accommodating price changes over longer term
- Excites engagement
> - Skirts credit speculation and arbitrage
> - Provides stable pricing in shorter term while accommodating price changes over longer term
How? If you pre-pay $5, your account is credited by $5, and when you make an API request you get charged at whatever the rate is for the model you called at the time you used it. You aren't buying some virtual currency or locking in a specific price.
> - Excites engagement
More accurately, irritates customers by keeping their money without providing any service in return.
For accounting it's better to give things an expiring date. Perhaps 5 year would have been better than 1 to keep people happy, but I don't know why they decided 1 year (or whatever is the exact number).
I suppose I can understand for accounting purposes to some extent. Once a purchase is done, they receive their cash immediately but perhaps actual revenue is deferred until actual usage since that will end up leading to the "actual" rendering of service by openai. Makes accounting sense.
Even though it gives me the vibes of something the fictional " Sirius Cybernetics Corporation", would do.
This is a complete nonsense given I have video games with virtual currencies in them that I've purchased for real money and the currency is still sitting there well over a decade later.
I'm not accountant, but I read that explanation a lot of time.
I guess in the game, you already bought the fake-gold-coins and you can "enjoy" having them even before exchanging them for fake-bread or fake-swords or fake-whatever.
I'm not an accountant either, that also makes sense.
If instead the exchange had been of real world money for N months of prepaid subscription, that was consumed after N months had passed, that'd be a little different but also presumably quite acceptable to accountants.
Suppose the exchange had been of real world money for N months of prepaid subscription credits that could be stored indefinitely and only consumed if the player chose to actively play during a month. That might turn into an accounting nightmare if those subscription credits didn't expire (maybe cannot recognise the revenue while they are unused, becomes liability on the balance sheet).
I wonder how the accounting rules work for stuff like Eve online where there is an game consumable item (PLEX) that when consumed extends your subscription, can be traded inside the game's economy, and can be purchased with real world money
That also makes no sense given I can add real money to Steam and Steam will never "expire" that money either.
yes. see also this thread from 4 months ago discussing accounting for credits, in the context of 1 year expiry for anthropic credits
https://news.ycombinator.com/item?id=44793827
Because someone at openAI decided it so and the CEO approved it.
Can someone explain why OpenAI credits expire?
Just guessing but probably to bring it up to par with a coin operated car wash to get more monies.
- Insert Duckets [1]
- Start Washing Car
- Insert More Duckets to Rinse Car.
[1] - slang, Items of a lootable nature, usually looted off fools.
That, or they don't want criminals building up a cache of credits from stolen credit cards, stolen accounts and reselling the credits / accounts but I prefer to think it's to be a car wash.