Monologue: Is Anthropic Killing Cursor?

0:00This is an iHeart Podcast.

0:24Hello and welcome to this week's Better Offline monologue. I'm your host, Ed Zitron.

0:35Over on my premium newsletter this week, I reported out a troubling situation with AI-powered coding environment Cursor, made by a company called AnySphere, who unexpectedly changed their pricing in the middle of June, as well as adding a$200 a month ultra subscription that, well, pissed everyone off. And pissed off a lot of people for many different reasons, in fact. For some history, Cursor is or was the bell of the ball of the AI industry. They had$500 million of annualized recurring revenue, which means their highest month times 12, making them the first high-revenue startup outside of Anthropic and OpenAI to actually show growth potential.

1:09There really is no one else like them out there at this number. I mean, there's AlphaSense with$400 million according to the AI database from the information, but everyone else is pottering around$100-200 million ARR and raising far more money. Everyone was really excited about Cursor. They were growing fast. Everyone loved them. And it was because their product allowed you to just build software just by typing stuff. And engineers liked it and regular people liked it. Not saying it was good or anything, just that people liked it. And they liked it because it gave you kind of unrestricted access to all of these models to build all this stuff.

1:44Now, what if I told you that perhaps they had grown to that 500 million ARR number using techniques like allowing people to spend way more than they were paying for the service? Yeah, that's exactly what happened. Previously, Cursor's pricing was pretty simple. You had 500 fast completions, meaning that you could ask Cursor to do something using a model like Claude Sonnet 4 or Opus 4, and it'd deduct requests from your allowance. The amount deducted was based on the model, with some models costing less and others, such as Anthropics Claude 4 Opus, costing more. Once you were out of those fast requests, Cursor would then put you in the slow lane, the unlimited slow lane, I should add, which nevertheless would let you use premium models, but you'd be put in the back of the queue and at peak times could be waiting some time before you get to your completion.

2:27You could also select auto and Cursor would select whatever was available, the best model for the job at the time. I never want to turn the best over to the company though. But on June 17th, 2025, Cursor launched that$200 a month ultra plan, along with a new and confusing pro package. It's very muddied. A new wording around said$20 a month plan and how it would work going forward, claiming that they would be rolling out changes to make it more generous, but actually changing pricing to reflect new wording offering unlimited agent requests and no real explanation as to what that meant and no further mention of any request limits or what those requests or rate limits might be.

3:05The reality was, of course, far grimmer. Cursor users have found themselves heavily rate-limited, especially on Anthropic models, with the so-called unlimited agent requests mostly pushing them towards Cursor's own frontier model, which users claim is nowhere near as effective as models from OpenAI and Anthropic. On June 30th, Cursor made another change to their product features, changing unlimited agents to extended limits on agents, further muddying pricing on a product that was once renowned for its simplicity and lack of limits. So, this isn't good, is it? Silicon Valley's favorite coding startup has, in the last few weeks, completely changed how its customers interact with its product, both degrading the service and making it far more expensive in the process.

3:43They also allow you now to use usage-based pricing. Now, this is the funny one. If you pay$20 a month on Cursor, they will guarantee you$20 a month of AI compute, at least. So they're literally giving money away. They had a 20 % fee on top of compute, but wow, so you're making 20 % margin? No, you're fucking not. They're losing money on everything, I'm sure of it. But it's strange. It's strange and it's bad. But this is also textbook and shitification. Cory Doctorow's term for when platforms offer a high-quality product to gain a large user base, usually through convenience or great value, then degrade the service over time to make more money as a means of maximizing value for shareholders or making money themselves.

4:22It's also part of my Rot Economy thesis, the growth at all-cost thinking has dominated the tech industry, and I'd argue, thanks to the proliferation of business idiots controlling everything, that they've drained some of the logic behind intitification away, because very few of these companies actually ever plan for sustainability, let alone profitability. Generally, intitification gets people through the door and makes the service totally impossible to avoid, makes it essential. That's really difficult to do with a paid software product like Cursor because AI compute is so fucking expensive. It's so expensive.

4:54So Cursor has decided to inshittify without making sure that they have something essential. But the thing is, I texted Corey about this. I think this actually is something quite different. I think this is the world's first chain in shittification. My belief is simple. Any sphere, which is the company that makes Cursor, by the way, is, despite getting$900 million in funding in early May, running out of money, or at least beliefs that continuing to operate its business in the way it did less than a month ago would cause it to do so. But why the sudden changes? Why the knife in the heart of their customers just after raising nearly a billion dollars?

5:29It's simple. It's a chain in shittification. Anthropic jacked up their prices and so did OpenAI. On May 22nd, 2025, a few weeks after Cursor raised$900 million, Anthropic launched both Claude Sonnet and Claude Opus 4. You might say Claude 4 Opus or Claude 4 Sonnet. I don't care. But these were two new powerful, as judged by benchmarks made specifically for large language models. And I should add that the expensive Claude Opus 4 was more focused on coding benchmarks. This is an important detail. Now, eight days later, on May 30th, 2025, a page on Anthropics API documentation appeared for the first time called Service Tiers, adding priority tiers for enterprise startups that didn't want to, and I quote, sorry, I mean, did want to, and I quote, provide a guarantee around the infrequency of server overloaded errors, even during peak times.

6:20Hmm, that's not good. Anthropics Service Tiers require a multi-month upfront commitment on how many tokens per minute your startup will use, but also add an insidious charge around prompt caching. Now, prompt caching is when you put something into a model, such as a code base in the case of a coding startup, or I don't know, a great deal of stuff about how a model might want to act. You put it in the cache so that it kind of like RAM, it just kind of reads off of it instead of rewriting and rewriting and rewriting. So they've added a vig to it or a tax, whatever you call it, a toll perhaps. And they're now charging, and this is really fucking insidious, either 125 % or 200 % of the cost of caching information that you need to access it more readily.

7:02And I should add, this is only if you want the priority tier. And another thing, coding startups are extremely prompt cache heavy. Kind of fucked up, right? Very fucked up. And they're not the only ones doing it. On June 25th, 2025, OpenAI also launched priority processing for API customers. They claim it's a pay-as-you-go tier where you pay higher API prices for and I quote predictable low latency. However, despite this being pay-as-you-go, this service is only available for their enterprise customers who have made an up-prompt commitment, much like Anthropic does. The difference being they are not trying to tax you on prompt caching.

7:38Now, Cursor CEO Michael Truell also said when announcing their egregious$200 a month plan that it was only made possible by multi-year partnerships with OpenAI, Anthropic, Google and XAI. In short, I think that$900 million that Cursor got may have immediately been handed to or committed to the major model developers. They got looted, baby! Now, what makes this weirder is that Cursor is also Anthropix's largest customer, with sources claiming that they're such a large customer that they're taxing Anthropix's infrastructure and making them run out of GPUs. Now, I should also add that Cursor isn't the only one that's recently dramatically changed their prices.

8:17Vibe coding startups like Replit and Lovable both have had to do so in the last month, and I think this is just the beginning of something really, really, really bad. I believe that Anthropic did this either as a deliberate attempt to price gouge its largest customers and or as a means of increasing revenue on its money-losing software. These changes are deliberate, aggressive, and targeted price increases, and they were timed with the launches of Claude 4, Opus, and Sonnet, which suggests that Anthropic's costs have dramatically increased with these models so much that simply increasing the cost per million tokens is insufficient.

8:48It's my belief that the launches of both Claude Opus and, to a lesser extent, Sonnet, have caused an upheaval in Anthropik's costs and compute demands, which in turn forced them to start increasing costs on their customers. However, Anthropik has, I believe, realized that there is no real way to just increase the cost of Opus and Sonnet 4 further on just the amount of tokens that a customer might use, and that doing so might push away smaller developers, which wouldn't make them more money. So they decided to find a way to specifically exploit the finances of their largest customers, coding startups, in a way that wouldn't be immediately obvious or that would spook non-coding assistant customers.

9:22Except I'm a crafty little fuck and I look at everything all the time. I do this for fun. I don't do this because I have to. Listen to me, Wario Amadei, if you're listening to this, I'm watching you. I have archive.org and a million Diet Cokes. Anyway, last year I talked about the subprime AI crisis where almost the entire tech industry has bought in on a technology sold at this vastly discounted rate. And they've heavily centralized and subsidized it too. And I predicted one major thing, that these model developers would eventually have to find a way to make their costs work. That they would have to find a way to crank up costs on their customers, because otherwise they would just continue burning money.

10:01I still think they are doing so. And I think that's what's happening here. I think Anthropic and OpenAI, to a lesser extent, have realized that they need to start making money back on these fuckers, and they're doing it. Except the fact that the companies like Cursor and Replit have immediately had to change their prices suggests that maybe none of these businesses make sense. Maybe this whole time this thing was unsustainable. Maybe it turns out the generative AI doesn't have the kind of business returns you need to run a startup if only someone had said something. Remember, look, see I fucked up saying remember, but I'm not editing it out.

10:38This is an honest podcast, but seriously, everyone, remember the pale horses. Rate limits, service interruptions, price increases, trouble raising funding, and trouble with money. The horses are drawing nearer, I'm telling you. We're coming to the end of this. I don't know if it will be soon. I don't know if it will be next year. But nothing about this suggests that things are going well.

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