AI Is Making Digital Work Cheaper.
Why Aren’t Prices Falling Too?

AI is changing the economics of digital work.

A website that once required days or weeks of repetitive coding can now be built much faster. Video editing tasks that previously involved hours of manual work can increasingly be automated. Developers can generate, review, debug and refactor code with AI assistance. Designers can create drafts, layouts, images and marketing materials in a fraction of the time.

The technology has changed.

Productivity has changed.

But in many parts of the digital-services industry, pricing has not changed nearly as much.

That raises a simple question:

“If AI significantly reduces the time and cost required to produce digital products, shouldn't customers eventually benefit from lower prices too?”

Productivity Has Changed Faster Than Pricing

For decades, professional services have largely been priced around human labour.

If a website required 40 hours of work and a developer charged $75 per hour, the economics were easy to understand.

But AI is beginning to break that relationship.

A controlled study examining GitHub Copilot found that developers using the AI coding assistant completed a programming task approximately 55.8% faster than participants working without it.^[1]

Research from the National Bureau of Economic Research also studied more than 5,000 customer-support workers and found that access to generative AI increased productivity by approximately 14% on average, with particularly large benefits for less-experienced workers.^[2]

These studies do not mean AI replaces skilled professionals.

They show something more important:

AI can allow the same professional to produce substantially more work in the same amount of time.

That is productivity growth.

And productivity growth changes the economics of production.

Lower Production Costs Should Eventually Mean Lower Prices

When technology reduces the amount of labour required to create something, the effective cost of producing that product falls.

We have seen this repeatedly throughout history.

Computers reduced the cost of calculation.

Digital photography dramatically reduced the cost of taking and processing photographs.

Cloud computing allowed businesses to use powerful infrastructure without purchasing expensive physical servers.

Software automation eliminated countless repetitive administrative tasks.

AI is now bringing a similar transformation to knowledge work.

Brookings has discussed how productivity improvements can reduce production costs and how, in competitive markets, part of those gains can eventually be passed on through lower consumer prices or higher wages.^[3]

Digital services should not be an exception.

AI Itself Is Already Becoming Much Cheaper

There is another important part of this story.

The tools themselves are becoming cheaper.

According to OECD research published in 2026, the quality-adjusted price index for text-based AI models fell by nearly 80% between January 2024 and April 2026.^[4]

That means businesses are experiencing two changes at the same time:

1. AI tools are becoming more capable.
2. The cost of accessing that capability is falling.

This creates strong downward pressure on the cost of producing many digital services.

That includes:

• Website development
• Software development
• Graphic design
• Video production and editing
• Marketing content
• SEO content production
• Business automation
• Data analysis
• Customer support

These services will not disappear.

But the amount of human labour required to produce them is changing.

Their pricing will eventually need to reflect that reality.

Consider Website Development

A small-business website used to involve many hours of repetitive work.

A developer might manually create navigation, page layouts, responsive sections, contact forms, buttons, animations, metadata, CSS and other common components.

Today, AI-assisted development can accelerate a significant portion of that process.

The developer still matters.

Someone still needs to understand the business, determine the correct structure, review AI output, correct mistakes, optimize performance, configure hosting, test mobile layouts, consider accessibility and SEO, and make sure the finished website actually works.

But there is an important difference:

“Ten hours of work should not automatically continue to be priced as forty hours of work simply because forty hours used to be required.”

The value of professional knowledge remains.

The amount of repetitive labour does not.

That distinction will become increasingly important.

The Same Change Is Coming to Video

Video production provides another good example.

Traditionally, producing a short promotional video could involve filming, organizing footage, selecting clips, colour correction, transcription, music selection, subtitles, transitions, resizing and exporting different versions.

AI can increasingly assist with many of those steps.

That does not make camera operators, editors or creative professionals unnecessary.

It makes them more productive.

One person equipped with good equipment, experience and AI-assisted editing tools can increasingly produce work that once required significantly more time or a larger team.

Again, the question becomes:

“Who should receive the benefit of that productivity improvement?”

The service provider should benefit.

But the customer should benefit too.

Software Development May Change Even More

Software development is particularly exposed to this transformation because programming languages work extremely well with modern AI systems.

AI can already help developers:

• Generate initial code
• Explain unfamiliar code
• Identify bugs
• Create database queries
• Generate tests
• Write documentation
• Refactor existing software
• Build prototypes
• Create interfaces
• Automate repetitive development tasks

McKinsey has estimated that generative AI could create between $2.6 trillion and $4.4 trillion in annual economic value across dozens of business use cases, with software engineering among the areas with substantial potential.^[5]

This does not mean software engineering suddenly becomes effortless.

Complex architecture, security, reliability, integrations, maintenance and business logic still require expertise.

AI-generated code also requires human review.

But development productivity is clearly changing.

As these tools improve, the cost of creating many standard applications should decline.

Cheap Does Not Have to Mean Low Quality

There is an important distinction here.

Lower prices do not necessarily mean lower quality.

There are two very different ways for a business to offer a lower price.

The first is to reduce quality.

The second is to improve efficiency.

AI makes the second option increasingly possible.

A company that continues working exactly as it did ten years ago may need to charge thousands of dollars for a project.

A smaller company using modern development tools, automation, cloud infrastructure, reusable components and AI may be able to deliver a similar result for substantially less while still operating profitably.

That is not necessarily underpricing.

It may simply be a different cost structure.

But Not Everything Should Become Cheap

AI does not eliminate every cost.

And not every service should experience the same level of price reduction.

A complex e-commerce platform is different from a five-page local-business website.

A banking application is different from an appointment-booking website.

A national advertising campaign is different from a short social-media video.

Human expertise still matters when a project requires:

• Complex strategy
• Original creative direction
• Security
• Regulatory compliance
• Advanced integrations
• Custom business logic
• Large-scale infrastructure
• Long-term maintenance
• Significant business risk

AI reduces the cost of execution much more easily than it replaces judgment, accountability or business understanding.

The largest price changes are therefore likely to happen first in services where a significant percentage of the work is repeatable and standardized.

Small-business websites are a good example.

We May Be Entering the Age of AI Price Deflation

For years, the conversation around AI has focused mainly on what the technology can create.

A more interesting economic question may be:

“What should those creations cost?”

If AI allows a worker to produce twice as much in the same amount of time, maintaining exactly the same price per project effectively allows the provider to capture almost all of the productivity improvement.

Competition usually makes that difficult over the long term.

Some businesses will eventually decide to pass part of the efficiency gain to their customers.

Those businesses may charge less while remaining profitable.

Competitors then face pressure to become more efficient themselves.

That is one of the ways technological progress translates into higher living standards.

Not because everything becomes free.

But because society becomes capable of producing more using fewer resources.

Our Philosophy at Chubbycat Tech Services

At Chubbycat Tech Services, we believe small businesses should benefit from this change.

Modern tools allow us to reduce repetitive development work and spend more time on the parts that actually matter: understanding the business, designing the customer experience, creating useful content, checking quality and supporting the finished website.

We don't believe the right response to AI is simply to produce more work while keeping all of the productivity gain.

We believe part of that gain should be passed on to customers.

That is one reason modern website development can be offered at prices that would have been difficult to achieve using traditional workflows.

AI doesn't make professional work worthless.

It makes efficient professional work less expensive to produce.

And when the cost of producing something changes dramatically, eventually the price of buying it should change too.

That may be one of the biggest economic changes AI brings to digital services.

Not just better technology.

Better economics.