Four Myths of Bundling

Myth 1

Myth 2

Myth 3

Myth 4

Future

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Thoughts on the future

A few implications and predictions

If you've made it this far, you have hopefully gotten a sense for a different way to think about bundles. To wrap this up, I wanted to discuss a few futuristic predictions, and some implications for the readers of this doc.

It's worth noting, that the thoughts in this doc started as a hobby for me. But over time, they have shaped my thinking in many ways. Here are a few ways that this framework might matter to you.

Bundling is a natural evolution for many industries

I've had a chance to work on many bundling relationships and have seen very productive outcomes. For example, the teams at Spotify applied these theories at many levels ー e.g. bundling Hulu with Spotify Students, and even the recent progress on expanding into podcasts and providing an "audio bundle". Or to pick an example in a very different industry, the team at Classdojo expanded an extremely popular service for teachers and students into a bundle for parents. In fact, I've found that most businesses have some way to apply the framework in this document.

Many of the examples in this doc focus on the media industry. This is partially because of my background in the media industry, but also because those examples are often generally relatable (most people consume media, and are experienced with those bundles). And clearly, the media industry has benefited greatly from bundling.

But if you step back from these patterns, you will start to see examples of bundling everywhere. Credit cards often bundle a financial instrument with (seemingly unrelated) perks and benefits. Airlines build out membership programs that bundle benefits for patterns of usage. Shopping services like Amazon have bundled together many goods and services. Insurance is a commonly cited example at many layers ー health care is a bundle of "sick and healthy people", but we also see patterns where health/medical/dental are bundled, or to take a step further, we see health care bundled with employment (in the US) and with citizenship (in many other countries).

The patterns in this doc are helpful for understanding dynamics of many industries ー which bundle relationships can product the most value, how to fairly divide money in bundles, etc. And I expect more and more industries to be affected by this framework.

The bundling framework can be applied to more general product development

Interestingly, as I've given talks on this topic to companies that don't have "multi product bundling" opportunities, a few of them have noticed a pattern ー this way of thinking about products works even within a single product as well.

As an example, many products will contemplate which set of features to push behind or in front of a paywall. For these discussions, the idea of Marginal Churn Contribution (MCC) can be a useful tool. Others may try to expand into new markets, and will be drawn to Myth 4 (typically the most provocative of the four myths) and stretch their thinking into areas that have less overlap with their current focus.

To use Coda as an obvious example ー we provide an all-in-one doc for teams. By nature, that means that our offering will feel different to different users. For some, Coda is a clean, well-designed document to replace their favorite editor. For others, Coda docs are workspaces ー with pages and collapsible content to organize their teams. For others, Coda docs are a new approach to spreadsheets and databases ー providing a modern approach to data. And for yet others, Coda is an app building platform ー allowing anyone to make docs as powerful as apps.

So as you naturally read this doc and think about partnerships, I'd encourage turning inwards to your product as well. Think of your product as broken up into a set of constituent parts. Which audiences are SuperFans vs CasualFans of each part?

The bundle of the future will be larger and more diverse than we have today

Picking a favorite myth is like picking your favorite kid, but for me, by far the most provocative myth is

Myth 4⁠

. It is so counter intuitive that I have seen it stump many discussions. But the core idea of "minimizing superfan overlap and maximizing casual fan overlap" leads to a broader conclusion.

It is worth noting that bundling has a natural economy of scale. It is much easier to go from 100 million to 101 million subscribers, than it is to go from 0 to 1 million. This is largely caused by CasualFan overlap ー the larger your bundle, the more CasualFans you can ammortize costs between. This in turn leads to provider willingness as well, since joining a larger bundle can offer expanded distribution instead of restricted. To use an example, Hollywood production houses used to cringe at the idea of placing content on Netflix where it might reach a tiny audience. But these days, getting content on to Netflix is actually a broader platform than just about any other single video distribution platform.

It is my view that an economy of scale like this is like a rolling boulder and will gradually gain even more steam. I expect the future to have bundles that not only pair our media products across formats, but bring in our food delivery, our ride sharing services, and even beyond to travel and health care.

As a provocative example, imagine joining a service, and having thousands of apps on your phone all light up to their "premium" version.

A "third business model" for the internet

In my view, most businesses on the internet have fallen into two buckets.

The classic models are "superfan" business models ー products that directly serve a specific set of users who have the willingness to pay and the activation energy to find those services (see

Myth 1⁠

for more on this definition). These tend to be transactional businesses ー e.g. Uber charges for rides, and if you don't have the need for a ride, then your relationship with Uber ends.

At the other extreme are "nonfan" business models. These tend to focus on users who are quite willing to spend time on a service, but would likely not participate if asked to pay directly. Many of these businesses are ad-supported ー journalism, social networks, etc. And interestingly, many of these business models were made viable by the advent of ad networks like AdSense ー they couldn't individually attract sufficient audiences for advertisers, but could participate if they were grouped together with other similar businesses.

Similarly, I think there are a class of businesses that largely serve "casual fans" ー businesses that are simply not viable without a broader subscription bundle to be a part of. Much of cable falls in this category ー I am doubtful that an independent History Channel would have much success, but it has a very profitable business as part of the "casual fan" portion of widely distributed bundles.

Just like AdSense (and ad networks) led to the creation of millions of previous unviable businesses, I think bundling offers a similar opportunity.

My view is that as the bundling concepts are more widely applied, we'll not only see interesting partnerships of existing businesses, we'll see whole new businesses get created.

In closing

Hopefully, you have enjoyed these thoughts on bundling. If you have suggestions or questions, please feel free to message me at @shishirmehrotra on twitter.

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Next Section:
`Extras`⁠
for some additional materials and reading

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