How Bundling Benefits Sellers and Buyers

The bigger a bundle gets, the more likely it is that a subset of users are all paying for basically one piece of the bundle, which could be sold separately at a better price.

Bundling is a tailwind to sales conversations. Why pay $30 per employee per month for five different products ($150) if you can get a comparable offering in a single bundle for $50? And companies with smaller budgets can buy additional products that were out of reach as point solutions. This is one of the few true accumulating advantages in softwar... See more

Bundling reacts to differentiated desires by creating a less differentiated publication that’s fairly valuable to everyone. But as the cost of the reader’s time rises, focus pays off. And the subscription newsletter model makes it easier than it’s ever been to profitably focus on exactly one topic, and build a one-person monopoly.

Why is streaming less profitable? Starting with economic theory, unbundling digital information goods inherently reduces profits and streaming is unbundling TV.

And as soon as a bundle is partially unbundled, there are two options: stop offering the part of the bundle that now has a competing single-purpose product, at which point the bundle switches from optimally-priced to overpriced, or keep offering it and accept lower margins. Bundles grow gracefully and shrink painfully.

The Internet, though, has enabled the bundling of services into broad subscriptions, as well as the unbundling of services into niche subscriptions, possible for a wide variety of businesses to offer.