“There are only two ways to make money in business: One is to bundle; the other is to unbundle,” Jim Barksdale said 20 years ago at Netscape. I was struck by a recent HBR interview with Jim and fellow Netscape alum Mark Andreessen about the role of bundling and unbundling in business.
Cable TV providers of course get the most attention for product bundles that rankle consumers — forcing everyone to subscribe to the same long tail of TV channels, when all a particular subscriber might want is a handful of channels.
The Cable TV incumbents have long resisted any changes to the status quo, but, increasingly, consumers are finding ways to “cut the cord” through unbundled season downloads from services like iTunes, creatively re-bundled services like Netflix and Hulu, or non-TV entertainment like YouTube. Verizon responded to the cord cutters with an announcement this week that they will offer an a la carte TV service by mid-2015.
This friction between bundling and unbundling underlies many industries from media to software. The evolution in the music industry from 45s (unbundled) to LPs and CDs (bundled) to single-song downloads (unbundled) to streaming services like Pandora and Spotify (bundled) is an example the constant change under many industries.
At the center of any of these shifts is what is better for consumers at the time. Incumbents often stubbornly resist the shift, focusing aggressively on trying to keep things as they are, rather than offering a better solution. You can only sit on the other side of what consumers want for so long. This dynamic create a lot of opportunity for new businesses, and the classic breeding environment for challenger brands.
As Jim Barksdale says in the HBR interview, “Of course, you always are bundling and unbundling. You can’t stand still.”
Here’s a cartoon I drew last year on “standing still”. I’d love to hear your thoughts on bundling and unbundling.
(Marketoonist Monday: I’m giving away a signed cartoon print. Just share an insightful comment to this week’s post by 5:00 PST on Monday. Thanks!)