“There are only two ways to make money in business: you can unbundle, or you can bundle. — Jim Barksdale

Bundling and unbundling are two fundamental business strategies as old as time. Companies switch between packaging their products and services as a combo deal or breaking them apart for à la carte purchases, all in the name of better customer experience and, of course, maximizing profits. It operates cyclically, as consumer desires constantly swing between more optionality (unbundling) and more convenience and lower prices (bundling). It has never been a better time to play the (un)bundling game than in the digital age, as it is inherently easier to bundle and unbundle digital products and services than it was with physical ones.

The History of Bundling and Unbundling

So far in the digital age, we have already witnessed three waves of bundling and unbundling. each triggered by a major technology breakthrough: PC, internet, and mobile. Microsoft bundled a whole suite of productivity tools and other software into its operating system, and sold the world on the promise of personal computing. Then the internet came along and democratized the distribution of information and software in the form of millions of open webpages and downloadable software. But that unbundling process produced new frictions, as information and services on fragmented webpages were (and still are) hard to find and access. That friction gave birth to the likes of Google, Facebook, and Amazon, all powerful aggregators that effectively bundled together webpages, digital identities, and online vendors, respectively.

The arrival of smartphone changed the game once again. The smartphone itself is a bundle of mobile phone, web browser, camera, and more, but when Apple introduced the App Store in 2008, it gave rise to the app economy we have today, where over 2 million iOS apps and 3.8 million Android apps have effectively unbundled many add-on functionalities of the mobile phone. Due to the limitation of screen size, battery life, and computing power, especially in the early days of smartphone, mobile naturally calls for an unbundling where lightweight, compartmentalized apps are preferred over cumbersome, all-in-one software.

Similarly, the music industry also underwent multiple waves of bundling and unbundling throughout the years. Physical copies of albums, in their various forms from vinyl records to cassettes to CDs, proved to be a great way to sell music consumers on a bundle of songs — all you needed was one or two hit singles to get people to pay for ten or more tracks. Then the iTunes store came along and made purchasing individual tracks possible, and before long album sales began to drop at an accelerating rate. By 2016, global consumer music market revenue has dropped from the high of $24 billion in 1999 to just $13 billion, according to the IFPI, marking a 63% drop when adjusted for inflation.

Luckily for the music industry, the ubiquitous connectivity that came with the mobile era also popularized music streaming, and now streaming services like Spotify and Apple Music offer the ultimate music bundle. Now, subscribers pay for on-demand access to a bundle of almost all music ever recorded for less than the cost of one album per month, and the music industry benefits greatly from all the loyalties that streaming brought to the back catalog, as well as recouping some of the revenue lost to piracy. More importantly, the streaming bundle transformed the music business from a risky, hit-driven model to a far more stable one of recurring revenue. Now, streaming services account for over 43% of all recorded music sales revenue. Altogether, the shift from bundling (physical albums) to unbundling (downloads) and back to bundling (streaming) again in the music industry is clear to see.

Digging further back into the history of modern media, one could argue that the invention of broadcast TV and its subsequent popularization marked the first time media has become bundled in the modern era. TV brought together news, entertainment, and all sorts of other content within one neat box in the living room. For a while, in the beginning there were just three national broadcast channels, then came the explosion of cable channels in the 1980s, which rapidly expanded the landscape of TV and forced the pay-TV carriers to come up with tiered bundles to allow for various price points and appeal to customers with varying content demands. Fast forward three decades, OTT streaming services are now in the midst of unbundling the TV package again. More on that in the next segment.

Throughout the history of modern media, the pendulum swings back and forth between the two primary business strategies as new technologies enable new distribution models. Bundles are often unfairly seen as consumer-unfriendly, but most of them come into existence for a reason — they respond to the consumer demand of a good combo deal, usually in times where aggregating channels take hold of distribution. All bundles start out great, until they inevitably tip over their own weight and consumers start clamoring for only parts of the bundle rather than the cumbersome whole. That’s when the pendulum starts to swing the other way again to meet the shifting distribution model and consumer demand.

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