Most industries go through the cycle of bundling and unbundling services. Bundling provides higher margins. Service providers can embed themselves more in customer businesses. Customers enjoy lower prices and getting a bunch of services from one place.
Streaming providers are now starting to bundle services. Does this make any sense?
What should we include in bundles? Let’s take the common example: TV. In the beginning, there were three OTA channels. No point in bundling. Over the years, the number of channels proliferated. We got cable TV. An expensive grouping of channels not everyone was happy about.
Then, cable companies started offering the Holy Grail: TV, internet, and phone bundles.
Everyone needed all three. You could set the price of bundles based on the number and type of channels you wanted. You could also set it based on the speed of the Internet.
Many industries follow this model. Service professions, like marketing agencies and law firms, provide consulting and execution. Manufacturers provide equipment bundled with maintenance and repair services. Insurers bundle home and auto.
Years ago, I worked for ADP. They provide HR software, payroll services, and benefits administration. Salesforce and Hubspot bundle CRM, marketing automation, customer service, and analytics. Microsoft and Google bundle office tools, storage, and collaboration services.
All the examples are bundling of related or tangential services. You can use each one individually. But, using them together makes them more than the sum of their parts.
Back to streaming. Bundles work best when individual services complement each other. Providing more of the same at lower prices is a volume discount. Do viewers actually want more? I haven’t heard anyone complain there aren’t enough streaming services.
Let’s take a look at the Disney+, Hulu, and ESPN+ related bundles. There is a bundle with Disney+ and Hulu. If you’re looking at the streaming TAM, how many people want Disney+ and Hulu? Is this going to grow Disney+ or Hulu’s subscription numbers?
What about the Disney+, Hulu, and ESPN+ bundle? There’s an even smaller audience for this bundle.
The streaming providers are in a conundrum. They cannot be profitable as separate services. Viewers will churn. They may sign up for one or more services. But, their choice of service may depend on which provider has the hot new show this month. The market for streaming bundles is small and isn’t going to drive the revenue needle.
Ad-supported tiers help, but they can’t offset churn.
So stacking more of the same type of service isn’t going to work. We’ve got to go back to the idea that the services or features in the bundles must be complementary.
The obvious play is infrastructure companies bundling with content companies. Comcast is offering packages that include Netflix, Peacock, and Apple TV+. T-Mobile offers bundles with Netflix. Verizon bundles with Netflix and Max.
What are some other options? Partner with home builders and real estate developers to offer lifetime subscriptions? Offer services through gym memberships for “temptation bundling.” Duolingo + Netflix to learn Scandinavian languages faster?
Basically anything besides cramming more streaming with streaming.