Thesis On Bundling and My Wishlist from Times Internet
A guide to 'good' bundles and lessons from McDonalds, Sony PS4, TataSky and more.
Father is a lectiophile. He exclaimed during the CoVid19 lockdown that he wants to read more ad-free quality journalism. Doubtful, we googled for options.
We discussed Times Prime and Bloomberg Quint amongst others. But, Times Prime is unique-they offer more than just news! Curious, we dwelled upon it and were surprised.
When most people think about The Times Group or Times Internet, they probably think about the news and its widely circulated newspapers, but they’re more than that.
Times Internet is a bouquet of news and non-news digital products, 27 digital products to be precise, a few notable ones below.
Times Internet has so much leverage from its products, diverse enough to be a great candidate for bundling. Bundled well, I believe Times Internet will be mentioned in the same breath as hall-of-famers Netflix, Tencent and others.
Today I want to talk about framework of ‘good’ bundle, apply the framework on Times Prime - Times Internet bundle.
“Gentlemen, there’s only two ways I know of to make money: bundling and unbundling.” - Jim Barksdale
TLDR 📋
Bundle is one of the most powerful ideas in business. Properly harnessed it maximizes revenue for all participants in a bundle. I mentioned in my last post that bundling is a moat.
'Good’ bundles increase the Total Addressable Market (TAM) for participating products(supply) by making them accessible for CasualFans - the consumers who have the reluctance to pay or are late adopters, more on this below.
‘Good’ bundles convey the value of a bundle by ensuring the components of the bundle have clear a-la-carte value. E.g. McDonald’s McSaver meal Vs A-la-carte.
‘Good’ bundles should serve diverse (needs and wants) or (aspirations) or (use cases) or (requirements), rather be narrow.
‘Good’ bundles optimize for fair allocation of revenue and churn for participating products(supply) by marginal churn contribution and not by usage. In other words “if I were to remove X from the bundle, how many people would churn?”. Similarly, “If I were to add X to the bundle, how many new subscribers would I earn?”. Bundle subscribers mentally start valuing bundle benefits over individual participating products.
🤝 Together we will build an ‘imaginary’ Times PrimeAll-Access bundle, which will win over people’s eyes 👀 and ears👂
[Disclaimer: This post is not an endorsement about Times Prime, but it is a perspective and exploration about the bundling of products and my wishlist from Times Prime]
We’re going to be here for a while. Go get some coffee. ☕
For a quick primer on bundling, let’s start with a simple example of McDonald’s McSaver meal.
Now picture a set of customers standing in line.
🍟🍔🥤🧸🖥️🧍♂️🧍♀️👨👧
The first customer remarks: “I really want a McSpicy burger, I kind-of want fries, and if I get those, then the drink is free”.
The second customer in the queue is thinking differently: “I really want a drink, I kind-of want a McSpicy, and now the fries are free!”.
And finally, behind them is a third customer with a crying child who is thinking “I really need a toy for my kid, and if I get this deal, then not only do I get a toy, but the whole meal is free!”.
What happened is McDonald’s value meal played along with the psychology of a customer by converting SuperFans who were ready to pay a-la-carte to CasualFans to get access to a broader array of adjacent products with a McSaver meal bundle.
Blue circles represent SuperFan revenue that McDonald’s would receive for each product offered a-la-carte. The green background highlights the new possibilities when McDonald’s activates CasualFan revenue with a bundled offer - McSaver Meal.
But, who’re SuperFan, CasualFan and NonFans?
Shishir Mehrotra of Coda has a remarkable thesis on bundling Four Myths of Bundling. My favourite concept from the piece is the idea of SuperFans, CasualFans, and NonFans.
SuperFan: This is someone who fits two criteria:
Willingness to pay retail or a-la-carte price for a product.
Early adopter and has the activation energy to find the product and purchase it.
CasualFan: Someone who would value the good if they had access to it, but lack one of the two SuperFan criteria ー either they aren’t willing to pay the a-la-carte price for the good or don’t have the activation energy to find it out, or both.
NonFan: Someone who will ascribe zero (or perhaps negative) value to having access to the good.
Shishir insists the best bundles minimize SuperFan overlap and maximize CasualFan overlap. In practice, this means bundles should contain diverse products rather than narrow ones.
Now if we offered McSpicy, Fries & Drink as just a-la-carte, then:
McDonald’s would only provide service (and collect revenue) for SuperFans (the blue circles), and
Consumers would only limit to goods for which they are a SuperFan
The a-la-carte model clearly doesn’t maximize value, as consumers are getting access to fewer goods than they might be interested in, and bundle providers, in this case, McDonald’s are only addressing part of their potential market.
On the other hand, the bundled offer expands the universe and not only matches SuperFans with the products they are SuperFans of, but also allows for those consumers to get access to products of which they may be CasualFans.
Above visualization shows that from McDonald’s perspective McSpicy is likely adding new customers to McSaver Bundle. From a consumer’s perspective, if you are a SuperFan of McSpicy or Fries or Drink, the bundle is likely a good deal - e.g. if you’re a SuperFan of McSpicy, then you “pay for McSpicy and get Fries and Drink as complimentary”.
Okay, so what’s this have to do with Times Prime - Times Internet Bundle?
Everything about Times Prime, a bundle of bundles
As I mentioned above, Times Internet is a bouquet of 27 digital products categorized in news and non-news products.
Products are diverse enough to be a great candidate for bundling, and that’s exactly what Times did with Times Prime, qualifying for ‘Good’ bundle. Times Prime check ✅
‘Good’ bundles should serve diverse (needs and wants) or (aspirations) or (use cases) or (requirements), rather be narrow.
But, Times Prime is a bundle of bundles, how?
Economic Times one of the providers in Times Prime is a bundle in itself.
X writer works for Economic Times(ET) on a beat.
ET bundles X’s stories with all the other writers’ stories.
Writers rely on ET for distribution.
A-la-carte pricing for individual writer’s stories is not available. We buy the ET as a bundle.
Orange circles below represent writers and blue background represents ET(bundle)
Similarly, Times of India is a bundle for news, Gaana for music, MXPlayer for videos, Dineout Gourmet Passport for restaurants, and so on. Hence, Times Prime is a bundle of bundles.
Times Prime is a bundle of bundles
Riffing off McSaver meal analogy for Times Prime, blue circles above represent SuperFan revenue that the Times Internet would receive for each service provider offered a-la-carte. The green background highlights the new possibilities when Times activates CasualFan revenue with a bundled offer.
Above visualization shows that from Times perspective ET is likely adding new customers to Times Prime. From a consumer’s perspective, if you are a SuperFan of ToI or ET or Gaana, the bundle is likely a good deal - e.g. if you’re a SuperFan of ET, then you “pay for ET and get ToI and Gaana as complimentary”. In other words, minimizing SuperFan overlap and maximizing CasualFan overlap qualifying for ‘Good’ bundle. Times Prime check ✅
‘Good’ bundles convey the value of a bundle by ensuring the components of the bundle have clear a-la-carte value. Times Prime check ✅
Times Prime has qualities of a ‘Good’ Bundle:
✅ Bundles should contain diverse products rather than narrow ones
✅ Minimizes SuperFan overlap and maximizes CasualFan overlap in a bundle
✅ Conveys the value of a bundle with a-la-carte Vs bundled price
⁉️ But, what about fair revenue allocation to providers? hard to comment on internal arrangements. But, let’s introspect fairway to allocate revenue in a bundle, anyway.
This diverse bundling made me curious and kept me pondering, bundler Times Internet and providers - TOI, Economic Times, Dineout, Gaana, etc. are different entities, but how does Times ensure fair distribution of revenue within its group entities?
Fairways to distribute revenue to providers in a bundle
Conventional wisdom would say “By Usage, obviously!!”
In September’18, TataSky(bundler) and Sony Pictures Network(provider with a bouquet of 32 channels) went through a contract dispute haggling over their carriage fee - the amount of money TataSky pays in fees to each channel provider out of your monthly bill.
Reason for the impasse between the two companies is that Sony as part of the new deal demanded Rs22.6 per subscriber per month, 63% higher fee than the previous deal of Rs13.9 per subscriber per month. Doesn’t, Sony with 32 widely viewed channels have the leverage?
Sony Pictures Networks India failed to re-acquire the broadcast rights for the Indian Premier League and lost its negotiation power. Guess(just a guess) what happened next? TataSky took Sony Pictures Network dark.
🆘🔥 TataSky dropped all 32 channels of Sony Pictures Network and made the scuffle public.
📞 TataSky sets up an IVR to measure customer complaint volume and encouraged subscribers to give a miss call to lodge a complaint, over missing Sony channels.
💡Customer complaint volume signalled the marginal churn TataSky was expecting by blacking out Sony.
📉 TataSky now with better data on expected marginal churn, negotiated hard with Sony and both mutually agreed on the carriage fee.
marginal churn contribution-
“if I were to remove X from the bundle, how many people would churn?”
“if TataSky removes Sony from the bundle, how many subscribers would churn?”
[Quoting another example from Chris Dixon’s classic post on bundling]
ESPN and History Channel were getting almost the same amount of usage. And yet if you were to look at their carriage fees there is a ~20x difference. History Channel can get from $0.20-$0.40 per month per subscriber, while ESPN collects $4-6 per month per subscriber.
So is this unfair? Shouldn't they be paid the same, based on Usage?
Let’s assume some numbers and do napkin math:
if ESPN were removed from the cable bundle then 10% of subscribers would churn
if the average monthly cable bill is $50/month, and roughly 100M households subscribe to cable, this would mean 10M households cancelling, or a loss of 10M * $600/yr = $6B in annual revenue at risk.
so the cable companies agree to pay the $6B, but distribute it across all 100M households, resulting in a carriage fee of $60/yr or $5/month for ESPN
TataSky Vs Sony and ESPN Vs History show that fair way to distribute revenue is not by usage, but by marginal churn contribution.
“if I were to remove X from the bundle, how many people would churn?”. Similarly, “If I were to add X to the bundle, how many new subscribers would I earn?”
I’m assuming that Times Internet has a similar arrangement to allocate fair revenue.
Ascertaining benefits of bundling, let’s build an ‘imaginary’ Times Prime All-Access bundle
I’m a SuperFan for music (subscribed to Spotify), a frequent visitor to Economic Times, OTT video (subscribed to a few), a subscriber to Gourmet Passport and other digital products. All over the place.
I just wish, there was this one ‘imaginary’ Times Prime bundle that assembled a set of services and made me feel they are part of a coherent good worth purchasing.
We consume content from all mediums, formats and platforms. ‘imaginary’ Times Prime All-Access should be coherent and assemble content products that target people’s eyes 👀 and ears👂, format and platform. I believe a few bundles can be carved out to satisfy the habitual triggers of SuperFans and CasualFans.
Categorising Times products into 1) Eyes Vs Ears 2) Long/Short form Vs Platform/User-generated.
[introducing an imaginary product line for paid user-generated content (PUGC) to unbundle content creation and to empower creators]
Eyes Vs Ears:
Long/Short form Vs Platform/User-generated:
Arm the bundle with best of both platform generated content and user-generated content, ensuring it maximises CasualFan overlap as visualised below.
Introducing Times Prime All-Access
One subscription with unlimited access. Coherent and worth purchasing. I’ll a happy subscriber for a lifetime.
[Note: Times Prime-All Access and pricing is just a viewpoint to learn about bundles and my wishlist from Times Internet]
🤟 Bonus reading: Other interesting bundles
One thing that stands out in below examples, - all the bundles expand the universe and not only matches SuperFans with the products they are SuperFans of but also allows for those consumers to get access to products of which they may be CasualFans of.
🎮This PlayStation 4 bundle gets you 3 games and is cheaper than buying the console by itself(link)
Gaming consoles & game titles are customarily for SuperFans - 1) who has the willingness to pay a-la-carte and 2) has the energy to research & find the product.
Sony to expand the audience and attract CasualFans bundled three games and a PS4 console to sweeten the deal. There are at least 15 other bundles on Amazon.
📧 Substack publishers are innovating its business model.
Writer/Publisher: Substack came along, unbundled writing and provided a platform for any writer to monetize to offer a-la-carte pricing. Bundling wasn’t a feature on Substack, but publishers are hacking its business model & product.
Subscriber: Substack is built for ‘A SuperFan’ who’ll pay a la carte pricing, but what about "CasualFans"?
Two publisher’s Nathan Baschez & Dan Shipper bundled their Substack publication to expand their audience. Divinations + Superorganizers bundle priced @ $15/month, while Divinations usually costs $20 / month, and Superorganizers usually costs $15 / month. That’s a 60% discount!
🛒Speaking of bundles, how can we miss Amazon Prime? No introductions needed here.
🎼 Re-bundle: Spotify Student plan @Rs 59/month, 50% discounted and re-bundled offer for the existing premium plan @Rs 119/month.
☂️ Allstate, the insurance giant promotes savings of up to 25% when you bundle Allstate insurance policies.
A SuperFan might only pay for X insurance or Y insurance, but not both. By bundling, Allstate expands its audience and increase revenue.
In summary
'Good’ bundles increase the Total Addressable Market (TAM) for participating products by making them accessible for CasualFans - the consumers who have the reluctance to pay or are late adopters.
'Good’ bundles should assemble a bundle of goods with low SuperFan overlap and high CasualFan overlap
‘Good’ bundles ensure the components of the bundle have clear a-la-carte value. E.g. McDonald’s McSaver meal Vs A-la-carte.
‘Good’ bundles should serve diverse (needs and wants) or (aspirations) or (use cases) or (requirements), rather be narrow.
‘Good’ bundles optimize for fair allocation of revenue and churn for participating products by marginal churn contribution and not by usage.
‘Good’ bundles make the set of products shown to you feel like they are part of a coherent good worth purchasing
Thank you 🙏
Aman Singhal, Ankit Agarwal, Toshi Prakash for feedback.
In closing
Hopefully, you have enjoyed this post. If you have any additional insights or feedback to share, don’t hesitate to DM me on Twitter & Linkedin.
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Sincerely,
Vishwanath 👋
Very Analytical...good one