Wednesday, April 15, 2015

The Bundle Is Dead

Advertising-financed, pushed, bundled-content media is quickly dying. For newspapers there are two critical truths: the medium has changed (newsprint is now online), and (much less understood in the industry) the nature has changed (one-way production and distribution of "the news" from one to many is no longer reality). The second point is the more important. We now can have access in depth to a much, much wider array of news and it is a two-way channel, "a conversation" in the words of BuzzMachine, that is many to many many times over. Often this is in a more raw, unrefined form. And it extends much beyond news into all aspects of media entertainment--it's not just Hildy Johnson that we're losing.

Before fretting that this is all a huge net loss, remember we used to have milk delivered to our doorstep--Those were the days! That was the cost-effective method, but it was a lot more expensive than milk is today. As markets evolve, the value propositions shift. There are always tradeoffs. More of everything for less cost is not ever a near-term option. So you shouldn't be surprised when to get the same channel lineup in a cord-cut world you have to pay as much or more than you pay today. Some of us are enjoying bundles that will not for long be profitable. This media trend began in earnest for print about 15 years ago. It began for radio about 10 years ago. And it began for television about 5 years ago, and it is accelerating.

Bundling was a natural and rewarding byproduct of economies of scale--falling average fixed costs created by mass production. But we are progressing past that part of economic growth into an era dominated by falling total fixed costs--Moore's Law has crossed a tipping point in magnitude. As that unfolds, we will continue to see the withering of business models singularly reliant on a combination of high fixed costs as a barrier to entry and the consequent economies of scale in production and marketing.