Bundles are (usually) a win for everyone. So why do we hate them?

1. 
Bundles are (usually) a win for everyone.
So why do we hate them?
BUNDLING EXPLAINED

2. WHAT IS BUNDLING EXACTLY?

3. Bundling: Selling two (or
more) products as a
single packaged unit.

4. The best known example?
CABLE TELEVISION

5. PEOPLE HATE IT.

6. 77% of Americans say
they’d rather buy
channels a la carte than
purchase cable bundles.
Source: tcrn.ch/2JBZZp3x

7. But there are good
reasons to like bundles.

8. CHRIS DIXON EXPLAINS.
Source: bit.ly/2ql0PXx

9. BUT FIRST, SOME DEFINITIONS
1 Reservation Price
The highest price a buyer is willing to
pay for an item.
Optimal Price
The price that maximizes the seller’s
revenue.
Consumer Surplus
The reservation price minus the optimal
price.
2
3

10. Optimal prices are almost
always a little lower than
reservation prices.
We’re going to assume 10% lower in this case.

11. IMAGINE TWO CUSTOMERS
SPORTS
FAN
SCIENCE
FICTION FAN

12. AND TWO CHANNELS
SYFY ESPN

13. But the sports fan also
kinda likes sci-fi. And the
sci-fi fan kinda likes
sports.

14. SyFy ESPN
Science
Fiction Fan
$10 $3
Sports Fan $3 $10
Their reservation prices look sort of like this.

15. Seller: $18 revenue
SELL INDIVIDUALLY
Buyers: $1 each
consumer surplus
$10 reserve price, less 10%
optimal price discount equals
$9.00 per bundle

16. Seller: $23.40 revenue
SELL BUNDLED
Buyers: $1.30 each
consumer surplus
$13 reserve price, less 10%
optimal price discount equals
$11.70 per bundle

17. That’s the logic behind the bundle.

18. Done correctly, it leaves
everybody a winner.