“Gentlemen, there’s only two ways I know of to make money: bundling and unbundling.” — Jim Barksdale, former Netscape CEO
From Thompson’s “2020 Bundles” posted Tuesday on Stratechery:
What is striking about the bundles that have emerged over the last couple of years — and over the last couple of weeks! — is the degree to which they span different types of media, often with widely varying business goals.
- Netflix: Bundle as Business Model…
- Disney+: Bundle as CRM [Customer Relationship Management]…
- Amazon: Bundle as Churn Management…
- Microsoft: Bundle as Market Expansion…
- Apple: Bundle as Money-Maker
All of this is a long way of explaining why I was relatively underwhelmed by last week’s announcement of Apple One. Apple One includes Apple Music, Apple TV+, Apple Arcade, and iCloud storage, for either individuals or families; Apple Premier adds on Apple News+ and Apple Fitness+.
Some of the aforementioned bundle strategies are applicable to Apple One, others less so:
- While Apple’s primary business model remains selling hardware at a profit, the company has a longstanding goal of increasing services revenue; selling a bundle potentially helps in that regard.
- Apple doesn’t really need any help connecting to its customers, although iCloud Storage does make for a better overall Apple experience.
- Apple One may reduce churn, particularly if customers are attached to the Apple-only services like Apple Arcade, Apple News+, and Apple Fitness+, but the truth is that Apple’s churn is already quite low
- On the flipside, Apple One doesn’t really make an iPhone any more accessible, particularly since Apple is competing against Android, as opposed to non-consumption.
To me the biggest hangup is the first one: the degree to which a bundle is compelling is the degree to which it is integrated with and contributes to a company’s core business model, and, in contrast to these other four companies, it’s a bit of a stretch to see how Apple One really move the needle when it comes to buying an iPhone or not.
My take: While Thompson is master of provocative soundbites, his arguments are often too intricate to easily summarize. Best to read the whole thing, especially since this one doesn’t require a Stratechery subscription.