Blog Post

Do Consumers Really Want Their Media in a Bundle?

[qi:_newteevee] When it comes to buying content, consumers prefer to pick a bundle rather than buy à la carte, Daniel Taylor, a GigaOM Pro analyst, argues over at NewTeeVee. To bolster his argument, he used the example of paying for cable, rather than individual channels (even though folks are still agitating for à la carte pricing) and he discounts Apple’s (s aapl) impact on album sales as consumers buy only singles through iTunes. Instead, he focuses on the fact that most of a consumer’s household income goes toward buying bundled services rather than individual media products:

But if we look at the $553 billion U.S. digital home marketplace, consumers don’t spend that much money outside of bundles, as described in a new GigaOM Pro report (subscription required). Sales of individual media products — such as songs, albums, video games, software, DVDs, etc. — occupy less than 15 percent of consumer spending. Each month, the average U.S. household spends close to $250 on the quadruple play services that include: fixed-line telephony, wireless telephony, pay TV and Internet access. By comparison, that same household spends $13.75 buying music, $16 buying DVDs, and $70 on pay TV services.

Herein lies the paradox. When we have the choice to spend for exactly what we want, we spend less. But given the choice between assembling our own bundle and buying one that someone else has built, we choose the latter. I can’t count the number of times I’ve given up on the dollar menu and selected a “combo” meal just to get through the line at the local drive-through. When the music industry was selling us albums, we’d buy an entire CD to get one or two songs. In a world of Internet downloads, we spend a couple of dollars on the one or two songs we know and give up on the rest of the album.

What his post doesn’t address, which I think is important, is that consumers still have to jump through a lot of hoops to assemble their best bundle today. That’s why it’s easier to subscribe to cable TV from a service provider to get the video content you want, rather than buy DVDs, subscribe to a variety of sports packages online, or hunt down last night’s episode of “30 Rock” on Hulu or YouTube. Or to bring it home to service providers that get $250 a month, it’s why most people choose to get a triple play rather than just broadband, because assembling the TV content and making sure the voice over IP phone service works is still too hard. People want what’s cheap and what’s easy, but mostly they just want what’s easy.

10 Responses to “Do Consumers Really Want Their Media in a Bundle?”

  1. We were forced by Comcast to accept a bundle in order to have high-speed internet service at all. I’m not kidding, Comcast refuses to sell high-speed internet service to consumers unless you accept at least one other option. This infuriated me to no end. Ultimately, we chose the phone option, which was the cheapest. The irony is that we never use it. We’ve tried at one point to get away from Comcast and go with consumer-grade DSL from the phone company, but the performance was terrible. I don’t know what the next alternative is — a satellite dish maybe. All I want is fast Internet to the home, streaming Netflix through my son’s X-Box, and our iPhones. Maybe an AppleTV would be nice, but that’s it.

  2. It’s not the bundling of disparate service (TV, Internet, VoIP), that I have a problem with. I currently have a discounted combined billing “package” from AT&T that includes U-Verse TV, Internet, and iPhone service for just under $200 a month, and I’m completely happy with that. What I have a problem with is the bundling of service options that force me to pay for additional service items that I don’t want. like TV channel packages I care nothing about, or an SMS upgrade to 1500 a month (way more than I need) from 300 (less than any average use). I just want more control over my options such as a sliding internet speed scale, sliding SMS scale, and ala carte TV channels. At the very least I just want to feel like I’m not paying for service that I don’t need or use.

    • Stacey Higginbotham

      My guess is a sliding scale model would have a big impact on margins and would be hard when discussing services such as TV content as opposed to something more commoditized like texting packages.

  3. Jacob Varghese

    I would jump on an HBO or Showtime online subscription if they were no more than $10 per month each.

    I dropped my digital cable+premium subscription when I realized I spent most of my time watching just a handful of channels.

    I am content with Hulu, network site, itunes combo.

  4. 9thpoint

    I hate cable! I hate bundling! We don’t really have a choice. The real choice is to match our preferences to offerings. we don;t have that with cable so we end up paying for too much more than we need.

  5. Terry Hayden

    I don’t bundle! As of now I will never bundle. I don’t want all communications coming into and leaving my house in one provider’s hands. And yes this idea of bundling as a way to save money is wrong. People are either too lazy or too busy to care , and that is what the major players rely on. Hey just bundle with us and we will save you money on are already too high individual prices.

  6. It’s not a paradox, spending is higher because A) bundles are more expensive yet marketed as saving money, B) bundles are shoved down our throats, and C) unbundled media takes some amount of technical knowledge and comfort (i.e. it’s harder) to purchase. And then there’s the broader digital divide..

    So consequently, the money taken from our pockets by bundled media is a larger amount not because people prefer it but because it seems like the easiest or the only way to get it for most people.

    Saying otherwise is like saying people prefer being poor because most people are.