Bundling not just Pricing option? Bundling as a basic value chain component?

November 22, 2007

Still thinking about the question from my last post : How can you get some exclusiveness to a music product and how should you define a “music product”?

If you have a look at basic value chains for the media industry sometimes, dependent on the author ( a while ago I already wrote about different authors and their value chain definition), you can find “bundling” as an own value chain component.

value-chain1.jpg

These authors see in media companies the central function to act as a “content intermediary”.

Definition of Intermediation:
(Rose, F. (1999): The Economics, Concept, and Design of Information Intermediaries, Physica-Verlag, Heidelberg, New York, NY. )

“An intermediary is an independent, profit-maximizing economic agent mediating
between two market sides in presence of market imperfections. Intermediation is the
bridging the incompatibilities between the two (market) sides involved in a transaction
by transformation of output attributes of the supply market side to appropriate input
attributes of the demand market side.”

That`s for example the classic job of the editorial office in a newspaper, a magazine, a news website, a radio station: Bundling of news articles, fotos et cetera – simply content.
Not till then the value of the product is high enough to get sold or to get the attention of the consumers. And the way of doing this bundling is a factor of success for the product.

So back to the “product definition of music”:
When we talk about bundling in the music industry we often just thinking about a “pricing option”.
But instead bundling should be seen as a basic part of the value creation. A few years ago compilations were very successful. At that time the industry saw the value of this step. But this bundle of round about 30 songs is not interesting enough for the consumers in the digital age, and the market for compilations dropped.

Aren`t there chances to find new interesting bundles?
Perhaps the successful services of Last Fm and Pandorra can be seen as a bundling service – done by a computer programm.

But isn`t there more?

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