Skip to content
Four Myths of Bundling



Background: Isn't bundling a bad thing?

Over the past decade, my opinions on paid subscriptions and bundling have changed 180 degrees. And I’ve come to realize that some of my previous misconceptions are fairly commonplace. This doc is a discussion of 4 myths that I’ve heard regularly... and the 4 theses I would replace them with.
But first, a bit of background on my journey. Before founding Coda, I spent a number of years as a Google executive responsible for the YouTube products. When I joined YouTube in 2008, it was fairly clear that our primary monetization model would be advertising ー but even still, there was always an item on our backlog to try different forms of user-paid offerings. We tried many experiments, but in those first few years, most were not very successful. As we reflected on why, I noticed a common pattern. Every idea we tried started with a similar premise ー we wanted paid offerings, but we didn't want to repeat what we saw as a "mistake" in the industry. Often it wasn't even stated, but every discussion started with an implicit view that "Bundling is Bad". And to be very clear, I was one of the most avid proponents of this view.
Recognizing this pattern, I became a student of bundling. I read everything I could on the topic. Chris Dixon has an that sparked the initial ideas. There's of course the , "Gentlemen, there’s only two ways I know of to make money: bundling and unbundling." I also reached out to many smart people to learn more ー starting with strategists and executives at media companies but gradually broadening. Eventually, I arrived at the conclusion that I had it backwards, and that many of my previous conclusions were incorrect. Per the title of this doc, I started developing a set of "Myths of Bundling".
When I left YouTube in 2014 to start Coda, this topic continued as a bit of a secondary hobby for me and my thoughts on the "myths of bundling" continued to expand. I started investing and advising a few companies in related spaces, including joining the board of Spotify (after realizing that Daniel Ek shared a lot of my views). Over the years, my framework for bundling has developed into a useful set of new principles. I've found these principles to have a profound effect on many business situations, and have shaped my views on broader topics as well.

Introducing the Four Myths

This doc represents a new framework for thinking about bundling. It is presented as a series of four "myths", each one followed by a new "thesis" statement. I have a background in mathematics and so tend towards understanding concepts with mathematical language ー but each one is also paired with a narrative that explains the myth and the new thesis.
The narrative is told as a discussion with a fictitious "Myth Maker". As you read it, you can picture many people you may know who share some of these views (perhaps yourself), but as I wrote it, I was mostly using it as a label for "old me" ー i.e. my own personal views from a decade ago.
Here’s the high level summary of the 4 Myths. We’ll work through these one-by-one in a moment.
Thesis 1: When done well, bundling produces value for both consumers and providers by giving access for (and revenue from) CasualFans.
Thesis 2: The most fair way to distribute revenue to providers in a bundle is by Marginal Churn Contribution, not Usage.
Thesis 3: For a Consumer to properly value a bundle, there must be a transparent (and reasonable) a-la-carte price for each of the products in the bundle
Thesis 4: The best bundle is one that minimizes SuperFan overlap and maximizes CasualFan overlap
There are no rows in this table

Why does this matter?

For a while, my thinking on bundling was just a fun hobby for me. Over time, I recognized that this set of principles was somewhat fundamental and has reshaped my views in a number of ways.
I've included a set of discussions on predictions and implications in the section of this doc. But here's a bit of a teaser of where this discussion may lead you:
Bundling is a natural evolution for many industries: Many of the examples in this doc focus on the media industry (both because of my background and because they tend to be relatable). But the patterns shown here are applied in everything from airlines to shopping to health care.
The concepts of bundling can be applied to more general product development: Though most bundle examples are “multi product”, they apply within a single product as well. Think of your product as broken up into a set of constituent parts ー which audiences are SuperFans vs CasualFans of each part?
The bundles of the future will be larger and more diverse than we have today: I believe the economies of scale of bundles (esp when combined with ) will lead to significantly broader bundles than we are used to.
A third business model for the internet: The includes a discussion on how this framework can not only result in new partnerships, but also in entirely new businesses that only make sense in a bundled environment.

But before we get to those conjectures, let's establish a common framework through the 4 myths.

Prefer to listen or watch instead? Here’s a few interviews I’ve done on this topic

Patrick leads a great end-to-end discussion on bundling.
Shishir Mehrotra – The Art and Science of the Bundle - [Invest Like the Best, EP.175]
Listen to this episode from Invest Like the Best with Patrick O'Shaughnessy on Spotify. My guest today is Shishir Mehrotra and the topic of our conversation is the bundle: offering access to multiple products, services, or providers for a single bundled price. This topic is full of incorrect pre-conceived notions, and as it turns out, the bundle is one of the most powerful ideas in business. Properly harnessed it is good for everyone involved. Shishir explains the ins and outs of bundles in this conversation. Shishir ran product at YouTube for years and sits on the Spotify board of directors. He founded and now leads Coda (which is “A Doc” spelled backwards) in 2014, to bundle together productivity apps like docs, spreadsheets, databases, and applications. I love this wonky, detailed conversation which has me thinking differently about many businesses and business strategy. Please enjoy.   This episode is brought to by Koyfin.   For more episodes go to Sign up for the book club, where you’ll get a full investor curriculum and then 3-4 suggestions every month at Follow Patrick on Twitter at @patrick_oshag   Show Notes (2:08) – (First question) – The arc of his career (3:32) – Why he has an interest in bundling (7:45) – The concepts of superfan, casualfan, and nonfan businesses (11:05) – Using Spotify as an example of bundles (13:24) – The first myth of bundling: Bundling is bad for consumers (17:53) – The second myth of bundling: 1st vs 3rd party providers and the bundlers (23:03) – Low usage but high Marginal Churn Contribution (MCC) business (24:26) – How insurance fits into these models   (26:37) – Myth 3 of bundling: How this impacts consumers (32:12) – How marginal costs play into the thinking of bundling (34:54) – Myth 4: Bundling things that have nothing to do with each other (39:51) – How bundling companies can apply this into their product development (43:21) – Strategic advice to companies building bundles (49:01) – How price and pricing power play into advantages for certain bundlers (54:16) – How does bundling play into his investing thesis (56:47) – Most interesting bundles he’s observed             (58:44) – Eigenquestions: The Art of Framing Problems (59:14) – What the future of this trend is (1:02:24) – What is an eigenquestion (1:06:29) – Kindest thing anyone has done for him   Learn More For more episodes go to  Sign up for the book club, where you’ll get a full investor curriculum and then 3-4 suggestions every month at Follow Patrick on Twitter at @patrick_oshag
Good video walk through in presentation form.
HeadSpin Corner Ep. 6: Shishir Mehrotra of Coda on the Four Myths of Bundling
Shishir Mehrotra, Co-Founder and CEO of Coda, recently unpacked his thoughts on bundling in a writeup that combines mathematics and up-close examples to challenge common misconceptions about bundling ( He presents the four myths here in detail, and speaks on current bundles and what he believes bundles will look like in the future. He also discusses his experience with Microsoft and Youtube and the idea behind the name “Coda”. Shishir Mehrotra, Co-Founder and CEO, Coda: Jeena James, VP of Developer Products, HeadSpin: In each HeadSpin Corner episode, our VP of Developer Products Jeena James talks to experts and thought leaders at HeadSpin and in the industry about what’s new in the testing community, the latest industry trends, how to achieve digital business success, and more. You can find more episodes here ➤ ➤ ABOUT HEADSPIN HeadSpin is the world’s first Digital Experience AI Platform that combines cloud-hosted and on-prem global device infrastructure, test automation, and ML-driven performance & quality of experience analytics for mobile, web, audio, and video. HeadSpin empowers engineering, QA, operations, and product teams to assure optimal digital experiences across delivery channels throughout the development lifecycle. Learn more ➤ ➤ 0:10 Tell us a bit more about yourself, what have you been up to, and an app you absolutely love now? 2:08 How has that [the journey starting a company, moving on to Microsoft, then Google, then starting a company again] been? Tell us a bit more about one thing you unlearned and one new thing you learned.  4:50 What gave you the idea of bundling? What was the opportunity that you saw that you felt you had to go deeper into this topic? Is there a body of work that is actionable? 12:08 4 Myths of Bundling 13:52 Terminology 14:10 (Myth 1) How does bundling produce value for both consumers and providers? 19:25 (Myth 2) How should revenue from bundles be allocated? 24:43 (Myth 3) What can we do to allow consumers to properly value a bundle? 28:47 (Myth 4) Are the best bundles narrow or diverse? 34:45 Recap of all 4 Myths 34:25 Did you look at why [Myth 4] is? Is it possible that the consumer is not a single consumer but a unit of consumers, so you are actually maximizing CasualFans hat can be CasualFans in a family or in a group of people consuming the same content? 36:43 What are your thoughts on Netflix in that case, where you do have profiles and you don’t have to necessarily pay for a single profile, you can have 5 profiles? Would you call that a bundle, or would that be in its own category? 41:56 How does bundling apply to a SaaS platform? Where have you seen [bundling] work very well? Where do you feel like people could have thought a little more while trying to bundle or show a la carte? 47:15 What will bundles look like in the future? 51:47 What are your thoughts on how Google and Apple’s been thinking about bundles (Apple Arcade, Google PlayPass, Google One)? Have there been massive or monumental shifts in [bundling] consumption with Shelter-in-Place and Work-from-Home going on? 55:48 What does Coda stand for?

A few other extras before you start

Short on time? Here's a presentation format
I've given a number talks on this topic, and have developed a slide deck that I use regularly. For faster reading, feel free to start with this:
Definitions of key terms: There are a few new terms that are used throughout the doc
Myth-maker = our personified adversary for this discussion - an individual who will vehemently argue that all of these 4 myths are true (I mostly pictured myself from a decade earlier)
Bundle participants
Consumer = purchaser of the bundle (though in some cases, a consumer could be a business, we’ll simplify terminology to consumer for now)
Provider = provider of a good within a bundle
Bundler = the organization that bundles goods together and sells them to consumers
Note: It is quite possible for an organization to be both a bundler and a provider (in fact, in the media industry, this is common place ー a show is a bundle of episodes, a channel is a bundle of shows, a channel group is an ownership group for multiple channels, your cable plan is a bundle of channels, and your provider likely bundles together phone, internet, and security into your plan)
Bundle = something a consumer purchases that includes access to multiple goods generally (though not always) from multiple providers. For shorthand purposes, we will assume all bundles in this doc are billed on a monthly subscription basis.
Types of Fans: Defined in
SuperFans: Consumers who would (a) pay retail for a good and (b) have the activation energy to find it
CasualFans: Consumers who lack one of the 2 SuperFan tests
NonFans: Consumers who ascribe zero (or perhaps negative) value to having access to the good
Marginal rates: Defined in
MCC aka Marginal Churn Contribution: Defined in , this refers to the percentage of people (and associated revenue) who would churn from a bundle if a particular product were removed.
MSacC aka Marginal Subscribed Acquisition Cost Contribution: Also introduced in and closely related to MCC, this refers to the percentage increase in a subscription base when a product is added to the bundle.
Useful reading, historical context, and other extras in the section
Useful reading: A number of links, including
Chris Dixon’s helpful primer
Historical context / Original doc: This doc was originally a google doc (
) that also has a lot of the early comments / conversations. Feel free to read those to learn more history.

A huge round of thanks to the following folks for reviewing and contributing to this doc. Their comments have made it immensely better (and any remaining shortfall is entirely my fault!): Trip Adler, Gene Alston, Sean Atkins, Prabhu Balasubramanian, Nikhil Chandhok, Rachel Colson, Ben Davis, John Donham, Shreyas Doshi, Daniel Ek, Phil Farhi, Wade Foster, Julius Genachowski, Kristin George, Daniel Graf, Manik Gupta, Jeff Holden, Brad Hoover, Matt Hudson, Sujay Jaswa, Sethu Kalavakur, Sriram Krishnan, Zachary Lloyd, Mike Mignano, Kavin Mittal, Sreejit Mohan, Alex Norström, Will Page, Tom Pickett, Rich Pierson, Shiva Rajaraman, Vishwa Ranjan, Peeyush Ranjan, Jay Richman, Jonathan Rochelle, Sam Rogoway, Richard Sarnoff, Aaron Schildkrout, Lane Shackleton, Hiten Shah, Ben Silbermann, Tom Staggs, Kevin Thompson, Eugene Wei, Ev Williams, Larry Zhong
Also, to see other docs from Shishir, check out .

Next Section: Get started with

A few of the 50,000+ teams that 🏃‍♀️ on Coda.

Coda is an all-in-one doc for your team’s unique processes — the rituals that help you succeed. Teams that use Coda get rid of hundreds of documents, spreadsheets, and even bespoke apps, to work quickly and clearly in one place. This template is a Coda doc. Click around to explore.
Find out how to Coda-fy your rituals.

Want to print your doc?
This is not the way.
Try clicking the ⋯ next to your doc name or using a keyboard shortcut (
) instead.