Bundling, unbundling, and pricing of multiform products: The case of magazine content

Abstract

The he Internet has given rise to a new class of multiform (i.e., hybrid) products that can be offered in both offline and online forms, such as music and magazines. The online medium enables bundling, and unbundling, of such products at negligible cost. Focusing on a print magazine publisher, we develop an analytical model to address three questions. Under what productmarket conditions should the seller offer the magazine content online? What assortment of online forms (bundle, unbundled modules, or both) is optimal? What are the pricing implications? A key result is that going online is profit enhancing even when the market strongly prefers the print medium and there are no advertising revenues. Under these circumstances, the online modules, rather than the online bundle, better complements the print bundle. Also, the wider the product line, the higher the prices of the individual products. © 2006 Wiley Periodicals, Inc.