In search of ‘Rundle’
A new word, made up to represent a ‘Recurring Revenue Bundle‘, an idea whose infancy was spent in software, but that is now reaching puberty in other markets.
The result of this pubescence is that business models are in the midst of radical change from ‘Ownership’ to ‘Usership’. The revenue and marketing models of software have moved from purchase to subscription, and following will be, almost everything that can be bundled as a service.
This is not a new idea, it is the foundation of the success of Xerox, charging by the copy, rather than selling copying machines, and Gillette in its early days, giving away the razors in order to sell the blades.
Given the boldness of that forecast, there is another thing that will emerge: Control of distribution will be essential. If you have a recurring revenue model, and no control of your distribution, you will be screwed.
Let’s consider cars, personal transport. Are we beginning to see the trend now, as differing companies place cars for ‘digi-rent’ in heavily populated neighbourhoods around the inner city. If you are going to digi-rent a car, it will not usually matter what the car is, beyond a functional definition: takes four kids, has a bike rack, and so on. So, the power of the brand of car will move towards the platforms that rent them out. If you are running Ford, or Mercedes, you need control of the platform from which the cars will be Digi-rented, in order to keep being able to move cars off the end of the production line.
What then will differentiate the Ford platform from the Mercedes platform?
Distribution.
You can see the beginnings of the battle to come in the subscription entertainment services. Netflix Vs HBO Vs Stan, and all the rest, now including the newly launched Apple TV and Disney. There is not room for them all, so there will be billions thrown at content, and most will end up in the hands of the few who control the distribution, building arithmetically on the recurring revenue.
My prediction is that Disney will be one of the last standing. They have a great brand, huge back catalogue, the cash reserves to churn out more great stuff, but their most important asset is the extension of the subscription services into other revenue sources. Licencing, Disney world, holidays, games, and all the other areas where the Disney brand has an existing or expandable position. The other winner will be Amazon, who have a platform, including Prime, that is in 55% of US homes, and rapidly taking over in other geographies. Distribution is automatic and bundled. The current leader, Netflix, is out on its own, great first mover advantage, but lacking the broad competitive base of Disney and Amazon.
The rest, beyond the very specific, super focussed services that will inevitably emerge, are toast.
Instead of products, you will be seeking to create ‘Rundles’ or Bundles of a value proposition to keep people coming back for more, rather than marketing to convince people to buy again.
The strategic task: Build barriers to churn.
