Content providers face a more predictable demand curve when they aggregate content that appeals in an unpredictable way to different customers. This is the second reason highlighted in the excerpt below; the first reason is convenience in distribution (which does not apply on the Internet) and in consumption (which applies: do you want to make a purchase decision for each article you read or image you download?).
"Most goods can be thought of as bundles of smaller goods (Lancaster, 1966). [...]
Why Aggregate?
There are two main reasons that sellers may wish to aggregate information goods. First, aggregation can directly increase the value available from a set of goods, because of technological complementarities in production, distribution, or consumption. For instance, it is more cost-effective to deliver a few hundred pages of news articles in the form of a Sunday newspaper than to separately deliver each of the individual components only to the people who read them, even if most of the Sunday bundle ends up in the recycle bin without ever being read. Likewise, purchasing a movie on videocassette may be cheaper than repeatedly renting it or attempting to separately charge members of the household for viewing it. These cost savings increase the surplus available to be divided between the buyer and seller, although they may also affect how the surplus is divided. Similarly, including certain types of functionality together in a software application can create value greater than the sum of its parts.
Second, aggregation can make it easier for the seller to extract value from a given set of goods by enabling a form of price discrimination. This effect of aggregation is subtler and, in the case of bundling, has been studied in a number of articles in the economics literature (e.g., Adams and Yellen, 1976; McAfee, McMillan and Whinston, 1989; Schmalensee, 1984). While the benefits of aggregation due to technological complementarities are relatively easy to see, the price discrimination effect does not seem to be as widely recognized outside the economics literature, although it can dramatically affect both efficiency and profits (Bakos and Brynjolfsson, 1996)."
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Content providers face a more predictable demand curve when they aggregate content that appeals in an unpredictable way to different customers.
This is the second reason highlighted in the excerpt below; the first reason is convenience in distribution (which does not apply on the Internet) and in consumption (which applies: do you want to make a purchase decision for each article you read or image you download?).
SOURCE: http://www.gsm.uci.edu/~bakos/aig/aig.html
"Most goods can be thought of as bundles of smaller goods (Lancaster, 1966). [...]
Why Aggregate?
There are two main reasons that sellers may wish to aggregate information goods. First, aggregation can directly increase the value available from a set of goods, because of technological complementarities in production, distribution, or consumption. For instance, it is more cost-effective to deliver a few hundred pages of news articles in the form of a Sunday newspaper than to separately deliver each of the individual components only to the people who read them, even if most of the Sunday bundle ends up in the recycle bin without ever being read. Likewise, purchasing a movie on videocassette may be cheaper than repeatedly renting it or attempting to separately charge members of the household for viewing it. These cost savings increase the surplus available to be divided between the buyer and seller, although they may also affect how the surplus is divided. Similarly, including certain types of functionality together in a software application can create value greater than the sum of its parts.
Second, aggregation can make it easier for the seller to extract value from a given set of goods by enabling a form of price discrimination. This effect of aggregation is subtler and, in the case of bundling, has been studied in a number of articles in the economics literature (e.g., Adams and Yellen, 1976; McAfee, McMillan and Whinston, 1989; Schmalensee, 1984). While the benefits of aggregation due to technological complementarities are relatively easy to see, the price discrimination effect does not seem to be as widely recognized outside the economics literature, although it can dramatically affect both efficiency and profits (Bakos and Brynjolfsson, 1996)."