Post date: Nov 19, 2016 4:31:34 PM
Many platforms use a flat-fee or subscription pricing to give one side (consumers) access to a bundle of products or participants on the other side (producers). My paper (published in Marketing Science, 2013; PDF at issuu.com) considers the distinctive economic forces in such multi-producer bundling - common in the TV, media and entertainment industries, but also in travel, computing, and services. I show when multiple firms (manufacturers) contribute to the bundled good, they tend to desire an excessive share of the benefits (the retailer’s price for the bundle), thereby substantially erasing the demand-side benefits from bundling. This tendency weakens the practice of bundling, especially when the producers have multiple distribution channels, and leads to frequent price disputes such as the carriage-fee disputes between content providers (e.g., Disney) and retailers (e.g., DirecTV). Ultimately it severely disrupts the retailer's business model, forcing the weakened retailer to recapture market power by shifting towards production (vertical integration) or exclusive distribution rights for popular content (exclusivity alliances).