Jeremy Philips

[Commentary] The internet promised to be the great unbundler. The evisceration of distribution costs would free consumers from paying for cable television channels they never watched, allowing them to bypass cable monopolies and pay only for the shows they wanted. But paradoxically, the same forces that allowed classified ads and news to be so easily separated also drastically increased the economic rationale for bundling across the board. Consumers merely have swapped one bundle for another (or often, several). There are more than 65 million subscribers to cheaper “over the top” packages provided by Netflix, HBO, Hulu, Sling TV and others (even excluding Amazon Prime Video).

One does not always think of all of these as “bundles” because these services do not consistently categorize their content using the commonplace TV channel taxonomy. However, their aggregation of shows looks more and more like a traditional cable bundle. We are in the age of the great rebundling, when firms use packages of services as a way to increase their scale advantage and thus deepen the moat around their businesses.

[Jeremy G. Philips is a general partner at Spark Capital and an adjunct professor at Columbia Business School.]