Bundling and downstream entry

• In certain industries, e.g., video or music streaming, academic journals, downstream products are offered almost exclusively as a bundle. • In such industries, an upstream supplier is faced with the decision of either to enter the downstream market or to sell via a downstream platform who offers all products as a bundle. • When consumers can multihome, following entry the supplier faces increased downstream competition but benefits from greater price setting flexibility. • Our theoretical model shows that entry becomes relatively more profitable if the products are closer substitutes or the correlation between product valuations is weaker. • Our results have important implications on recent developments in industries such as video and music streaming. We investigate the incentives of an upstream producer to enter the downstream market where the alternative is to sell via a downstream platform who offers all products as a bundle. When consumers can multihome, following entry the producer faces increased downstream competition but benefits from greater price setting flexibility. We show that entry becomes relatively more profitable if the products are closer substitutes or the correlation between product valuations is weaker. Our results have important implications on recent developments in industries such as video and music streaming.