Cartel Economics in the Age of Artificial Intelligence
Do you remember about two decades ago when cord-cutting first became a thing?
Back then, cable was a racket. You were paying $150, $200, sometimes $250 a month for 900 channels you didn't watch, just to get the handful you did. Then Netflix and a few other early streaming services showed up and made a simple promise: pay less, get what you want, stop subsidizing a bloated bundle.
It felt like the market was finally doing what markets are supposed to do: Real competition. Real choice. Lower prices.
Except that's not what happened.
As streaming matured, every content owner launched their own walled garden. Netflix. Hulu. Disney+. HBO Max. Paramount+. Apple TV+. Peacock. Prime Video. On and on. Each one with a slice of exclusivity. Each one saying, "You want our stuff? You need our app."
And suddenly the "cord-cutting savings" story flipped. You weren't paying one overpriced cable bill anymore. You were paying six, seven, eight smaller bills. Ten to twenty bucks each if you tolerate ads, more if you refuse to let commercials interrupt your life. Added up, plenty of people now spend more than they did on cable, while still getting ads shoved in their face.
So what did we really cut? The cord, sure. The cost? Not so much.
What We're Really Watching
Here's what I think we're watching in real time: the streaming wars created a new cartel.
Before your mind goes somewhere dark, let me define cartel in plain English.
A cartel is when a group of separate players in the same industry behave like a coordinated monopoly without ever formally admitting it. The classic example is oil. OPEC isn't one company. It's a club of producers and each with their own distinct type of oil (e.g. light sweet crude, heavy sour crude). All of which are needed for a fully functioning global economy. Each member technically competes with the others, but they move in lockstep around production and pricing. One country signals a shift, the rest follow. The public sees "multiple suppliers," so there's no obvious monopoly to rage against. But prices float upward anyway, because everyone benefits when everyone plays the same game.
Cartels thrive on the appearance of competition.
Streaming is the same playbook, just dressed up in slick interfaces and monthly billing.
There's no competition for Paramount shows. They live on Paramount+. There's no competition for HBO originals. They live on Max. There's no single service where those offerings have to fight for your subscription on equal terms. Every company owns its little territory, walls it off, and raises prices slowly enough that you grumble but don't revolt.
Unique silos. Exclusive rights. Prices rising together. Consumers trapped in the middle.
The Part That Worries Me
Now here's the part that worries me.
The same cartel logic is starting to creep into AI.
ChatGPT came out first and lit the world on fire. For most people, it was free, magical, and seemingly unlimited. It wrote, edited, summarized, brainstormed, explained. You could feel the open horizon. A tool that might actually democratize knowledge and productivity.
Then the carving began.
Not only did other major LLMs show up, each with its branding and strengths, but the entire ecosystem started splintering into paywalled niches. Claude is "best at reasoning." Perplexity is "best at research." Gemini is "best for video." Another tool is "best for slides." Another is "best for meeting notes." Another is "best for coding." Another is "best for agents." Another is "best for voice."
Every one of them costs "only" $20 a month.
And that's exactly the point.
You don't notice the cartel forming while you're subscribing one at a time. You tell yourself you're paying for quality. You tell yourself you're being efficient. You tell yourself you can cancel anytime.
But pretty quickly, the modern knowledge worker is staring at:
$20 for ChatGPT Pro
$20 for Claude
$20 for Perplexity
$20 for Gemini
$20 for some specialized workflow tool
$20 for another specialized workflow tool
You see where this goes…
We're rebuilding the cable bundle, except this time it's an AI bundle. Minus the bundle. Plus five separate bills. And in a year or two, we'll be having the same conversation we're having about streaming: "How did we end up spending more than ever on the thing that was supposed to save us money?"
AI's promise was abundance. The market's trajectory is scarcity with a smile.
The Structure Is the Issue
To be crystal clear, I'm not arguing that these products shouldn't exist. Specialization is real. Some tools are meaningfully better at certain tasks. The issue isn't innovation. The issue is structure.
When each company owns a fenced-off domain and extracts rent for access to it, we don't get competition. We get cartel economics. We get price escalation disguised as choice. We get the illusion of a vibrant marketplace paired with the reality of everyone climbing the same ladder together.
What We Can Do About It
So what do we do about it?
A few thoughts, offered as a consumer and as someone who's spent a career watching how markets behave when incentives go sideways:
Push for interoperability. The moment AI tools can talk to each other easily, share context, and plug into common workflows without penalty, cartel power weakens. Walled gardens only work when switching costs are high.
Reward bundling that actually lowers total cost. Bundles aren't evil. Cable was evil because it was forced, bloated, and priced like a hostage negotiation. A genuine, competitively priced AI suite could be a good thing. But the test is simple: does it reduce your total spend for the same outcome?
Stay ruthless about ROI. Don't subscribe because the internet says you should. Subscribe because the tool pays for itself in time saved, revenue gained, or sanity preserved. If it's not doing that, cancel it. Cartels rely on consumer inertia.
Support open models and standards. Open-source AI and shared standards act like a counterweight to cartel formation. They create a baseline of accessible capability that pricing games have to compete against.
Name what's happening. This is the underrated one. Cartels survive because they're invisible. Once consumers recognize the pattern, they start making different decisions. Markets respond to that.
What’s next
Here's what I want to leave you with.
Cartel economics aren't inevitable. They're a choice. They emerge when industries decide that fragmented exclusivity is more profitable than genuine competition. Streaming chose that path. AI is flirting with it right now.
The question is whether we let the AI revolution turn into another expensive maze of subscription toll booths, or whether we demand a future where abundance stays abundant.
Because if we don't, we're going to wake up in a few years, staring at a dozen $20 charges on our credit card statement, and realize we didn't cut the cord at all.
We just traded it for a prettier one.