The proposed marriage between Charter Communications and Time Warner Cable Inc. not only promises to shake up the broadband world, but also offers a fresh look at the market forces that are reshaping fashion.
The logic of the merger, which values the Time Warner cable business at nearly $79 billion, revolves around the last digital mile, the cable that brings Internet and TV into homes across America. And should the deal go through, it will give the company much more bargaining power with the “content creators” — the people who make and distribute everything on TV and online.
It’s a deal that will set up a new cable giant that can counterbalance Comcast, which tried to buy Time Warner last year, but ultimately abandoned the bid last month having hit regulatory hurdles.
The merger with Charter should give aid and comfort to deal-makers in all markets, since it reminds everyone that the stock market is still sky high and demonstrates that big deals can still get done. It is not, however, a new idea and is therefore not likely to kick off a new round of deal-making.
Greg Portell, a partner in the communications, media and technology practice at A.T. Kearney, said the deal has content creators wondering where they’ll be when the wheel stops. Before, entertainment players, such as the Los Angeles Dodgers, could play Charter and Time Warner against each other as they negotiated access to their viewers in certain markets.
But this deal marks a systemic change.
“Charter-Time Warner really rebalances the economics of content,” Portell said. “You will have two somewhat equally sized players putting pressure on the content industry. This will open the door for more transformative deals [in media] as opposed to the past, when it was more niche acquisitions.”
This plays into a trend that Portell said reaches into the broader world, including fashion.
“You’re going to see the infrastructure players — think big companies or firms that have distribution — become more important in the balance between creative and distribution.”
Fashion saw something similar to this when Federated took over May Co. to form Macy’s Inc. a decade ago. At the time, executives at the big wholesalers such as Liz Claiborne Inc. and Jones Apparel Group acknowledged that the balance of power was tipping. Now, both of those companies have more or less been transformed entirely.
The wheel is spinning again in fashion and Macy’s, which has thrived, is among the companies trying to perfect the omnichannel approach, serving shoppers both with their stores and their Web sites. But moving in on the space are the digital giants, from Amazon.com to eBay to Alibaba and brands that have e-commerce storefronts of their own.
The final mile — that link that lets goods actually get to customers — is up for grabs again in fashion and more transformation is no doubt in the offing.