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Summer 1996
City Journal Summer 1996.
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Silicon Island?
Joel Kotkin
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Though the New York economy as a whole has stagnated in the nineties, much hoopla has attended the rise of the city's computer-based multimedia companies. The local press, from New York magazine to the Times, has celebrated the industry like no other, making Manhattan seem like its headquarters.

This spring a state-sponsored study came up with the same conclusion—unsurprisingly—and even attempted to estimate the emerging industry's size and recent growth. Conducted by Coopers & Lybrand, the survey found over 4,000 new media firms in the metropolitan area, with some 71,000 employees and over $3 billion in revenues.

New Yorkers would do well to treat such news skeptically. The Coopers & Lybrand study simply assumes that a certain percentage of the growth in fields like advertising, television, and telephone communication belongs to the new industry. Nowhere does it try to catalog actual companies. Nor does it include any real comparative research to justify its extravagant claims about New York's leadership in the field, ignoring altogether such multimedia centers as Los Angeles and Seattle and basing its comparison to the San Francisco Bay Area on old numbers collected in a very different way.

The Carronade Group, the industry's top research firm, provides a useful corrective. It concludes that New York, though home to some significant players in the new industry, still trails far behind both Los Angeles and the Bay Area, each of which has about three times as many firms in the field.

As for the job boom described by New York's increasingly boosterish press, David Hensley, chief regional economist for Salomon Brothers, finds virtually no evidence for it. Last year the city created roughly 8,200 new jobs in all business-service and entertainment employment—a nice uptick but hardly enough to justify the headlines.

To Hensley, the attention lavished on multimedia is a desperate attempt to seize on a small but growing new field in a city whose core businesses are performing poorly. He argues that today's New York lacks precisely the sort of entrepreneurial, technological, and entertainment muscle to make multimedia a star. "It's the usual local attempt to find something in a bleak environment," he explains.

Tom Lipscomb, founder of Infosafe, one of Manhattan's few technology growth companies, also dismisses all the hype about "Silicon Island." He believes that New York has many important assets for a high-tech start-up—access to media, abundant office space, natural linkages to industries like publishing and advertising—but falls far short of the proper economic climate for turning a fledgling company into a thriving, mid-sized business. Citing the high cost of taxes and housing, heavy regulation, and a dearth of strong universities in engineering and computer science, Lipscomb plans to move his company elsewhere as it makes money and expands. As he sees it, "This used to be a two-fisted, business kind of city, and that's what it should get back to."

 

 


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