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NEW YORK - While Silicon Valley companies seem to go public on a weekly basis, Silicon Alley just celebrated its first IPO last Friday when online music entertainment company N2K sneaked onto the New York Stock Exchange - after a failed attempt last fall. But while tanned West Coast entrepreneurs and venture capitalists might be smiling all the way to Wells Fargo, an extensive study released today by Coopers & Lybrand shows an explosive growth in jobs and revenues in the Big Apple's new-media industry, showing that the industry's biggest beneficiaries may not be the start-up CEOs swimming in stock options, but the city itself.
The findings may be stunningly obvious, but the accounting firm has provided a much more psychologically valuable service: statistical assurance that something is in fact working. Manhattan's new-media industry now produces US$5.7 billion in revenues, the survey says, and it has added 30,000 new jobs in the past 18 months - doubling since 1995 when a similar study was conducted.
With more than 105,000 workers in the industry, new media now has more full-time jobs than any of the traditional media industries in the city, including magazines, television, and radio. Venture capital investments, the life blood of an industry still waiting for profits, also leapt up 451 percent.
The past 18 months have seen the Alley rocket from the Cambrian to Silicon age. By point of reference, Silicon Alley's comparatively mammoth N2K employed just 10 people in January 1996 and now has 199 people on staff. CEO Larry Rosen says N2K never considered starting out in the Valley because "the music business happens here."
Not surprisingly, content continues to be king. Content, design, and development services account for 61 percent of all new-media work in the city, with e-commerce (4 percent), software (5 percent), and content-creation tools (3 percent) so small as to be incidental. Coopers & Lybrand partner Andrew Zimmerman suggested that New York is moving from "the embryonic stage into the developmental ... professional stage" as sales and marketing budgets for businesses have quintupled.
To plug the survey release, Coopers & Lybrand prepared an anthemic infomercial on Silicon Alley, starring local name-brands Aliza Sherman of Cybergrrl, Chan Su of Agency.com, and Michael Wolfson of The Knot, who engaged in bald-faced boosterism. "We wanted to shake up the weddings world," said Wolfson. "There was not one place to go but to Silicon Alley."
Of course, the Alley's growth is relative. The entire idea of percentage change masks the real truth: New York's tech economy is a flea circus comparatively. West Coasters Intel, Cisco, 3Com, Sun, and Netscape alone raked in $40 billion last year, with 50,000 new jobs created.
The figures on New York job increases may also be misleading, says Jason Chervokas, editor of the start-up newsletter @NY. Contract workers who are on more than one company's payroll could skew the survey upward. "A lot of the old-fashioned ways to do labor analysis don't apply to new media," Chervokas says. "It's hard to take the employment numbers without a grain of salt."
For the report, Coopers & Lybrand identified local businesses through subscription lists from magazines (like those of CMP and Meckler Media, and Upside), and the membership rosters of organizations like the New York New Media Association. From the pool of 5,000 businesses, the company randomly selected 400 companies and had each company fill out an extensive questionnaire about their revenues, hiring, and expectations of growth. The study, however, conspicuously avoided questions about profitability because, as Zimmerman said, "it's a very sensitive question" and the respondents would have become much more reluctant to answer the questionnaire as a result.
As if to make up for lost time, the city has taken significant steps to make New York comfortable for start-ups. Mayor Rudolph Giuliani secured a 30 percent rental tax reduction for small businesses in the boroughs, a city-sponsored program has made low-cost wired office space available in abandoned buildings in the financial district, and New York became the first state to make ISPs exempt from state taxes - which NY Deputy Commissioner Patricia Kaufman called the "statute of liberty."
For the "capital of the world" though, the city still has a ways to go. In terms of "competitiveness," the report indicates that New York's primary strengths are access to editorial and artistic talent - and to customers. But, it probably comes as no surprise to anyone living in the sun-bleached Valley or near Redmond's grassy campus that survey respondents said quality of life and affordable facilities are NY's major weaknesses.
Finally, the report suggests that for New York's new-media prowess to grow, the city needs a "world-class computer-science research facility" to rival Stanford and MIT. That may happen sooner rather than later. Columbia University filed last month for a $20 million National Science Foundation grant to create it.
From the Wired News New York Bureau at FEED magazine.
