Finding the Way from San Jose

The web started in Silicon Valley — but the future of media is being created in New York.

“There was a good reason why Detroit was Detroit,” says Enrico Moretti, author of “The New Geography of Jobs.” The Motor City’s location on the Detroit River, which drains into Lake Erie, made it ideal for shipping steel to auto factories and sending cars to market.

Where digital companies set up shop has less to do with the lay of the land. “Traditional manufacturing, we could explain,” Moretti says. But nothing “in the dirt” of Silicon Valley makes it a technology hub. Instead, technology companies cluster in the Bay Area because of “highly specialized workers in an industry,” many of them freshly minted from top universities nearby. And don’t forget the Valley’s concentration of another key resource for startups — venture capital dollars.

All of this makes the Bay Area an attractive place to build next-generation technology — think cloud computing — but the workers who matter most for media don’t live in Palo Alto, and they don’t want to. That’s why the lion’s share of digital media startups are launching in cities home to the legacy media companies they want to usurp.

“A decade or so ago, the center of the high-tech universe was the Nerdistan of Silicon Valley — no one thought of New York or London as startup hubs,” says urban theorist Richard Florida. “But in tech generally, and digital media in particular, the trend has been towards cities and urban neighborhoods. We see this not only in the rise of New York and London as tech foci, but in the shift within the Bay Area from Silicon Valley to downtown San Francisco. Increasingly, cities — not old techno-burbs — are where the talent wants, and needs, to be.”

Indeed, the locations of media startups now closely track the geographic distribution of the world’s largest media companies. A Traffic analysis of financial filings from the world’s largest media companies, as well as tech companies involved in media, such as Facebook and Google — revealed 149 companies with more than $1 billion in annual revenue. New York City has the largest share of such companies: 11.4 percent. Just behind it are Tokyo, with 10.1 percent, and London, with 7.4 percent. Only one company on the list calls San Francisco home: Twitter.

That’s not far from the percent of media startups located in these cities. The only major disconnect is Tokyo, which boasts many billion-dollar media companies but relatively few tech startups, perhaps due to Japan’s low level of entrepreneurialism. An exclusive Traffic analysis of 7,903 companies categorized as “digital media,” “publishing,” “news,” “broadcasting,” or “journalism” in CrunchBase’s startup and investor database found that 9.9 percent of these companies are based in New York, 6.5 percent are in London, and 4.2 percent are in San Francisco.

Moretti attributes New York’s bustling digital media scene to the city’s old-media roots — and the editorial and advertising talent they attracted and fostered — which he sees as a “catalyst” for the next media empires. Technical skills are important, but it’s editorial savvy, not just coding skills, that will determine whether New York’s digital-media startups will eventually make it into the billion-dollar club.

INFOGRAPHIC DATA SOURCES: CRUNCHBASE, NATIONAL VENTURE CAPITAL ASSOCIATION, TRAFFIC REPORTING

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