Bay Area Aims to Be a Contender

Watch out Big Apple!

The recent announcement that Knight-Ridder, the nation’s second-largest newspaper company, plans to move its corporate headquarters to the Bay Area is yet another sign that California is on the verge of replacing the greater New York metropolitan region as the information capital of the United States and the world. Since the late 19th century, New York has had a virtual monopoly over the U.S. news media, serving as the headquarters of the national wire services, the three broadcast networks, most of the country’s leading magazines and its two influential newspapers. But those days may be numbered, because the same kinds of economic forces that caused the news media to settle on the Atlantic seaboard are producing a new media concentration along the Pacific Coast.

New York’s media monopoly developed as a result of several advantages in location. The Port of New York was the arrival point for the vast majority of foreign travelers carrying news from Europe to the United States, which gave local newspapers a decided edge in reporting on international news. The development of the New York Stock Exchange and the choice of Manhattan as the site for a growing number of corporate headquarters further propelled the city into the center of nationally important news. Equally important was that the inventors, entrepreneurs and companies most responsible for developing the technologies that produced the first U.S. communications revolution in the late-19th and early-20th centuries were located in and around New York City. These included Daniel H. Craig and wire-service pioneers who made Manhattan the nerve center of the U.S. telegraph network; and David Sarnoff, the first president of the Radio Corp. of America, who, with the support of General Electric and Westinghouse, used his control over radio technology to create the modern broadcasting industry.

Once established, the New York media monopoly became self-reinforcing. The city became a magnet for writers, producers and other creative types who wanted to work in media, as well as for agents, publicists and organizations that wanted to influence its content--and New York priorities and perspectives began to shape the way the media covered the United States and the world. The foremost obstacles preventing New York from totally controlling the media industry was that it was not the nation’s political capital and that national media were ill-equipped, or disinclined, to capture local newspaper markets.

Over the past 20 years, however, a number of important developments in the industry have altered the media equation radically. For one, the rise of cable television has eroded the audience and influence of the three major broadcast networks. Between 1982 and 1997, the networks’ share of the nation’s television audience declined from 72% to 53%. Moreover, cable facilitated the development of new regional media centers, like the CNN complex in Atlanta, that compete with New York for talent and influence. Add to this the broader trends of the fragmentation of U.S. society, the growing importance of global markets, the ebbing authority of traditional Boston-New York-Washington-based elites and the declining salience of “national” news--all serve to diminish the comparative advantages of New York as a media center. To be sure, the city still is--and will remain--”a” major media center, but it is no longer “the” media center.

While no one place is likely to replace New York as “the” media center, the two metropolitan regions that have the best chance of doing so are the Bay Area and Southern California. Over the past decade, the media shift westward has unfolded in a series of big and small steps. The two most notable milestones were Rupert Murdoch’s purchase of 20th Century Fox in 1985, which led to the creation of Fox Broadcasting, the first noncable network ever not to be based in New York; and the Walt Disney Company’s 1996 acquisition of ABC and ESPN cable sports network as part of its merger with Capital Cities. Although less heralded, moves like Public Broadcasting’s “NewsHour” closing its New York studio in 1996, then opening a bureau in the Bay Area a year later, and AT&T; Corp.’s establishment of a research lab focused on the Internet in Silicon Valley, are also important indicators of the media industry’s maturing recognition of the importance of having a major presence in California.

The growth of the media industry in Southern California primarily has been driven by content considerations, with Hollywood the world leader in the production of filmed entertainment. But because of worldwide news interest in Hollywood, the international appeal of its tourist and sports attractions, the multiethnic character of the region’s population and its strategic location at the center of the new Pacific Rim political economy, Southern California is an important source of news as well.

Long term, however, the future of the media industry is likely to be determined more by the tides of technology. Just as the invention of the telegraph and radio contributed to New York’s dominant position in the media industry and the country, the growth of the computer industry is playing a major role in reshaping California, especially the Bay Area, into a major national and world media center. Digitalization is dramatically transforming all aspects of the media industry by creating new methods of producing and presenting content and changing the way content is delivered. It is forcing media companies to come up with new ideas about how to price and market content. And the one place where most of the people--creators, technicians, entrepreneurs and financiers--making this revolution are concentrated is the Bay Area and, more generally, California. Consider:

* The computer and electronics industry in the Bay Area is substantially larger than in any other metropolitan region. It employs nearly two times as many workers as are employed in the industry in Southern California, more than three times as many as in New York and more than five times as many as in Seattle and Austin.

* According to one estimate, about 30% of the nation’s multimedia firms are located in the Bay Area; another 26% are located in Southern California.

* Of the roughly 1,000 worldwide Internet companies identified in “The 1997 Internet and Online Industry Sourcebook,” more than 385 are based in California, as compared with 113 in Massachusetts and 70 in New York. Moreover, Silicon Valley companies such as Intel, Hewlett-Packard, Cisco Systems, Sun Microsystems and Netscape dominate most sectors of the industry not controlled by Seattle-based Microsoft.

The Bay Area’s dominance in new media is especially telling. Of the four major Internet search engines, which are fast becoming the main gateways to the World Wide Web, three--Yahoo, Excite and Infoseek--are located in the Bay Area. While there are major new-media players--Disney, Time-Warner, AOL and IBM--elsewhere, no other region in the country has an overall agglomeration of computer and new-media companies that can compare to the Bay Area’s--and this concentration of expertise and energy is precisely what attracted Knight-Ridder, which aims to turn itself into a dominant new-media player.

While proximity to the seat of technological innovation is the principal reason why traditional media companies relocate to the Bay Area, the only way the region will be able to replicate the New York story is if it can develop as a producer of content. The foundations for such development already exist.

First, as home base of the most influential clusters of companies in the two industries--information technology and biotechnology--most likely to shape the postindustrial economy, the Bay Area’s news appeal is similar to that of Manhattan’s when its industrial giants were creating the old industrial order.

Second, with Stanford University, the University of California complex, which includes the Berkeley and San Francisco campuses, three major national research labs and the Oakland headquarters of the statewide system, the region has an intellectual talent pool hard to match.

Finally, the Bay Area is home to many of the most prominent authors, commentators and journalists in the country, who previously had to look mainly to New York for national outlets for their writing.

There is good reason to believe, then, that the move of Knight-Ridder and the development of new-media outlets such as Wired Magazine, CNET and @Home could presage the emergence of the Bay Area as a dominant media center. If so, Bay Area priorities and perspectives are likely to play an increasingly critical role in shaping media content worldwide.