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'New' Media in 'Old' Urban Areas: The Emergence and Evolution of Toronto's Multimedia Cluster
Doctor of Philosophy, 1998 Shauna G. Brail
Department of Geography University of Toronto
The Toronto region has emerged as Canada's predominant centre of multimedia activity, and
a major centre within North America. This thesis presents an empirical analysis of Toronto's
multimedia industry carried out through the development of an industry database, an electronic
survey of 31 1 multimedia firms in the Greater Toronto Area (GTA) and a series of nearly 80
interviews with multimedia firm principals, industry leaders, government representatives, and
with representatives of related industries.
A database of 418 multimedia firms in the Province of Ontario shows that 62 percent of the
province's multimedia firms are located in the Greater Toronto Area; 61 percent of these firms
are located in the central areas of the (former) Metropolitan Toronto. Survey results indicate that
firms comprising the Toronto area multimedia industry are relatively young and small, and focus
mainly on the development of customized, interactive multimedia products using a combination
of media and platforms, catering to several different markets.
Interviews with industry representatives further detail the industry's emergence and the
atmosphere in which it operates. Interview data focuses on: the linkages between multimedia
and related sectors including arts, computing, finance, media and communications; the
significance of location when working in multimedia; the key role played by local demand in
stimulating the industry's early development and the changing relative importance of local
versus export markets; the significance of local suppliers and the labour market in supporting the
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industry's growth; innovative business practices that characterize interfirm relationships and
enable firms of all sizes to participate in the industry; and the role of public policy, public
institutions, and private forms of associational action and associative behaviour in nurturing the
sector's rise to prominence.
At the global scale, multimedia production is reviewed with respect to the industry's
emergence in AsidAustralia, Europe and North America, with special emphasis on the
experience of multimedia industries in San Francisco and New York. The revelation of
similarities and differences between Toronto's multimedia industry and other prominent
international multimedia industries, helps to place the local industry in the context of a global
hierarchy of multimedia production.
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I would like to acknowledge the support of a number of people and organizations -- without
their assistance my thesis would not be complete.
I am grateful for the financial assistance provided by: Social Sciences and Humanities
Research Council of Canada; Ontario Graduate Scholarship; Connaught Scholarship; University
of Toronto Open Fellowship; Associates of the University of Toronto Travel Grant;
Communications and Information Technology Ontario; Smart Toronto; and the Geography
Department at the University of Toronto.
Ilyse Smith served as both a terrific resource and a good friend, freely sharing the names and
numbers of industry contacts, and truly helped inform my understanding of the multimedia
industry, especially during the early stages of my research. Bill Sweetman of Multimediator -
Canada's Multimedia Guide greatly assisted me by providing technical support and editorial
assistance in designing the Internet-based component of my survey, and also sponsored the
presentation of my research results on a widely-respected industry web site. I am also indebted
to: Jean Marc Hamilton for designing the cgi script for my Internet-based survey; to Philip
Coppack at Ryerson University for assisting in geocoding my database of multimedia firms; and
to Lee Feliciano at GCM Services for generously donating his time and use of his valuable map
files, allowing me to create several unique maps (see Figures 2.2 and 2.3).
I would also like to thank the more than 100 people who gave their time and energy and
participated in surveys, interviews, follow-up phone calls, etc. I am particularly appreciative of
the extra support and industry insight provided through friendship with Connie Putterman at
CITO, Adam Froman at MAT, Walter Stewart at Smart Toronto (now at Silicon Graphics
Canada) and Bill Sweetman at Multimediator.
I could not have completed this thesis without the tremendous support, ideas.sharing,
encouragement and friendship provided by my thesis supervisor - Meric Gertler. I'd also like to
acknowledge the support provided by other committee members - Susan Christopherson, David
Wolfe, John Britton, Gunter Gad, Larry Bourne and Carl Arnrhein. Thank you.
Finally, I am fortunate to have always had the support of my family: my parents -Judy and
Sid, and my brother Les. My mother deserves a lot of credit for listening to my PhD woes on an
almost-daily basis, and to her I dedicate the 'h' in PhD! Last but not least I'd like to thank my
fianci, Ayal -- without his empathy, companionship, and near-constant desire to take exotic
holidays, the process of researching and writing my dissertation would certainly have been far
more difficult!
TABLE OF CONTENTS
1 MULTIMEDIA: THE EMERGENCE O F A 'NEW' INDUSTRY ............................................... 1
1.1 INTRODUCTION .......................................................................................................................... 1
1.2 QUESTIONS AND THEMES ......................................................................................................... 5
I . 3 DEFINING AND CLASSIFYING MULTIMEDIA ........................................................................ 8
1.3.1 Classifying the Multimedia Production Chain .................................................................... 10
...................................................................................... 1.3.2 A Typology of MultimediaFirms 13
1.4 ORGANIZATION ........................................................................................................................ I7
2 THE EMERGENCE O F THE MULTIMEDIA INDUSTRY IN CANADA . FOCUS ON
TORONTO ................................................................................................................................................ 20
........................................... 2.1 FORCES UNDERLYING THE EMERGENCE OF MULTIMEDIA 20
...... 2.1 . 1 Origins of the Multimedia Industry: Transition to a New Techno-Economic Paradigm 21
2.1.2 New Competitive Dynamics and the Changing Organization of Industry: Forces Shaping the
Geography of Multimedia Production .................................................................................................... 24
...................................................... 2.1.3 Spatial Impacts Associated with the 'New Competition' 30
2.2 THE MULTIMEDIA INDUSTRY IN CANADA ...................................................................... 32
.................................................................................... 2.2.1 LMATIIndustry Canada 1995 Study 33
2.2.2 Size of Multimedia Industries in Canadian Municipalities ................................................. 37
2.3 INDUSTRIAL STRENGTHS OF THE TORONTO AREA PERTAINING TO MULTIMEDIA39
2.4 FIRST GLANCE AT TORONTO'S MULTIMEDIA INDUSTRY ............................................ 44
2.5 RESEARCH QUESTIONS ............................................................................................................ 53
3 ORIGINS AND GEOGRAPHY O F SUPPLIERS AND MARKETS .......................................... 55
3.1 RESEARCH APPROACH ............................................................................................................ 55
3.2 CHARACTERISTICS OF TORONTO'S MULTIMEDIA INDUSTRY ................................... 58
3.3 INTRAFIRM REQUIREMENTS: HUMAN RESOURCES. FINANCIAL CAPITAL AND
TELECOMMUNICATIONS INFRASTRUCTURE ................................................................................. 61
3.3.1 Multimedia's Entrepreneurs ................................................................................................. 62
3.3.2 The Labour Force - Features and Practices of Employment in Multimedia ......................... 65
.......................................................................................... 3.3.3 Financing Multimedia Ventures 74
......................................................................... 3.3.4 Infrastmctural Requirements of Multimedia SO
3.4 SUPPLY CONDITIONS: SOURCES. SKILL. AND REGIONAL STRENGTHS ...................... 81
3.4.1 'Supplies' Sought .................................................................................................................. 82
........................................................................................................... 3.4.2 Location of Suppliers 85
........................................................ 3.4.3 Inter- and Intra-industry Cooperation and Competition 87
3.5 DEMAND DYNAMICS ................................................................................................................ 91
................................................................................................... 3.5.1 Clients and Markets Served 92
...................................................................................... 3.5.2 From Regional to Export Markets 93
3.5.3 Related Industries as Consumers of Multimedia ............................................................... 100
3.6 REVISITING THE PARADOX OF FIRM LOCATION. CLUSTERING AND TECHNOLOGY 107
3.7 TORONTO'S STRENGTHS AS A MULTIMEDIA PRODUCTION CENTRE ....................... 110
4 INVESTING IN MULTIMEDIA: PUBLIC POLICY. FINANCIAL SUPPORT AND
ASSOCIATIONAL ACTION ................................................................................................................ 115
4.1 THE ROLE OF PUBLIC POLICY IN THE DEVELOPMENT OF CANADA'S CULTURAL
INDUSTRIES .......................................................................................................................................... 118
4.2 NURTURING MULTIMEDIA'S GROWTH: PUBLIC POLICY AND ASSOCIATIONAL
ACTION .................................................................................................................................................... 126
4.2.1 Federal Government Initiatives ........................................................................................ 126
4.2.2 Provincial Government Initiatives ...................................................................................... 129
4.2.3 Local Government Initiatives ........................................................................................... 132
4.2.4 Associational Action ........................................................................................................... 133
4.3 NON-TRADITIONAL MEANS OF ACCESS TO CAPITAL ................................................... 138
4.4 ASSESSING RESPONSES TO MULTIMEDIA'S EMERGENCE .......................................... 144
5 GLOBAL CENTRES OF MULTIMEDIA PRODUCTION? .................................................... 147
5.1 THE MULTIMEDIA INDUSTRY IN A GLOBAL CONTEXT ................................................ 147
................................................................. 5.1 . 1 Multimedia Development in Australia and Asia 148
5.1.2 Agglomerations of Multimedia Activity in Europe ............................................................. 15 1
5.1.3 American Centres of Multimedia Production ..................................................................... 155
5.2 CLOSE-UP: MULTIMEDIA IN SAN FRANCISCO AND NEW YORK ................................. 158
5.3 SAN FRANCISCO . CONVERGENCE AND MULTIMEDIA'S EMERGENCE .................... 159
5.3.1 From Silicon Valley to Multimedia Gulch .......................................................................... 160
5.3.2 Location. Clustering and Technology ............................................................................ 162
5.3.3 Clients .................................................................................................................................. 165
5.3.4 Suppliers .............................................................................................................................. 167
5.3.5 Labour Market ..................................................................................................................... I69
5.3.6 Cooperation and Competition ............................................................................................. 170
5.3.7 Addressing the Multimedia Industry through Public Policy in San Francisco .................... 172
5.3.8 Regional Strengths ............................................................................................................. 175
5.4 NEW MEDIA IN NEW YORK ................................ .... ............................................................... 176
5.4.1 Location. Clustering and Technology ............................................................................. 180
5.4.2 Clients .................................................................................................................................. 182
5.4.3 Suppliers .............................................................................................................................. 185
5.4.4 Labour Market ..................................................................................................................... 187
5.4.5 Cooperation and Competition ............................................................................................. 188
............................................................................. 5.4.6 Public Policy and Associational Action 189
5.4.7 Regional Strengths ........................................................................................................... 192
5.5 ACCOUNTING FOR MULTIMEDIA CLUSTERS IN GLOBAL CITIES ............................... 193
6 CONCLUSIONS ............................................................................................................................. 196
6.1 OVERVIEW ................................................................................................................................ 196
6.2 TORONTO: ANOMALY OR NORM? ...................................................................................... 198
.............. 6.3 GAPS AND CHALLENGES FOR POLICY AND INSTITUTIONS ........................ ... 201
6.4 'NEW' MEDIA PREFERS 'OLD' URBAN AREAS ............................................................... 203
...... 6.5 IMPLICATIONS FOR THEORY ON THE GEOGRAPHY OF ECONOMIC ACTIVITY 205
.............................................................................................. 6.6 ISSUES FOR FURTHER STUDY 209
7 APPENDICES ................................................................................................................................ 212
8 REFERENCES ............................................................................................................................... 230
LIST OF FIGURES
FIGURE I . 1. CLASSIFYING MULTIMEDIA ACTIVITIES .................................................................. 12
FIGURE 2.1. MULTIMEDIA FIRM CLUSTERS IN TORONTO .......................................................... 47
FIGURE 2.2. LOCATION OF MULTIMEDIA FIRMS IN TORONTO ................................................. 48
FIGURE 2.3. MULTIMEDIA FIRMS IN DOWNTOWN TORONTO ................................................ 49
.... FIGURE 2.4. LOCATION OF TORONTO'S PRINTING AND PUBLISHING INDUSTRY FIRMS 50
FIGURE 2.5. LOCATION OF MEDIA INDUSTRY FIRMS IN TORONTO .................................... 21 1
FIGURE 3.1. MAKE OR BUY? 83
LIST OF TABLES
TABLE 1.1 : DIVISION OF MULTIMEDIA ENTERPRISES BY FIRM FUNCTION ........................... 13
TABLE 2.1: MULTIMEDIA FIRMS IN THE 'BIG THRE ..................................................................... 38
TABLE 2.2. TORONTO CMA EMPLOYMENT .................................................................................. 41
........................ TABLE 2.3. EMPLOYMENT IN SELECTED CANADIAN CONTENT INDUSTRIES 44
TABLE 2.4: MULTIMEDIA FIRMS IN THE PROVINCE OF ONTARIO ............................................. 45
TABLE 2.5. MULTIMEDIA FIRMS IN THE GTA .................................................................................. 46
TABLE 3.1. LIST OF MULTIMEDIA FIRMS INTERVIEWED ............................................................ 57
TABLE 3.1. LIST OF MULTIMEDIA FIRMS INTERVIEWED (CONT'D) .......................................... 58
TABLE 3.2. INTERACTIVITY OF PRODUCTS ..................................................................................... 59
TABLE 3.3. FUNCTIONAL FOCUS ........................................................................................................ 60
TABLE 3.4: PLATFORM FOCUS ............................................................................................................. 61
TABLE 3.5. RANGE OF FIRM FOUNDERS' BACKGROUNDS .......................................................... 62
TABLE 3.6. EMPLOYMENT IN MULTIMEDIA .................................................................................... 67
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TABLE 3.7. EMPLOYMENT BY SIZE OF FIRM ................................................................................... 68
TABLE 3.8: EMPLOYMENT BY JOB TYPE AND SKILL CATEGORY (EXCLUDING LARGEST
FIRM) ................................................................................................................................................ 70
TABLE 3.9: EDUCATIONAL INSTITUTIONS SUPPORTING THE REGIONAL MULTIMEDIA
INDUSTRY ........................................................................................................................................ 73
TABLE 3.10. GROSS REVENUES ........................................................................................................... 75
TABLE 3.1 1: CLIENT FOCUS ............................................................................................................... 86
TABLE 3.12. LOCATION OF SUPPLIERS BY SALES VOLUME ........................................................ 86
TABLE 3.13. MARKET FOCUS .......................................................................................................... 92
TABLE 3.14. PRODUCTSMARKETS SERVED .................................................................................. 93
TABLE 3.15. LOCATION OF CUSTOMERS BY SALES VOLUME ................................................... 94
TABLE 3.16. REASONS FOR FIRM MOVES ..................................................................................... 109
TABLE 4.1. HIGH TECH ASSOCIATIONS IN THE GTA .................................................................. 134
TABLE 5.1: SAN FRANCISCO MULTIMEDIA FIRMS -INDUSTRY AND GEOGRAPHIC FOCUS
TABLE 5.2. NEW YORK MULTIMEDIA FIRMS . INDUSTRY AND GEOGRAPHIC FOCUS ....... 183
TABLE 6.1: TORONTO. NEW YORK AND SAN FRANCISCO ..SIMILARITIES AND
DIFFERENCES ................................................................................................................................ 199
TABLE 7.1. DIGITAL MEDIA ENABLING EFFECT ON OTHER SECTORS OF ECONOMY ........ 214
1 MULTIMEDIA: THE EMERGENCE OF A 'NEW' IN~USTRY
1.1 Introduction
The multimedia industry has emerged over the past ten years as a result of the convergence
of visual, print and audio media with digitization technologies. It is an industry which continues
to evolve in its formative years, and is heterogeneous, fluid and dynamic. A noticeable
proliferation of multimedia firms, especially over the past five years, is beginning to change the
industrial landscape in North America. Most significantly for geographers, the industry is
having a notable revitalizing impact on the urban industrial structure of several North American
cities, including New York, San Francisco, and Toronto.
If multimedia is a new industry, work on the industry is even newer. Very little is known
about the multimedia industry in Canada, the foundations for its emergence and the role that it
plays in the urban economy. At the onset of this research, only one comprehensive study of the
Canadian multimedia industry (IMAT, 1995), and a handful of studies on multimedia activity in
other countries such as the United Stdtes and Australia (Cutler and Company, 1994; Coopers and
Lybrand, 1995; Scott, 1998a) had been completed. Today, while the breadth of information
available on the multimedia sector has increased substantially at both the Canadian and global
scales, there is still much to be learned.
Developing an understanding of the emergence, organizational structure and economic
geography of the multimedia industry is critical not only because we do not know much about
the industry as of yet, but also because of the increasingly widespread hope that multimedia
production will help propel an economic transition in industrialized countries, in which
"knowledge is now being recognized as being at least as important as physical capital, financial
capital and natural resources as a source of economic growth" (Industry Canada, 1997d, 5).
Multimedia, as part of a larger group of knowledge-based industries, is viewed as a sector which
will improve Canada's ability to compete in the global marketplace into the 21st century. The
country is relatively well positioned with respect to making the transition towards a knowledge-
based economy, and one that is highly dependent on information technology,
telecommunications infrastructure, computing and a highly skilled labour force. For example:
Canada has the highest proportion of home computer, cable and telephone penetration in the G7;
it has been ranked at the top of the G7 by the World Economic forum in terms of technology
potential; the country's phone and Intemet charges are among the world's lowest; and Canada
has the highest level of post-secondary school enrollment in the G-7 (Manley, 1998). By
committing resources to ensuring that the multimedia industry is understood, supported and
sustained, countries such as Canada are making an investment in moving successfully towards
addressing the anticipated economic realities of the early 21st century.
This thesis attempts to develop an understanding of the multimedia industry's economic
geography using the largest centre of multimedia activity in Canada - Toronto - as a case study.
The main question driving this thesis is: Is the emergence of the multimedia industry related to,
or dependent on, a set of pre-existing factor conditions or regional endowments? Furthermore, if
multimedia is a path-dependent industry, reliant on a region's pre-existing strengths, what does
this say about the ability of local andlor regional actors (i.e. governments, public-private
partnerships) to create, from scratch, an environment in which a multimedia industry can
flourish?
I will approach these questions by examining the industry's emergence and the environment
in which multimedia firms operate with respect to analyzing whether there are linkages between
multimedia and other industry sectors. Furthermore, I will assess the policy milieu surrounding
the industry's growth and attempts by governments and industry associations to leverage the
perceived benefits associated with multimedia. Finally, the emergence of the multimedia
industry in Toronto is not an isolated occurrence: across North America, Europe and Asia centres
of multimedia production have begun to develop. In order to provide a wider context for my
analysis of the Toronto case, I shall also review the recent experience in other major centres,
with special emphasis on multimedia activity in New York and San Francisco, to determine the
strengths and weaknesses of Toronto's multimedia industry vis-a-vis the global hierarchy of
multimedia production.
The belief that multimedia should be considered as a distinct, new industry underlies the
arguments presented in this thesis. Why should multimedia be considered an industry? One line
of reasoning can be found in the review of literature describing the emergence of other 'new'
industries. One su-h industry, albeit one that is still in the early stages of growth, is the electric
vehicle industry. Though the distribution of electric vehicles may be the same as for gasoline-
powered vehicles, the electric vehicle industry is considered a separate industry because it: is
based on a distinct core technology (fuel cells versus internal combustion), is dependent on
custom R&D, requires the production of many unique components, and is organizationally
different than other industry sectors in the overall production of transportation machinery.
Although the electric vehicle industry has some important linkages with the gasoline-powered
automobile industry, including a shared labour force and technical expertise, it is acknowledged
as a distinct industry (Cenzatti, 1995; Scott, 1995).
The multircrdia industry shares similarities with the electric vehicle industry. Aspects of the
multimedia industry, including some (but not all) content, artistic inputs, and skilled labour, are
derived from more mature industries such as computer hardware and software development and
traditional media, in the same way that the electric vehicle industry shares a common labour
force and technical expertise with the gas-powered automobile industry. However, multimedia is
not simply the result of a deepening social division of labour in other, older sectors. Multimedia
is based on a distinct use of technology -- the convergence of digitization with traditional media -
- it requires distinct R&D for product development and testing, a unique skill set, involves the
production of unique products that are not produced by any other industry, and some studies
have shown it to be organizationally different than other 'related' industry sectors (Scott, 199th).
Furthermore, mine is not the first research to recognize the distinctive characteristics of
multimedia: examples abound, and many are cited in this thesis. Governments and businesses
around the world have recognized these distinctive traits: including those in Canada (Industry
Canada, 1997f; Digital Media Champion Group, 1997); the United States (US. Department of
Commerce, 1998; City of San Francisco Planning Department, 1997) and in Asia (Multimedia
Development Corporation, 1997a), supporting the contention that multimedia can be regarded as
a distinct industry.
While the existing literature on the multimedia industry is small, there is a set of theoretical
arguments that might help us understand the multimedia industry's emergence and operation.
This literature encompasses and addresses: the economic process and impacts of technological
change (Freeman and Perez, 1988); the changing face of business and competitive practices in
the latter part of the 20th century (Best, 1990); the urban geography of industrial organization
(and reorganization) (Kutay, 1988); the debate on the requisite characteristics of flourishing
industrial districts and their influence on successful regional economies (Saxenian, 1994); and by
the broader issue, also addressed in the industrial districts literature, of the function and
prevalence of local industrial clusters and institutions in the face of globalization (Amin and
Thrift, 1992). Further discussion of the above and how they apply to the multimedia industry
can be found in Chapter Two of this thesis.
1.2 Questions and Themes
This thesis addresses the following questions: Why has the multimedia industry emerged?
Are there a set of 'encouraging' pre-existing conditions in the regions that have emerged with a
competitive advantage in multimedia? If so, what are these? Is it possible to encourage the
development of a multimedia industry through public policy intervention and associational
action in a place where one has not 'naturally' emerged? What kinds of characteristics does
multimedia share with other industries? What makes the industry unique? What factors
influence the location of multimedia? What are the similarities and differences between the
multimedia industries that have emerged in various parts of the world? Will the locational
patterns that the industry has established in its early years continue to hold as the industry
matures?
Frequently defined as the convergence of traditional media (visual, print and audio) with
digitization technologies (see Section 1.3), multimedia represents a new way of communicating.
The multimedia industry represents much more than a new type of communications industry
however. Multimedia is a labour-intensive, knowledge-based industry that could not exist
without the current and evolving digitization technologies, and would not have reached its
present status without the joint contributions of entrepreneurial, creative and technical talent.
The characteristic traits of the multimedia industry -- a highly skilled and entrepreneurial
labour force, and firms offering new products strongly based in information technology -- have
contributed to the multimedia industry's reputation as a desirable industry to promote. Because
of these characteristics, multimedia is viewed as a potentially substantial generator of both
economic vitality, technological dynamism, and employment opportunities. The minimal
environmental impacts of this new industry further add to its allure. The potential contribution
of the multimedia industry to the regional economy, and especially its role within the 'digital' or
information technology sector of the local economy, constitutes a plausible and significant
opportunity for broadening a region's industrial base as industrialized nations begin to move
even further towards the development of knowledge-based sectors. Supporting and developing a
strong multimedia industry at both the regional and national levels in the early stages of the
industry's emergence is viewed by some as a way of encouraging the establishment of
geographically-based competitive advantage in what is anticipated to become a global industry
that pervades all sectors of the economy (Industry Canada, 1997e; Scott, 1998a).
As a cautionary note, however, a number of predictions concerning the impact of the
multimedia industry have not come to fruition. One such example is the consumer CD-ROM
industry. In 1994, The Econotnist reported on the feverish activity surrounding the industry and
the substantial profits being earned by multimedia developers. Two years later, The Eco~lornist
(1996, 12) acknowledged that "multimedia CD-ROMs have failed even to match the success of
Nintendo's simple video-game machines .. . [and] most of the companies that make them are
losing money at it." Clearly, some of the anticipated (positive) economic impacts of the
multimedia industry are based more on hype than on reality. One of the underlying issues in this
research is the extent to which the multimedia industry can -- and cannot -- contribute to the
economic well-being of regions.
One issue that emerges time and again with respect to the geography of multimedia activity
is its urban nature. All of the anecdotal evidence available to date, as presented in studies of
multimedia in New York (Coopers and Lybrand, 1997), San Francisco (MDG.org et al, 1998),
Amsterdam (Naylor, 1997): Munich (Strater, 1997), and London (Tang, 1997), suggests that the
multimedia industry is highly concentrated in the centre of large, metropolitan areas. Research
conducted for this thesis and presented in Chapter Two shows that the industry's geography in
Toronto is consistent with this pattern, with an ovenvhelming proportion of multimedia firms in
the Greater Toronto Area (GTA) located in the City of Toronto (formerly Metropolitan
or onto)'. This may seem somewhat surprising, given the conventional wisdom that information
and communication technologies will enable economic activities to be carried out at increasing
distances from historicltraditional urban centres. The locational patterns of the multimedia
industry clearly depart from this conventional wisdom, though they are consistent with other
findings concerning the impact of information and communication technologies on the
geography of economic activity. Hence, this thesis looks at the question: why are 'new media'
industries located largely in 'old' urban centres?
Related to the issue of the multimedia industry's apparent predisposition toward urban
locations is the question: In what way is the location of multimedia firms influenced by a
region's pre-existing economic foundation? That is, does the emergence of a multimedia
industry represent a path-dependent evolutionary process', suggesting that the industry can be
expected to develop only in some centres, based on a particular set of inherited industrial
strengths? Multimedia's linkages with related industries (e.g. media and communications) that
helped to spawn the industry, prove also to be a key factor in the industry's operation at present.
' During the course of this research, the provincial government introduced a bill to amalgamate what was previously a regional government, 'Metropolitan Toronto', comprised of six local municipalities (including the central 'City of Toronto') into one municipality, to be called 'Toronto'. For the purposes of this research, the pre-amalgamation municipal boundaries are used. The GTA is used here as the most extensive definition of the Toronto region, being comprised of Metropolitan Toronto and the four adjacent regional municipalities. The GTA's total population is 4.5 million. ' Path-de~endency is a conceut that arose out of evolutionary economics. The conceut of path-dependency sueests that tcch~ologicaichange reskts from interdependent choicds and asserts that indust& c h a n g e l ~ o w t h / e ~ e r ~ ~ c e in a particular region is related to the prior industrial and technological experiences of that region (Storper, 1997).
The impact of linkages with such related industries will be examined in more detail, and help us
determine the strength of path-dependency in multimedia's urban evolution.
Also of importance here, though not a key facet of this thesis, is the role of multimedia as a
force in helping to revitalize older urban areas in decay. The distinctive micro-geography of the
industry suggests that firms are quite sensitive to the availability of particular kinds of space and
by the way that space is regulated. Because the multimedia industry has played a positive and
visible role in bringing renewed activity to the CBD frame3, local governments in places such as
New York and San Francisco have taken an active role in addressing the industry's needs and in
pursuing attempts to ensure that firms remain (Krantz, 1995; Berman, 1997; City of San
Francisco Planning Department, 1997). This suggests that there is an important role to be played
by public policymakers at the local and regional levels that may both directly and indirectly
support multimedia's sustainability in urban settings.
1.3 Defining and Classifying Multimedia
Before the intricacies of the multimedia industry can be explored and understood, it is crucial
to clarify: i) what exactly is meant by the term 'multimedia'; ii) what types of activities fall
under the proposed definition; and iii) what types of firms are classified as 'multimedia firms'
under the boundaries of the present study.
Judging by the various uses of the term 'multimedia' (a term which is used interchangeably
with 'new media', 'interactive media' and 'digital media'), and the seemingly exponential
'The central ciry refers to the city around which a metropolitan area was built. Within the central city, the Central Business District (CBD) core is a high-density area that is "distinctive for its high-rise structures, internal business linkages. psdestrinn ~ratlic. l iml t~d &ing s p x e and near-complete use of site!" (Hxtshorn. 1992, 334). Surrounding the CBD core is the CBDfranle. an area Ihm ,upports thc CBD core. and is "t)pically composed of warehouses, parking lots, medical services, light industy, and wholesale functions ... many of its functions support core activities and therc is a high level of interaction between the two areas" (Hartshorn. 1992, 334). A reritral ciry industry is an industry in which a majority of the industry's firms are located inside the central city, rather than in the remainder of the metropolis.
growth in applications of niultimedia to new forms, uses and activities, defining this term is
somewhat of a challenge. Wallis (1996, 1) cites a study that claims "multimedia and the
information superhighway are terms used so broadly that they have come to mean absolutely
everything and, as a result, are beginning to mean virtually nothing."
There are a multiplicity of definitions for 'multimedia' which range from all-encompassing
abstract notions of using more than one medium to convey messages to people, to more robust
definitions that reflect the spirit of merging media through digitization in an interactive format.
It is this latter definition which seems to encompass the most useful definition of multimedia for
industry categorization purposes. Typically, multimedia is referred to as a dynamic, interactive
means of communicating that has resulted from the convergence of computing technology and
telecommunications with the production of content (Coopers & Lybrand, 1996; Federal Office of
Regional Development t t al, 1997; REDO and OCEDCO, 1997). Furthermore, as stated at the
outset of this thesis, multimedia production entails the digitization of visual, print and audio
media. The City of San Francisco Planning Department (1997, 1) incorporates all of these
qualities into a definition of multimedia that states:
Multimedia is an emerging industry that facilitates access to and distribution of information through new communication tools and processes. Multimedia firms develop products or provide services that integrate sound, image, video, or text into a form tailored to specific user needs. These products and services allow the user to interact with that information.
The dynamic nature of multimedia is further complicated by the sheer scope and complexity
of the industry, which continues to evolve. Not only, therefore, is it important to define
multimedia, but also, it is critical to clarify specific types of activities that are considered to be a
part of the sector. Virtually every study of the industry has developed a unique framework that
includes a classification of multimedia activities on a variety of fronts.
1.3.1 Classifying the Multi~nedia Production Clzain
Scott (1998a). in what is one of the first academic studies of multimedia activity4, approaches
aclassification of the industry by examining the types of activities that firms undertake and
divides them into two basic categories: title developers and title publishers. According to Scott
(1998a, 138) "Developers are firms that actually produce multimedia outputs (i.e. titles);
publishers are firms that issue and market titles, usually under their own imprimatur." Scott also
notes that a third group of firms exists, those which are involved in the physical distribution of
multimedia products, though he does not include these firms in his study of the California
multimedia industry. The first study of multimedia activity in Canada employs similar
classifications of multimedia activity, dividing firms into two sets of actors: producers (creators
and developers of multimedia products) and publishers (firms that market and distribute titles)
(IMAT, 1995). Both Scott (1998a) and IMAT (1995) note that some firms are involved in both
developing and publishing multimedia products, highlighting the kterogeneous nature of the
industry.
Another element of 'multimedia' activity pertains to firms which produce the technology and
tools (hardware and software) with which multimedia developers work, and without which
multimedia products could not be developed. While some studies consider these enabling
tooYtechnology developers as part of the multimedia industry (Coopers & Lybrand, 1997a;
Groupe Secor, 1997), others consider these activities to be a component of the support network
which surrounds core multimedia production and services (City of San Francisco Planning
Department, 1997; Scott, 1998a).
'This study was conducted and released in 1995, several years prior to its 1998 publication
To summarize the basic divisions of multimedia activity then, there are essentially five
sectors or links in the chain of multimedia production: hardware and software manufacturers;
content creators and owners; developers5; publishers; and distributors (Groupe Secor, 1997).
While all five of the above activities may be carried out within a single firm, there is generally
some separation of activities, especially where distribution and manufacturing are concerned.
This thesis groups together content creators and developers, as these activities are most
frequently carried out within a single firm, while publishers are considered separately. Firms
whose sole focus is the physical distribution of multimedia products are not considered
multimedia firms for the purposes of this study. Likewise, hardware and software manufacturers
provide the tools that enable firms to develop interactive digital media products. They are not, in
and of themselves, however, considered as multimedia firms under the definition described
above (see Figure I. 1).
The distinction between content creators and developcrs is that content creators develop their own content for use in multimedia work while developers use pre-existing content in the production of multimedia. This distinction is difficult to make in empirical studies, as many multimedia firms exhibit tendencies towards being both content creators and developers, depending on the project at hand. Therefore, most studies group the two together.
1.3.2 A Typology of Multirnedia Firrns
There are also other distinguishing characteristics of multimedia firms, the types of work that
they carry out, and where they fall along the value chain of multimedia production. The San
Francisco Planning Department (1997) usefully divides the industry into three main groups: core
multimedia, multimedia tools and applications, and support services (see Table 1.1). Core
multimedia firms create products and provide services using digitization technologies and have
their genesis in multimedia rather than in other industries. Multimedia tools and applications
firms are those that incorporate multimedia into 'older' industries such as graphic design.
Though these firms may ultimately become core multimedia businesses, they are labeled 'non-
core' multimedia firms so long as their focus lies in the development of non-digital products.
Finally, support services are firms that operate at the periphery of the multimedia industry.
These services are typically not producers of multimedia materials, but rather, as their name
suggests, supporters of multimedia production (See Figure 1.1).
According to the City of San Francisco Planning Department (1997), a distinction between
Table 1.1: Division of Multimedia Enterprises by Firm Function
content and service providers should be made. Content providers create multimedia products
through the development of proprietary concepts and designs, while service providers create
Support Services Computer training, hardware and consulting services Non-digital film and photography Business Services
Core Multimedia Digital Design
Virtual Communities
Film Post-Production
Source: Adapted from City of San Francisco Planning Department, 1997.
Tools and Applications Printing and Lithography
Graphic Design
Film, Video and TV Production
Copy Shops
multimedia products for a client that exercises authority over product development. While these
two activities are not mutually exclusive, and many firms produce both custom products for
individual clients as well as products conceived by the firms themselves, the process by which
products are created and the source of creative authority is an important variable which translates
into different levels of financing, staffing, and external support, as well as leading to potentially
different methods of publishing and distribution. This study develops a somewhat similar
distinction between mullimedia firms that produce mass marketed products and those that
develop custom products for clients. The former are often similar to the above-mentioned
content providers, while the latter are akin to the City of San Francisco Planning Department's
(1997) definition of service providers (see Figure I. 1).
The discussion above also noted that firms can be divided into core and non-core multimedia,
based on whether a firm produces multimedia products and services as its sole business offering
or alternatively, produces multimedia products in conjunction with other activities, such as non-
digitized graphic design. This sentiment is echoed by the Center for Technology Assessment in
Baden-Wiirttemberg, which notes that the production of multimedia is being carried out by both
established firms entering into multimedia as a new field of business, and by the establishment of
new firms devoted to the production of multimedia products and services. Examples of the
former include "traditional radio and television corporations as well as the movie industry,
advertising companies, book and magazine publishers and companies in the traditional ICT
[information and communication technology] sector ... [and the latter group includes] newly
established corporations in the field of CD-ROM publications, Intemet services, etc" (Fuchs,
1997). Firms that produce multimedia products or services as their sole source of business are
considered in this study to be 'multimedia only' firms, while firms that derive income from
other, traditional industrial activities and combine these with multimedia production, are
considered 'multimedia component' firms (see Figure 1.1).
Another useful distinction can be made by looking to the end user of a product. There are
numerous examples of companies w~rk ing in traditional (non-multimedia) fields that develop
multimedia products in-house for the company's internal use6. However, most definitions and
classifications of multimedia firms do not consider firms developing multimedia solely for in-
house use to represent multimedia firms, rather they represent the traditional industry upon
which their product offering is based (Fuchs, 1997; San Francisco Planning Department, 1997;
MDG.org et al, 1998). The approach used in this thesis with respect to firms producing
proprietary multimedia products to be used in-house mirrors these studies and excludes such
firms from the classification of 'multimedia firm' (see Figure 1.1).
The above discussion highlights that it is indeed a challenge to develop a system to classify
the dynamic, heterogeneous and complex activities which constitute the multimedia industry.
The industry's rapid change does not make this an easy task, and a system of classification that
works for the state of the industry at present is not guaranteed to be applicable in future years.
Furthermore, firms cannot be classified or understood according to simplified characteristics, but
rather by a combination of variables that highlight different aspects of the firms' activities
For the purposes of this study, therefore, a 'multimedia firm' is (i) one that comes from an
established firm that has moved into the field of multimedia, including graphic designers,
computer software developers and book publishers; and (ii) newly developed 'multimedia-only'
firms, whose core business offering is the development and production of interactive products
For example, when the staff of the University of Toronto's Geography Department staff creates a web-site, the Geography Department does not become a multimedia firm.
and services that incorporate digitized content and are based on CD-ROM, Internethtranet,
Kiosks, etc. Established firms in traditional industries that use multimedia applications andlor
technology to enhance their operations are not considered 'multimedia firms.' Firms that
distribute multimedia products and those that produce multimedia hardware and software are
considered critical inputs to the functioning of the multimedia industry, but are not considered
'multimedia firms.' While this definition largely concurs with those used by Brail and Gertler
(1997), Fuchs (1997). City of San Francisco Planning Department (1997). and MDG.org ( 1 9 9 0
there are studies which define multimedia differently. For ev.ample, Coopers and Lybrand
(1997a). use a much broader definition of multimedia in their study of New York's new media
industry that includes, among other types of firms, software developers, on-line service
providers, and business support services as multimedia firms.
Finally, there are two other important distinctions to be made with respect to classifying the
activities of multimedia firms. The first is the technology platform upon which products are
based. This information is important because it provides an indication of the state of technology
and technological development that drives the industry forward. Technology for
distributing multimedia products are generally divided into two groups: on-line and off-line. On-
line distribution methods include the Internet, intranets, and other private services that are
accessed using telecommunications networks and technology. The product itself is accessible by
connecting to an information server that may be in a different location than the product user.
Off-line distribution of multimedia products come in the form of a tangible good such as a CD-
ROM, kiosk, disk, or game console.
'See Appendix A for a description of each of these technology platforms.
Second, the types of markets for which multimedia firms develop products is an important
indicator of the diversity of the industry and also of the adoption rates and utilization of
multimedia products by various markets and economic sectors. The main markets that
multimedia products tend to be geared towards include: corporate (i.e. company web site),
entertainment (i.e. interactive game), education (i.e. language-training CD-ROM), edutainment
(a hybrid of entertainment and education) (i.e. interactive storybook that teaches arithmetic),
information (i.e. tourism kiosk) and health (i.e. on-line pharmacy). The corporate sector can be
further broken down into a number of industries that tend to be frequent users of multimedia:
advertising and marketing, consumer products, finance, information technology, and
telecommunications. Multimedia firms may target their products toward one or more of these
market segments! The key markets for multimedia products are shown in later chapters of this
thesis to have a critical impact on the location of multimedia activity in terms of the industry's
linkages to its demand markets.
1.4 Organization
The remainder of this thesis is oganized into five chapters. Chapter Two explores the forces
and dynamics responsible for driving the evolution of Toronto's multimedia industry, establishes
the extent of Toronto's dominance in the hierarchy of Canadian centres of multimedia activity,
and links the industry's strengths in Toronto to the city's dominance in other sectors of Canada's
economic and cultural fabric. The chapter also begins to look at the size and intraurban location
of multimedia firms in the GTA through analysis of a database prepared for the purposes of this
research as well as a series of maps. The chapter concludes by asking a number of questions that
Sce Appendix B for a description of the ways in which multimedia products are used by different client sectors.
should be answered in an effort to understand the emergence, structure and locational attributes
of the multimedia industry in Toronto.
Chapter Three highlights the structure and origins of Toronto's multimedia industry,
presenting detailed results of a survey of Toronto area multimedia firms in combination with
interview results from a series of nearly 60 interviews that were conducted in the GTA with
principals of multimedia firms, representatives of government and industry associations, and
spokespeople from related industries such as computer hardware and software production,
advertising and finance. In this chapter, survey and qualitative data helps to paint a
comprehensive picture of the four main features characterizing Toronto's multimedia industry:
(i) basic industry characteristics, (ii) requirements for operation at the intrafirm level, (iii) type,
location and variety of relationships with suppliers, and (iv) dynamics associated with demand
for multimedia products.
Chapter Four presents an evaluation of the policy and institutional environment that has both
directly and indirectly supported the emergence of the multimedia industry in Canada and in
Toronto. This discussion addresses the role of Canadian cultural policy in fostering the
development of strong cultural industries in Canada, as well as the indirect impact this policy
environment has had on multimedia's emergence. Policy and funding mechanisms geared
directly to multimedia at the federal and provincial levels are assessed, under the general
observation that direct multimedia policy has tended to lag rather than lead the industry's
development. The wider institutional environment of the Toronto area is also documented, and
the region's system of both formal and informal multimedia-related associations and
associational behaviour is explored.
Chapter Five shifts the geographical focus by reviewing the emergence of multimedia at a
global scale. Although the industry is centred around North America, lessons from the industry's
emergence in Australia, Asia and Europe reinforce the picture of an industry that is profoundly
urban in orientation, with very strong linkages to other key economic and cultural activities in
the local economy. Two of the world's largest centres of multimedia production, in New York
and San Francisco, provide a comparison to Toronto's multimedia industry, as well as to one
another. Research and interviews with representatives of multimedia firms and industry
associations in each city reflect the industry location and clustering patterns, supply and demand
conditions, levels of cooperation and competition, and key strengths of each city as a centre of
multimedia production.
Chapter Six offers a summary of key research findings and conclusions reached as a result of
the empirical work conducted. This is followed by a discussion of how the research findings can
be applied towards informing both public policy and theory with respect to the geography of
economic activity. The chapter concludes by posing a series of questions for future research that
arise as a result of the findings presented here.
2 THE EMERGENCE OF THE MULTIMEDIA INDUSTRY IN CANADA - FOCUS ON
TORONTO
The study of multimedia's emergence as a new economic activity has a limited history, at
best, in Canada. By describing the features underlying the emergence of multimedia in the
Canadian context however, it may be possible to develop a framework from which to understand
why the industry has emerged, and furthermore, whether or not there is a predictable pattern
associated with the rise of regional multimedia industries. In an attempt to determine why the
industry has emerged, and why the industry has emerged in particular locales, it is important to
first review a series of theoretical and empirical issues. To this end, the present chapter explores:
how theories in economic geography and regional economic change apply to the emergence and
expected locational pattems of the multimedia industry; the state of information on the size,
structure and location of Canada's multimedia industry to date; industrial strengths associated
with the Toronto regional economy that may help to support the region's multimedia industry in
some way; and evidence of the industry's intraurban location patterns in Toronto. The chapter
concludes with the presentation of a series of questions to be answered through more detailed
study of Toronto's multimedia industry.
2.1 Forces Underlying the Emergence of Multimedia
At one level, the emergence of the multimedia industry can be understood as arising from
fundamental changes in capitalist economies. However, as vital background to this more
specific literature, it is also important to understand the changing nature of capitalist competition,
and the dynamics of inner city industrial land reuselredevelopment. The discussion which
follows helps to answer two questions: i) What forces have been responsible for the creation of
multimedia?; and ii) How do we understand the locational dynamics of the multimedia industry?
2.1.1 Origins of the Multimedia Industry: Transition to a New Techno-Economic Paradigm
Techno-economic paradigm shifts occur when a far-reaching change in technology,
involving both incremental and radical innovations, impacts the entire economic system and
results in a new mode of economic activity (Freeman and Perez, 1988). Freeman discusses the
impacts of techno-economic paradigm shifts as follows:
Some changes of paradigm are so pervasive because they offer such a wide range of technical and economic advantages, that they affect the behaviour of the entire system, changing the 'common sense' rules of behaviour for engineers, managers and designers in many sectors or in all, as well as their inter-sectoral relationships and technological complementarities (Freeman, 1991,509).
Freeman and his colleagues have identified a succession of techno-economic paradigms
including early mechanization, steam power and railway, electrical and heavy engineering,
Fordist mass production and, most recently, information and communication technologies
(Freeman and Perez, 1988). Associated with the rise of new techno-economic paradigms is the
massive restructuring of existing activity to adjust to new conditions predicated by the emerging
paradigm. Without the development of the current techno-economic paradigm based on
information and communications technologies, and concomitant features of the industry that
include advanced digitization, interactive formats and data transmission capabilities, the
multimedia industry would not exist in its present form. Both 'new' and 'old' firms alike are
learning to develop and employ multimedia as the capability of multimedia technologies
increasingly become embedded in economic activity. By marrying a group of new technologies
with traditional media, multimedia has come to represent a part of the current techno-economic
paradigm shift.
The Internet represents just one of several multimedia technology platforms, but it provides a
compelling example of how multimedia and other information and communications technologies
(especially with respect to computing and telecommunications, and also cable, satellite and
wireless) have become embedded with one another, and have become key components of
traditional media players' strategies. There are significant cost savings in publishing and
distributing material electronically, as opposed to on paper, television, radio or live. Time-based
constraints associated with live production and broadcast can be alleviated through the use of
multimedia as each user can choose their own time frame. Multimedia is a user-friendly medium
- it allows users to access information interactively, when they want and where they want,
provided the proper equipment and infrastructure is present.
The use of multimedia is rapidly diffusing throughout the economy, as can be witnessed by
the growing use of the Internet (the current multimedia platform of preference) by diverse
groups. The rise of the Internet is having a considerable impact on the structure of economic
activity in traditional industries. For example, Barnes and Noble, one of the largest booksellers
in North America, recently launched a virtual book store on the Internet to compete with
Amazon.com, the first Internet bookstore (launched in July 1995) which is now a publicly-traded
company with sales of $148 million in 1997 (U.S. Department of Commerce, 1998). In addition,
educators use the Internet to develop and distribute distance-learning programs, marketers
promote their products on it, governments release statistics and press releases via the Intemet and
international corporations use the Internet to for both internal communications, as well as for
communicating with clients and suppliers.
Reflective of the rapid diffusion of the Internet is the growth in the number of users
worldwide. Consider that in 1996, there were 40 million people connected to the Internet around
the world; by the end of 1997 this number increased to more than 100 million. There are
estimates that up to 1 billion people may be connected to the Intemet by the year 2005 (U.S.
Department of Commerce, 1998). Multimedia's rise, and consequently the increased use of the
Internet, has been aided in part by the decreasing costs of computer hardware and access to
telecommunications infrastructure. While computing power has doubled every 18 months for
the past 30 years, the cost of microprocessors has declined by six orders of magnitude during the
same time period. According to the U.S. Department of Commerce (1998, 8) "No other
manufactured item has decreased in cost so far, so fast." It is now possible to purchase a low-
end, multimedia-capable computer for less than $1000 in Canada (Just Imagine, 1998).
It is also important to note that the emergence of the multimedia industry is part of a larger
movement towards an information and communications-based economy that appears in theory to
present varied locational opportunities. In practice, however, this paradigm shift appears to be
reinforcing the centralization of these new activities in larger urban centres. Examples from both
industrial and service sectors have repeatedly confirmed that "the development of the
information economy has a strong metropolitan bias" (Hepworth, 1989, 184). For example, a
recent study on employment growth and change in Canadian urban centres (Coffey, 1996) has
found that "the concentration of high skill jobs in Canada's largest cities increased and
companies tended to cluster in areas where there was an educated work force, government
offices, research institutes and other businesses that provided a market for their services"
(Church, 1997). This sentiment is also echoed by Graham (1997, 107) who states that:
The basic pattern (of urban dynamics in telecommunications investment) seems to be one of continued urban dominance, with the largest and most international cities acting as information hubs for the rest of the national space economy. This concurs with other evidence that large cities strongly dominate both investment in, and use of. advanced telecommunications equipment.
While this may come as no surprise to urban geographers, the ability to use new technologies
to conduct economic activities at increasing distances from traditional urban centres will not
necessarily lead to the demise of urban centres -- the significance of agglomeration and
urbanization economies may have a 'pull' effect, drawing industry in, that is effectively stronger
than the 'push' effect of new technologies that enable industry to move away from cities and
from metropolitan areas altogether. Thus far, evidence from information technology and
telecommunications sectors appears to support the argument that the emergence of industries
reliant on advanced technologies have the potential to benefit larger urban centres. Whether or
not multimedia is yet another example of a technology-dependent industry that exhibits spatial
agglomeration in the CBD frame and surrounding areas, remains to be seen. Before delving
further into this issue however, it is important to consider other features of economic change that
may impact the organization and locational patterns of multimedia.
2.1.2 New Competitive Dynamics and the Changing Organization of Industry: Forces Shaping the Geography of Multimedia Production
There is good reason to argue that the spatial organization and locational dynamics of the
multimedia industry have been strongly shaped by a new set of competitive forces in capitalist
economies. A number of authors have evaluated changes occurring in the nature of capitalist
competition, concluding that there has been a shift in the dominant organization of production
away from Fordist, mass production methods and towards more flexible means of production
(Piore and Sabel, 1984; Best, 1990; Porter, 1990; Sayer and Walker, 1992). Summarizing the
general assertions of these authors, it is generally agreed that competition is no longer based on
price alone. Rather,
this 'new competition' is premised on the shift away from mass markets and standardized production toward far greater differentiation between qualitatively distinct 'niche' markets. Under the terms of this new regime, firms are competing more on the basis of quality, distinctiveness, attentiveness, and responsiveness to changing needs or demands in the marketplace, the ability to generate new or improved products successfully and to bring them to market quickly (Gertler, 1996,6).
Both intrafirm and interfirm changes characterize the shift to the new competitive order
imposed by the current phase of advanced capitalism. Within firms, firm structure is being
reorganized from hierarchical to flatter systems, teamwork is becoming increasingly important,
and emphasis is being placed on flexibility in work force size, capability and continuous learning
(Buckley, Barovick and Schwanke, 1994). Furthermore, for small firms, focusing on niche
markets and constantly improving the quality of their product, become important means by
which to compete (Berridg et al, 1995).
Increased intensity in the interaction between firms is another important characteristic of the
'new competition'. With firms focusing on their core competencies and purchasing specialized
inputs from external suppliers, the importance of interfirm relations has taken on new
significance with respect to collaboration, joint ventures, alliances, and relational subcontracting
(Sayer and Walker, 1992). The significance of interfirm interaction, in the form of both
competition and cooperation, has led to a resurgence of interest in industrial districts and the
forms of flexible production that are organized in such districts.
The concept of an industrial district arises from the theory, first put forward by economist
Alfred Marshall, that agglomeration economies or external economies of scale result from the
concentration of a variety of interrelated producers. According to Marshall, industries cluster to
take advantage of: labour pools, opportunities for small firms and the prevalence of technological
spillovers as a result of interfirm communication (Marshall, 1920).
Scott (1998a) asserts that agglomeration economies result in industrial districts that generate
localized externalities. The particular features of the industrial district, as identified by Scott, are
as follows:
1. The co-presence of many different kinds of producers offering specialized inputs and services in timely and flexible response to needs as and when they arise.
2. The learning effects that are engendered by the constant interaction of producers within transactional networks.
3. The emergence of local pools of labour with agglomeration-specific skills and forms of habituation.
4. The cultural and institutional infrastructures that invariably come into being in and around industrial districts, and that are often critical to the effective operation of the entire local socio-economic system (Scott, 137, 1998a).
According to Storper (1997), agglomeration economies take the form of both traded and
untraded interdependencies for firms. Untraded interdependencies are relationships developed
amongst firms located in close proximity to one another which aid in the success of the firm and
the region such as labour markets and institutionall cultural conventions. These
interdependencies are essentially non-standardized assets which cannot be easily reproduced and
are not traded directly through the market, though their existence benefits the agglomeration as a
whole. For firms located in industrial districts.
The territorial specificity and differentiation of certain untraded interdepencies and spillovers, or the territorial differentiation of the same, by permitting actors to travel along superior technological trajectories ... can confer on them absolute advantages that shelter them, at least temporarily, from Ricardian competition (that is, competition based on prices for factor inputs) (Storper, 1997.20).
Agglomeration economies will continue to be important for industrial development in
innovation intensive sectors, despite the ability for firms to develop along non-territorial lines
based on improvements in communications and transportation technology (Storper, 1997). This
is a result of the move towards production of specialized, non-standardized products, and also the
benefits of organizational and technological learning that result from interaction facilitated
through the agglomeration of interrelated firms.
According to supporters of the industrial districts literature, it is the balance between
interfirm cooperation and competition, the development of distinctive industrial institutions,
cultural norms and social networks, that confer competitive advantages to the industrial district
as a whole and enable it to assert its role not only regionally and nationally, but potentially
globally as well (Cooke, 1995; Saxenian, 1994; Scott, 1998a; Storper, 1997).
The view that regional economic growth is being driven by locally-based industrial
agglomerations is not without criticism, however. Amin and Robins (1990, 13) particularly
single out Storper and Scott for being "caught up, like Piore and Sabel, in the idealization of
flexible specialization and industrial districts and the demonization of fordism and mass
production." They are furthermore led "into a totalizing vision in which they see flexible
specialization and locational agglomeration, and only this, wherever they look" (Amin and
Robins, 1990, 14). According to Amin and Robins (1990) the most powerful agent of regional
industrial change is the multinational corporation. They contend that a major failure of the
industrial districts literature is that it typically neglects to consider the powerful impact of global
actors in local systems of production. Amin and Thrift (1992) assert that while there are some
authentic examples of local production systems driven by the actions of local. as opposed to
global firms, the 'Marshallian' method of encouraging economic growth is restricted to a small
number of places. They argue that while the concentration of economic activity may persist, this
is largely related to restructured (and centralized) patterns of corporate command and control,
and not the result of renewed power by individual firms at the local level.
Nevertheless, Scott (1996; 1997) contends that industries (including multimedia) which
produce cultural products9 exhibit organizational dynamics very much in line with the industrial
districts logic outlined above. He asserts that for cultural products industries in general, "the
production system, too, is highly susceptible to vertical disintegration, for the uncertainties and
'Cultural products industries centre around 'image-producing' activities which "refers very liberally to those kinds of economic activity that depend for their success on the commercialization o f objects and services that transmit social and cultural messages, either as a primary or a secondary function" (Scott, 1996,306).
instabilities that flow from the competitive environment in which producers operate tend to
accentuate the play of external as opposed to internal economies of scale and scope" (1996,307).
One important consideration that appears to have been left out of this discussion is the issue of
multimedia firm age. Perhaps it is not so much that the multimedia industry is becoming
vertically disintegrated but rather that as a young and evolving industry, it has developed - from
scratch - patterns that emulate other cultural industries which have become vertically
disintegrated over time. However, there are numerous examples of integration in the cultural
industries to counterbalance instances of disintegration. Disney, Time-Warner, and CNN all
represent examples of firms that have increased their concentration of holdings in various
segments of the cultural industries - publishing, theatre, broadcast television, etc. In contrast to
Scott's argument for the significance of agglomeration and concomitant trends towards
flexibility and vertical disintegration in industrial organization, it is interesting to note an Ontario
Film Development Corporation (OFDC) study which concludes that, for the multimedia
industry, "as in the film/television industry, there is increasing vertical integration as producers,
for example, attempt to take control of their distribution channels"(OFDC, 1995, 5). This begs
the question, to be answered through empirical research in Chapter Three: Has the multimedia
industry developed patterns of vertical integration or vertical disintegration, or both?
Oakey et al's (1988) work presents results on the agglomeration propensities of high
technology firms from a somewhat different angle than Scott's industrial district studies. Citing
a study of new technology based firms in the United Kingdom, dating from 1970 to 1985, they
note that: electronics, computer hardware and software, instruments and biotechnology firms
display noted spatial clustering. According to Oakey et al, the factors that lead to clustering of
these industries include: "proximity to suppliers and customers, access to skills, availability of
manufacturing sub-contracting capacity, proximity to sources of technological know-how
(including other firms) and the presence of companies and academic institutions as sources of
spin-offs" (1988,21). Furthermore they argue that the quality and quantity of local inputs helps
to facilitate rather than to guarantee, the success of these clusters. This discussion of industrial
agglomeration, while similar to Scott's industrial district hypothesis (1998a), presents another
means by which to review the role and importance of interfirm agglomeration within the
multimedia industry.
The above discussion on the industrial districts debate illustrates that, while helping to
explain the success of some industrial areas, the literature is far from conclusive in explaining
exhaustively the changes occurring in both established and emerging industries and industrial
districts. Reviewing the literature on industrial districts, a number of issues arise which may
have particular relevance to the study of the multimedia industry. Foremost among these is the
role of agglomerative settings in supporting the development of multimedia - if industries based
on advanced technologies tend to locate in larger urban centres, might this be based in part on
some of the features associated with agglomeration economies found in industrial districts? Are
there benefits to multimedia firms that can be realized by virtue of proximity to potential
suppliers and sub-contractors? It might also be posited that if multimedia firms are producing
highly specialized, niche products, that location in an agglomeration of similar firms would
facilitate communication and interaction between firms as well as enabling them to flexibly
adjust to changes in staffing needs and suppliers. Finally, is the industry reliant on specialized
inputs from other industries that also exhibit patterns of spatial concentration?
2.1.3 Spatial Zrnpacts Associated with the 'New Comnpetitiomz'
While it is recognized that changes in the structural organization of industry have
implications for the spatial location of industrial activity, this relationship is rarely studied or
elaborated upon. Berridge et al(1995.30) note that trends towards the adoption of flexible
machinery, vertical disintegration and just-in-time supply relations result in the "somewhat
paradoxical result that those firms which are the healthiest (by virtue of their adoption of these
'best practice' innovations) may actually be cutting back on the amount of factory space they
use."
There are two main forces that, combined, have led to an increasing supply of older, inner
city industrial land. First, current industrial organization strategies based on adaptations to the
changing nature of capitalist competition mean that less space is required for goods production,
irrespective of location. Second, contemporary industrial location trends favour suburban and
exurban locations on greenfield sites because such locations provide easy access to air and road
transportation networks, proximity to suburban labour forces and the benefit of less expensive
land away from the CBD frame.
Industries and services that have relationships with firms in the corporate complex'0 tend to
locate outside the Central Business District (CBD) core but within the CBD frame (Hutton,
1994; Gertler, 1996), thus contributing to both the demand for space and the vibrancy of the local
economy. The growth of small, specialized firms; the incubator effect of inner city areas
associated with the presence of urbanization economies; and the development of creative and
cultural services and industries are factors that may present opportunities for the uselreuse of
lo The 'corporate complex' is defined by Ley and Hutton (1991, 182) as the "most propulsive sector of the service economy ... the interwoven network of head offices and producer services" and is largely concentrated within urban areas in metropolilan regions
existing industrial spaces. The growth of creative services including advertising, graphic design,
and architectural firms surrounding the Vancouver CBD (Hutton, 1994) present examples of
industries with strong 'propensities' for a CBD frame location. Similarly, Gad's studies of
Toronto indicate that firms in advertising and media are likely to be found in close proximity to
the CBD (1991).
Presenting a rationale for the clustering of these activities in the CBD frame, Hutton (1994,
29) proposes that:
Cities appear to possess certain unique advantages for the production of applied design and creative services, which may suggest the durability of applied design as a comparative advantage of urban areas against a backdrop of the relentless decentralization of more standardized commodity and services production.
In his discussion of the garment industry in Manhattan, Scott indicates a locational tendency for
"high quality flexible forms of manufacturing in the core, and the lower-quality routinized forms
of manufacturing in the periphery" (1988a. 79). In more recent work on the cultural products
industries in Southern California, (including the fashion industry, film and television,
advertising, and multimedia - among others), Scott (1996) notes that these industries tend to
locate in the inner core of the Los Angeles metropolitan region. He goes on to say that "the most
successful cultural-products industries in Los Angeles have tended to maintain high levels of
skill, worker remuneration, and market appeal. and to have worked out viable, if limited, forms
of inter-firm collaboration and coordination in the quest for outstanding products" (1996,315).
There is little discussion, however, regarding the relationship between the location of cultural
products industries in the CBD frame of the metropolis and new formsltrends in industrial
organization which may lead to or support this location pattern.
Where the multimedia industry is concerned, anecdotal evidence presented in Chapter One of
this thesis notes the concentration of multimedia firms in the centre of large metropolitan areas.
What we do not know on the basis of this preliminary evidence, however, are the reasons why
this occurs. Based on research by Hutton (1994), Gertler (1996), Gad (1991, and Scott (1988) it
is plausible that multimedia's apparent development as a central city industry may be occurring
for several reasons:
1) The industry has relationships with firms in the corporate complex which require a proximate
location;
2) The CBD frame is acting as an incubator to fledgling multimedia firms - though they may
move away from the core as they mature;
3) Multimedia firms are an example of a 'creative' industry and as such there are special
advantages realized by a central location;
4) Multimedia represents an example of an industry based on high-quality, flexible
manufacturing in which a central location in the CBD frame is enduring.
These suppositions as to why multimedia might develop as a central city industry will be further
examined through empirical work to be detailed in Chapter Three of this thesis. First, however,
it is important to review the state of information on the multimedia industry nationally in an
effort to focus the key questions and issues to be addressed in studying Toronto's multimedia
industry.
2.2 The Multimedia Industry in Canada
Very little information is available on the multimedia industry in Canada and the role which
the industry plays in the urban industrial landscape. In part, this paucity of information stems
from the industry's youth and the lack of a national (or provincial) framework from which to
begin collecting and analyzing data on this dynamic industry. As yet, there is no standardized
method of collecting statistical material on the industry, though this may be forthcoming in the
future, and will be discussed further in Chapter Six. The information that we do have regarding
the Canadian multimedia industry stems largely from limited study by Industry Canada. Data on
the multimedia industry in individual provinces and in individual metropolitan areas is also
limited, and if available, is generally provided through provincial and municipal government
studies, and by independent firms, organizations and researchers.
2.2.1 ZMAT/Zndustry Canada 1995 Study
The first study of the Canadian multimedia industry was conducted in 1995 when Industry
Canada collaborated with the Interactive Multimedia Arts and Technologies (IMAT)"
Association to provide a national overview of the industry. Included in the database developed
for this study were both multimedia content producers, as well as firms involved in both
production and marketing, promotion, and financing of multimedia products. Though the study
was national in scope, nearly 70 percent of the 561 multimedia firms in the database were
located in Ontario.
This study was conducted in order for both M A T and Industry Canada to obtain a better
understanding of the challenges facing the multimedia industry in Canada and to assist in
formulating effective policies to bolster the industry's presence. Given that more than two-thirds
of responding firms were located in Ontario, this study is largely indicative of the state of the
multimedia industry in Ontario, despite its national scope.
The study looked at the following issues: industry profile, content, technology, marketing
and distribution, human resources, finance, strategic alliances, government, barriers to industrial
" IMAT is the national organization formed to represent the interests o f the Canadian multimedia industry. Its mandate and role will be discussed in further detail in Chapter Four.
development and industry representatives' view of IMAT. Of the 410 surveys sent out, 203 were
returned, representing a response rate of 52 percent.
Information gathered for this study revealed a number of important features characterizing
the Canadian multimedia industry. While 37 percent of firms were working in multimedia prior
to 1991, 38 percent of firms entered the industry between 1991 and 1993, and the remaining 22
percent of firms began working in multimedia between 1994 and 1995. These data help to
convey the youth of the industry, and provide an indication of the industry's rapid pace of
growth in the year prior to the survey.
While one-third of responding firms indicated that their revenues were derived solely
from work in multimedia and were therefore defined as 'dedicated' multimedia firms, nearly two
thirds also generated revenues from activities outside of multimedia work ('non-dedicated'
firms).
The study also revealed that more than 85 percent of multimedia firms in Canada in 1995
were independent ventures, while a small number of firms were subsidiaries of larger companies
in the software, publishing and more traditional media sectors. The size of firms was found to be
small, with nearly half of all firms employing fewer than 10 people, and another 30 percent
having between 10 and 30 employees. An average of 21 people were employed in dedicated
multimedia companies, whereas non-dedicated multimedia companies employed 106 people on
average." Employment by skill category in multimedia was found to be dominated by creative,
technical and management workers. The survey data also showed a strong reliance on contract 1
temporary employment in multimedia, especially where creative employees are involved.
" Median firm size is probably a much better indicator of typical multimedia firms, because while most multimedia firms are small in size, the presence of only a few large firms disproponionately increases average employment figures.
Just under 80 percent of all industry revenues were found to be generated in the Canadian
market. Exports by Canadian multimedia firms to international markets were led by exports to
the United States, and followed by exports to Europe, Japan, Latin America and Southeast Asia,
respectively. Furthermore, the report identified that the longer a firm had been in operation, the
more likely it was to have developed export markets for its products.
Multimedia firms reported that they serve a variety of market segments, led by products
developed for the corporate sector, and followed by product development geared towards
education, government, and the home market. However, for most firms, the high cost of
developing products for the mass consumer marketplace was found to limit their access to this
markett3. In part this is a reflection of the fact that "Canada is a niche market, and one generally
considered not large enough to exclusively support a multimedia product development base
focusing on the consumer market" (MAT, 1995, 11). Not surprisingly then, the majority of the
firms surveyed indicated that their marketing focus was to produce individualized products for
the corporate sector, while only one-third of firms generated revenues from consumer markets.
The main barrier to cultivating a strong consumer market focus in Canada seems to be the lack of
financing and content ownership,'' both of which are viewed as prerequisite to international
success. Because of the strength of the multimedia industry in the United States, where both
l 3 For instance, it was estimated that CD-ROM game titles developed by multimedia firms (often owned by media and studio giants) in Hollywood cost $2 million each in 1994 (Economist, 1994). Furthermore. if they do get mass market products developed, small publishers have to compete for limited shelf space with CD-ROMs sold by the most powerful companies, such as Microsoft (Economist, 1996). "Content ownership refers to ownership of the material that is used in multimedia products (visual, text, audio). The most profitable situation in this respect arises when content is developed in-house. Content may also be purchased or licensed from an external source, or developed jointly between different firms.
financing and content are more readily available, the IMAT study expressed fear that Canada
will lose some of its talent unless increased activity in publishing and financing of multimedia
projects ensues.
In summary, the IMAT study concluded that the Canadian multimedia industry in 1995 was
characterized by: the predominance of young and small firms; a majority of firms combining
multimedia production with other types of work within the same firm; the widespread use of
contracting out; a focus on producing corporate, entertainment and educational products for the
Canadian market; and difficulties in developing mass marketed products due to the small size of
the Canadian market and the difficulty of obtaining access to content and financing. The IMAT
study provided early evidence of the fact that multimedia work is often combined with other
types of work within a single firm, raising the possibility that there are relationships between the
multimedia industry and other industries. It provided basic information on the size and nature of
the industry at a national scale, but little detail on the reasons for the industry's emergence,
geographic distribution patterns and connection to other industries. The M A T study did not
identify what other types of work are combined with, or related to, multimedia. Furthermore,
while the IMAT study details some of the forward linkages between multimedia firms and their
clients, it neglects to consider the importance of backward linkages between multimedia firms
and their suppliers as a factor in the industry's emergence and development. Two important
questions arise as a result of this missing information: Do linkages between multimedia firms
and their suppliers play a role in the multimedia industry's operation and structure? If so, who
are these suppliers and to what extent do they provide inputs to the operation of the multimedia
industry? Finally, while the M A T study noted that the bulk of multimedia firms in the country
were in fact located in Ontario, the study did not address any issues relating to the geography of
multimedia in Canada or the impact of geography on the industry's development and location
patterns.
2.2.2 Size of Multi~nedia Irzdustries in Canadian Murzicipalities
The first available evidence on the geography of multimedia production in Canada is derived
from the M A T (1995) study which ranked Ontario as the province with the largest concentration
of multimedia firms, followed by Quebec and British Columbia. A 1996 study of Quebec
identified at least one hundred businesses there "devoted to developing and producing interactive
applications based on CD-ROM, on web sites, or at kiosks and teller machines" (Micro Intel
Case Study, 1996). By mid-1997, approximately 400 companies were estimated to be active in
Quebec's multimedia industry (Federal Office of Regional Development et al, 1997). The
Centre for Image and Sound Research (1995) conducted the most recent study of the new media
industry in British Columbia, and estimated that the industry there is comprised of 150 new
media companies employing approximately 2,000 people. There are some significant problems
in comparing these numbers, however, the most pressing of which is the lack of a consistent
definition of multimedia. This may lead to the inclusion of numerous firms in some studies
which would be excluded by others. This problem is not only a reflection of the dynamic,
youthful nature of multimedia, but also of the lack of a standard, agreed-upon classification as to
what constitutes multimedia activity. While this poses some serious challenges to making
comparisons between studies, between cities and between countries, it is nevertheless possible to
develop a general hierarchy of multimedia centres in Canada.
An assessment of two of the most nationally comprehensive, recently generated listings of
nultimedia firms indicates that the Toronto area multimedia industry is the country's largest, and
is followed in size by the next largest Canadian cities, Montreal and Vancouver. Table 2.1
shows that Toronto contains the largest proportion of multimedia firms in Canada's three largest
metropolitan areas, estimated at between 25 and 36 percent of the national total. The
discrepancies between the two estimates is related to the fact that ~ t r a t e g i s ' ~ is a bilingual,
Industry Canada database coordinated from Ottawa, while the Multimediator Canadian
Developers ~ i r e c t o r ~ ' ~ is a Toronto-based directory of Canadian multimedia firms. The
Toronto-bias and unilingual nature of the Multimediator site helps to explain why Toronto
contains a larger percentage of national multimedia firms in the Multimediator database, and also
helps to explain why Montreal's multimedia industry is represented as being smaller than the
Vancouver industry. Both databases require that firms self-subscribe (free of charge) in order to
be included on the database and therefore neither contains a complete listing of all Canadian
multimedia firms.
Table 2.1: Multimedia Firms in the 'Big Three'
Strategis Multimediator Metropolitan Area
To gain a clearer understanding of the metropolitan agglomeration of multimedia firms,
Toronto Montreal Vancouver Canada
consider the following: of multimedia firms listed in the Industry Canada Strategis database, 53
Firms
percent of Ontario's multimedia firms are located in Toronto, 66 percent of Quebec's multimedia
154 98
57
625
l5 Found on the Internet at: http://strategis.ic.gc.ca. l6 Found on the Internet at: http://www.multimediator.com.
Percentage of Canadian Total 25 16
9 100
Firms Percentage of Canadian Total
155
35 42
43 1
36 8
10
100
firms are located in Montreal, and 88 percent of British Columbia's multimedia firms are located
in Vancouver. Using the Multimediator Canadian Multimedia Developer's Directory, 63 percent
of Ontario's multimedia firms are located in Toronto, 66 percent of Quebec's multimedia firms
are located in Montreal, and 77 percent of British Columbia's multimedia firms are located in
Vancouver. Finally, these two databases indicate that the three largest metropolitan areas in
Canada represent the location of between 50 and 54 percent of all multimedia firms in the
country. This information should be regarded with some caution however, as the databases used
here likely exclude a significant number of firms in the industry since they are comprised of
firms which have requested a listing on the database mainly for marketing, public relations and
informational purposes. Furthermore, the definition of multimedia used in the development of
each database is inconsistent. Despite these shortcomings, the data presented above paint a
picture of the metropolitan concentration of multimedia activity in Canada, document the fact
that multimedia firms are centred in Canada's largest metropolitan areas and provide a rough
estimate of the importance of Canada's largest centres as centres of multimedia activity.
2.3 Industrial Strengths of the Toronto Area Pertaining to Multimedia
An examination of Toronto's regional economy is warranted based on the concentration of
multimedia firms in the nation's largest metropolitan area, and on evidence presented in the
M A T (1995) survey that multimedia firms produce the majority of their customized products for
the corporate sector. This examination will help to identify whether there is the potential for
fonvard and backward linkages between the local multimedia industry and related industries,
which forms a key argument of the industrial districts literature in explaining industrial
agglomeration patterns.
Toronto's position as Canada's largest metropolitan area, with a 1994 population of 4.5
million (Greater Toronto Area Task Force, 1996) may be partially responsible for its
preeminence in the hierarchy of Canadian centres of multimedia activity. Toronto is also the
location of choice for many national and multinational corporations, financial institutions and
other business services. For instance, Toronto has North America's third largest concentration of
employment in financial services, behind New York and San Francisco (Slasor and Whitehead,
1997). Furthermore, 6.6 percent of the city's jobs in 1996 were in high tech industries, putting
Toronto's high-tech sector just behind the top ranking Montreal, where 6.9 percent of all jobs in
1996 were in this sector (Little, 1997). The high tech sector has been the major engine of
provincial growth in Ontario since 1990 (Slasor and Webb, 1997).
Table 2.2 identifies Toronto Census Metropolitan Area (CMA) employment by occupation
and industry. Thirty-seven percent of the Toronto CMA labour force works in managerial,
professional and technical positions, and a nearly equal proportion (38 percent) of the labour
force is employed in BusinesslPersonal services. Toronto's strengths in management and
business services appear to tie into the multimedia industry's focus on producing products for the
corporate sector, providing a potentially large base of Toronto-area corporate clients whom
emerging multimedia firms may pursue as clients.
Table 2.2: Toronto CMA Employment
1 TOTAL 12,158,500 1 100 1 Source: Statistics Canada, 1996
Business1 Personal Services 1 823,200 138
The concentration of corporate headquarters, financial services and contentlcultural
Public Administration 1 85,400
industries in the Toronto area bodes well for supporting the development of a local multimedia
4
industry. Toronto employment in business services, financelinsurance and communication and
media industries accounts for more than half of all provincial employment in these industries
(Slasor and Whitehead, 1997).
In reviewing the emergence of the multimedia industry it is important to consider not only
the industry's ability to develop relationships with potential clients, but also its ability to forge
alliances with potential suppliers. Furthermore, the industrial districts literature would suggest
l7 Other includes the following occupations: primary occupations, conslmclion trades, transportation equipment operating, and material handling & other crafts.
that if industries upon which multimedia is dependent for specialized inputs exhibit patterns of
spatial agglomeration, then the multimedia industry might also display similar patterns of
clustering, to take advantage of a pre-existing infrastructure of industrial interaction and supply-
related support.
One type of supplier industry that multimedia production could be expected to have a
connection to, is computer hardware and software production. Evidence shows that the Toronto
area is the centre of the country's information technology (IT) industry18, with 40 percent of total
national revenues generated by IT firms located in the GTA (Pritchard and Associates, 1997).
While the Toronto area is not particularly strong in the production of computer hardware, there
are a number of custom and specialized software production firms in the region that develop
software used specifically by multimedia firms both in Canada, and abroad. According to a 1995
study, Ontario is the source of 90 percent of all multimedia software used worldwide in the
entertainment sector (Ministry of Economic Development, Trade and Tourism, 1996). For
example, AliastWavefront, a Toronto based software developer, produced the animation
software used in the creation of special effects for the blockbuster movie, Jurassic Park.
In addition, as an industry which represents the convergence of traditional media with
digitization technologies, multimedia should be expected to have connections with the traditional
media industries such as publishing, broadcasting, and sound recording upon which some
multimedia products are based. Toronto is also Canada's largest centre for English-language
electronic and print media, film, video, music and television production, and other cultural and
'' Information technology industries includc: computing and telecommunications hardware, software and services companies (Pritchard, 1997).
'content'lg industries. More than 90 percent of arts activities in Metropolitan Tor wto take place
in downtown Toronto. According to the Toronto Arts Council, this "can be attributed to the
traditional clustering effect of the arts that takes place in all urban arts centres" (Toronto Arts
Council, 1997,2). A major centre of both film and television production, Toronto is the third
largest film production centre in North America, and ranks second in terms of television
production (City of Toronto, 1998a). Moreover, film production activity in the city has grown
by 4,000 percent in the past four years (City of Toronto, 1998b) and employment in both film
and television production now stands at 28,800 (City of Toronto, 1998a). Within the book
publishing industry, more than 40 percent of the country's firms are located in Ontario (largely in
the Toronto area), generating nearly 70 percent of all industry revenues in this field (Industry
Canada, 1997b). Sound recording is even more highly concentrated in Toronto, with the six
major multinational producers located there and 80 percent of national activity by revenues
occurring in Ontario (Industry Canada, 1997~). Table 2.3 presents employment figures for radio,
television, film and sound recording, and publishing, for both Canada and Metropolitan Toronto.
These figures show that Toronto has nearly one-quarter of the nation's employnient in radio,
television, and film, and more than one-third of all national employment in publishing. It should
also be noted that these figures do not include employment data for the areas surrounding
Toronto, elsewhere in the GTA. These figures, if available, would likely show further increases
in the concentration of content industries in the Toronto area.
l9 It should be noted that there is typically some overlap between the definitions of cultural and content industries. According to Industry Canada (19976): content industries include print publishing industries, new media content industries, and audiovisual industries; while cultural industries include: heritage institutions, performing arts and music, visual arts, crafts and design as well as the content industries listed above.
Table 2.3: Employment in Selected Canadian Content Industries
If the results of the IMAT (1995) study represent an accurate reflection of Toronto's
multimedia industry, then the presence of corporate headquarters in Toronto may provide an
important source of clients to multimedia firms. Though the IMAT study did not consider
whether there are industries that supply inputs to multimedia (or which industries these might
be), the assumption has been made here that the traditional media industries comprise key
suppliers to multimedia firms, and that therefore, the prominence of Toronto as a national media
centre leads to the region's further potential success as a centre of multimedia production.
Sector Radio, T.V., Film, Sound ~ecording"
Publishing
2.4 First Glance at Toronto's Multimedia Industry
Before attempting to answer the many questions which have been presented through the
discussion of relevant theory and empirical evidence in this chapter, I will first turn to a
Sources: Industry Canada, 1 9 9 7 ~ ; Metropolitan Toronto Employment Survey, 1995.
Canada Employment 52,265
51,713"
preliminary glance at the size and location of the multimedia industry in the Toronto area
Through this exercise, it is possible to determine whether there is reason to argue that multimedia
is differentiated at the interurban and intraurban levels, and on this basis, whether or not there are
agglomerative features that help to explain the industry's development in particular spatial
forms. To this end. a database of multimedia firms in the Province of Ontario was developed in
Metropolitan Toronto
-- --
20 While Industry Canada provides employment figures for each of these industries individually, the Metropolitan Toronto employment survey provides data on these industries in aggregate. " This figure represents total Canadian employment (199411995) in newspapers, magazines and other publishing; book; book publishers and exclusive agents; and other publishing and printing. 2' This figure represents 1995 employment in the former Metropolitan Toronto for the areas of books, periodicals and newspapers.
Employment 12,683
1 8,646"
Percentage of Canada 24
36
an effort to determine the size and geographical distribution of the multimedia industry in the
province2! A total of 418 multimedia firms were confirmed to be in operation in the province in
February 1997. Table 2.4 displays the intraprovincial location of multimedia firms in the
database. In total, 319 or 76 percent of all firms were located in the GTA. This database shows
that a majority of the province's multimedia firms, or sixty two percent of all firms in the
province, were situated in the central municipality of Toronto.
Table 2.4: Multimedia Firms in the Province of Ontario
In Table 2.5, a geographical breakdown of multimedia firms within the region highlights the
Location Metropolitan Toronto Rest of GTA
Rest of Southem Ontario Ottawa Region
Other Province Total
concentration of 8 1 percent of regional multime.!ia firms inside Metropolitan Toronto, with 54
percent of all multimedia firms in the GTA located in the (former) City of Toronto.
* does not equal 100 due to rounding
Number of Firms 259 60 47 42
13 418
'3 The database was developed by combining lists of Ontario multimedia firms from six sources: 1) the Interactive Multimedia Arts and Technologies Association Members' Directory (1996); 2) firms who classified themselves
Percent of Province 62
14 1 I 10 3
99 *
within the multimedia industry in the Industry Canada Strategis website as of January 1997 (htlp://strategis.ic.gc.ca); 3) firms llsled in the C~nadlan Developers Direclor) on the t&l~imed~luor u e b s w as of Jnnuxy 1997 fht1o://wwu.1nult1mcd1n1or.com1: 4 B 5 ) firms uilh listlner in the 1996 and 1997 "Guide lo Mulllmed~a Ser \~ces" . . ~, , advertising section in Marketing Magazine; 6) firms listed as new media producers and creators in the Heritage Canada "Canadian Directory of New Media in the Cultural Sector" (1995).
Table 2.5: Multimedia Firms in the GTA
Figures 2.1 through 2.3" show the geographic location and metropolitan concentration of
multimedia firms in the Toronto area. Figure 2.1 depicts the distribution of multimedia firms in
areas surrounding the CBD frame as well as the concentration of firms in the downtown area; it
shows that the largest clusters of multimedia activity are centrally located in Toronto, with small
numbers of firms located in a variety of neighbourhoods surrounding the City of Toronto. Figure
2.2 identifies the location of multimedia firms in Toronto by street address, and shows that
Toronto's multimedia corridor is concentrated in downtown Toronto, fanning north of the city 's
CBD along Yonge Street, the main north-south thoroughfare, and dispersed somewhat randomly
throughout the remainder of the region. Figure 2.3 shows that the largest concentration of
multimedia firms is found in older industrial areas (coloured light gray) in the CBD frame. In
particular, the area bounded by Parkside Drive to the west, Front Street to the south, the Don
Valley Parkway to the east and Bloor Street to the north, contains 125 multimedia firms,
representing 48 percent of all multimedia firms in Metropolitan Toronto. This corridor of
Figure 2.1 was developed mapped using the first three digits (forward sortation area) of postal codes. Figures 2.2 and 2.3 were prepared using street address location.
Figure 2.1: Multimedia Firm Clusters in Toronto
# of Multimedia Firms
4 9
Figure 2.3: Multimedia Firms in Downtown Toronto
multimedia firms encircles and overlaps the city's central business district, centred around King
and Bay Streets. These maps and tables provide strong preliminary evidence displaying the
agglomerative character of the multimedia industry as well as apparent marked intraurban
clustering of multimedia firms in older industrial areas of the CBD frame. The concentration of
multimedia firms in Metropolitan Toronto, with noted clustering in the City of Toronto, signifies
that there is further reason to explore the nature of the region's multimedia industry, and that
there may in fact be particular features associated with the city that have led to the emergence of
a disproportionate number of multimedia firms there.
Figures 2.1 and 2.2 show the location of printing and publishing and media industry firms in
Toronto. When one compares the location of multimedia firms to the spatial distribution of the
media and content-producing industries discussed in Section 2.3 which are posited to have a
connection with the multimedia industry based on their mutual interests, these maps highlight the
spatial similarities in location patterns amongst these industries. The apparent locational
symmetry between multimedia firms and firms in the printing, publishing and media industries in
Toronto may also be a reflection of an underlying relationship amongst these industries. Do they
share a similar labour force? Do they produce products together? Do they rely on one another to
act as suppliers? One is immediately struck by the strong spatial concordance of these individual
industries. particularly in the CBD frame's older industrial areas. The strong location cr~rrelation
between these different sectors hints that there may be interrelationships between these sectors;
the reality of the nature of relationships between multimedia and content industries will be
explored in further detail in Chapter Three.
2.5 Research Questions
This review of theoretical and empirical evidence relating to the emergence, location,
structure and organization of the multimedia industry raises a number of unanswered questions.
If studied in further depth, the answers to these questions would help in the development of an
understanding about why the multimedia industry has emerged where it has, and what features of
the industry (and/or of the regions in which it has emerged) have led to the emergence of
apparently strong and large multimedia industry agglomerations in some places. and not in
others.
Using the cxample of Toronto as a case study, Chapter Three addresses the reasons for
multimedia's emergence and explores whether or not there is a definitive basis for the industry's
urban propensities. A series of questions concerning the nature of the multimedia industry have
been posed throughout the discussion of theoretical and empirical information presented in this
chapter. These questions can be grouped under two main, interrelated sets of issues. First, is
multimedia an industry that thrives in urban (as opposed to suburban and/or exurban) areas, and
why? Second, are there particular benefits to the operation of the multimedia industry, or to
individual firms, associated with location in the centre of large metropolitan areas and what are
these?
Evidence presented in this chapter on the concentration of multimedia activity in Canada's
three largest metropolitan centres, combined with mapwork showing the location of multimedia
firms in the Toronto area, suggests that multimedia is indeed a central city industry. However,
this data does not answer the question: why? In order to understand why the multimedia industry
is located in the centre of large metropolitan areas, it is important to utilize some of the assertions
made through the literature on agglomeration economies and industrial dictricts discussed
previously. This literature, as it applies to the study of multimedia, would suggest the relevance
of the following issues, in understanding whether there are particular features of agglomeration
that benefit the multimedia industry:
1) What are the basic characteristics of the industry? (i.e. How big is it? Does it produce
specialized or mass marketed goods?)
2) What inputs are required and how are these sourced? (i.e. What are the labour, capital,
and infrastructural requirements?)
3) What role, if any, do suppliers play in supporting multimedia production? (i.e. What
effect do suppliers have on the location and operation of multimedia firms? How are
relationships characterized between suppliers and multimedia firms?)
4) Who does the industry serve, and how? (i.e. What sectors do clients come from? Where
are they located? What do they want?)
5) How is the industry supported? (i.e. To what extent is there intraindustry or interindustry
interaction? Is there government support for the industry? Do public associations foster
the industry's growth?)
Discussion in the next chapter will begin to provide the answers to these questions by explaining
how the multimedia industry functions in the context of Toronto's urban industrial landscape.
3 ORIGINS AND GEOGRAPHY OF SUPPLIERS AND MARKETS
This chapter presents the results of the first in-depth survey of Toronto's multimedia
industry, exploring the defining characteristics and structure of the nation's largest centre of
multimedia production, supported by information gathered through interviews with key industry
players. Following from the discussion in Chapter Two, the focus of this chapter is on
determining whether or not the industry's location patterns are related to the industry's
organization, both internally and externally. This is accomplished by assessing the data from
four perspectives: i) basic industry characteristics, ii) requirements for operation at the intrafirm
level; iii) type, location and variety of relationships with suppliers; and iv) dynamics associated
with demand for multimedia products. By developing an understanding of these four key factors
and the manner in which they may or may not influence the location patterns of the multimedia
industry, it is then possible to assess whether the development of the multimedia industry in
central cities is paradoxical to its expected reliance on advanced technologies. Finally, the
chapter concludes with an evaluation of the industry's emergence in Toronto, answering the
question: Why has Toronto emerged as Canada's largest centre of multimedia production?
3.1 Research Approach
A two pronged approach using a survey and a set of structured interviews was used in an
attempt to understand and evaluate the multimedia industry in Toronto. A survey was distributed
to all multimedia firms in the database located in the GTA during FebmaryMarch 1997". The
survey was electronically distributed by electronic mail to 286 firms and sent by regular mail to 5
'5 See Appendix C for a copy of the survey.
firms that did not have e-mail addresse? for a total of 3 11 delivered surveys. The survey was
also posted on a popular Canadian web site for accessing information on multimedia, and this
enabled firms to access the survey via the Internet, regardless of whether firms were on the
research database or not." This approach was used in an attempt to ensure all 'eligible' firms
had access to the survey in light of the lack of an inclusive, recognized listing of multimedia
firms, and also as a way of adding new firms to the research database.
In addition to the survey, face-to-face interviews with principals and senior staff at
multimedia firms in the Toronto region were conducted to add depth to the survey results and to
explore issues associated with the industry's emergence, organization and location patterns in
greater detail. The interview sample was designed to capture the full diversity of sizes,
locational choices and type of ~ o r k ' ~ . ' ~ . Table 3.1 identifies all firms interviewed by firm name,
person, size and intraurban location. Interviews were also conducted with representatives from
related industries that act as both suppliers and customers to multimedia as well as with
representatives of the financial community30. These interviews further our understanding of how
and why Toronto's multimedia industry has emerged and developed its present shape and
structure. In all, 59 interviews were carried out in Toronto for the purposes of this research.
26 The field of 319 multimedia firms in the GTA was reduced to 31 1 firms at this point in the research process as I was unable to locate 3 firms, lmailed survey was relurned by the post office, and 4 sent in responses indicating they were not working in multimedia. "A total of 85 usable responses were received. Of those, 81 were respondents from the electronically distributed survey and 4 were respondents to the mailed version. Seventeen surveys were received from firms that were not o n the initial research database. This represents a response rate of 22.4 percent for thc electronically distributed surveys (not including the responses from the 17 non-database firms), and an overall response rate of 21.5 percent (mailed and electronically distributed surveys). Attempts to reach non-respondents were made by contacting firms via a second distribution of the survey. This was done approximately three weeks after the initial request to complete the survey. '' The sample of interviewed firms were chosen according to: size ( I . 2-20, 20+ employees); intraurban location (downtown, midtown, fringe); and multimedia composition of their work (multimedia only or multimedia component). l9 The guide used in Toronto-area interviews can be found in Appendix E. 'O See Appendix D for a complete list of Toronto interviewees by industry sector.
Tabie 3.1: List of Multimedia Firms Interviewed
I Firm Name 1 Person Interviewed 1 Position 1 Firm 1 Location
Bill Sweetman
Midtown
Flying Disc Frank Abrams Midtown Entertainment
Frank O'Hara Midtown TNT Interactive Midtown
" Downtown was generously defined as the area south of Bloor St. to the water, between Duffcrin St. to the west and the Don Valley Parkway to the east. '2Midtown was defined as the area north of Bloor St. to Eglinton, generally surrounding the downtown area and north along Bathurst, Avenue. Yonge, and Mount Pleasant.
Table 3.1: List of Multimedia Firms Interviewed (cont'd)
3.2 Characteristics of Toronto's Multimedia Industry
Firm Name
Previous studies have shown that the multimedia industry emerged in earnest in the early
1990s (IMAT, 1995; Scott, 1998a). The first comprehensive survey of Toronto's multimedia
Person Interviewed
industry, conducted as part of this thesis research, suggests that the median age of all Toronto
area firms working in multimedia in early 1997 is five years, while the average (mean) firm in
Position
the Toronto area began to work in multimedia in 1993. To further emphasize the youth of the
industry, consider that fully 40 percent of firms were established in 1994 or later. Due to
Firm Size
typically low barriers to entry and exit in the industry, the population of multimedia firms is
Location
I3 ~ r i n ~ e was defined as all areas outside of Downtown and Midtown, within the Greater Toronto Area
prone to changing quickly, and a substantial number of responding firms indicated having been
in business for less than one year.
Recalling the definition and description of multimedia production activities in Chapter One,
surveyed firms were asked to identify the proportion of their work that fell under the categories
of developing, publishing and distributing multimedia titles, the proportion of their products that
were interactive and non-interactive, and their relative use of various distribution platforms.
This information provides an initial glimpse of the nature of Toronto's multimedia industry.
Table 3.2 shows that 80 percent of responding firms report that more than half of their
products by sales are interactive, while 19 percent report that more than half of their products by
sales are non-interactive. Furthermore, fully 42 percent of respondents report that 100 percent of
their products, by sales, are interactive. Interactive products are considered to fall into the more
robust definition of the term multimedia, as described in Chapter One; these figures show that
the bulk of multimedia production in Toronto is in the production of interactive products.
Table 3.2: Interactivity of Products
1 Interactive I Non- Interactive
>50% <50%
0% 20
NO ANSWER." 28 n = 8 1, bold = highest % in category See footnote 35 for information on interpreting Tables.
" The figures presented under the heading "NO ANSWER" in this table and in subsequent tables most likely correspond to an answer of zero. However, they are reported sepamtely in order to present the results as unambiguously as possible. " Survey respondents were asked to rank activities in one of the following four percentile groups per category (listed horizontally): 100% =al l of their work falls under this category; >50% =more than half their work falls under this category; 4 0 % = less than half their work falls under this category; 0% = none of their work falls under
The functional focus of multimedia firms in the Toronto area is shown in Table 3.3. Fully 95
percent of firms are involved in at least some product development, with 64 percent involved in
publishing activities, and 41 percent in distribution. The functional focus of multimedia firms is
clearly mixed, with most firms involved in more than one aspect of the process.
Table 3.3: Functional Focus
Platform focus'6 refers to the medium through which a multimedia product is distributed (see
100%
>SO%
<50%
0%
No ANSWER
Table 3.4). The survey results show that there are very few firms that focus solely on one
platform type. Most respondents indicated that their work is divided between two or more
n = 8 1, bold = highest % in category
Developer 28
42 25
4
1
platfom~s. The least common platform is game consoles. This is in many ways an expected
result as games development is a very expensive mass market undertaking requiring access to
Publisher 9 19 36 15 22
finance, markets, distribution channels, and increasingly, the support of large corporations (see
Distributor 5
7 28
37 22
Footnote 13). With respect to the other five platfarm foci, however, the most common appears
to be Internet1 Intranet, followed by CD-ROM, Hard Disk and Floppy Disk and then Kiosks.
this category. The numbers presented in all columns to the right of the left hand column represcnt the percent of firms whose work falls within each percentile group, per category. "Refer to Appendix A for a definition and example of each platform type.
Table 3.4: Platform Focus
n = 85, bold = highest % in category
In describiug some of the basic features of Toronto's multimedia industry, what the above
data show most powerfully, is that there is diversity not just within the local industry, but also
within individual firms. Firms carry out numerous roles: as developer, publisher and sometimes
distributor of multimedia products; and in addition, they develop products for multiple platform
types. The subject of how these relatively new firms are organized in order to achieve this
apparent diversity in production roles and methods forms a key component of Sections 3.3 and
3.4.
3.3 Intrafirm Requirements: Human Resources, Financial Capital and Telecommunications Infrastructure
Survey and interview data indicate that four main supports comprise the conditions that
enable multimedia firms to operate: entrepreneurs, labour. capital and infrastructure. Multimedia
is a highly entrepreneurial industry. Of the 29 Toronto-area multimedia firms interviewed for
this research, 24 were privately owned, typically established by one or more of the firms'
partners. Probably the second most important component of multimedia firm structure is the use
and availability of a talented labour force: many firm principals noted that human capital
comprises their most important resource. While financial capital is critical to the operation and
growth of multimedia, its availability for Toronto area multimedia firms is shown to be weak.
Finally, the multimedia industry's use of Toronto's telecommunications infrastructure is assessed
- and is most notable for what it does not provide to an industry based on advanced technology
and telecommunications
3.3.1 Mulli~nedia's Entrepreneurs
Where did the entrepreneurs who began multimedia firms come from and how did they enter
into the industry? Recalling that multimedia represents the convergence of several industries,
most notably related to the information and communications technology, media and creative
sectors, it might be expected that at least some multimedia firm principals have prior work
experience in these sectors. Table 3.5 illustrates the range of firm founders' backgrounds prior
to entering multimedia.
Table 3.5: Range of firm founders' backgrounds
Media and Communications Advertising Audio visual Broadcast television Digital video Film and broadcast Pre-press Publishing Sound recording Television. film and radio
Computing and Technology Computer Sciences Engineer Manage technology-related companies Physics Robotics, automation Scientist Software development
Art and Design Art as a hobby Art college Fine arts teacher Interior design Graphic Design Music Painterlartist
Finance, Insurance and Management Banking (training) Finance and insurance
MBA Marketing and sales
Other Sociology Professor
Indeed, Table 3.5 does show that media and communications, computing and technology and
arts and design are the three most commonly cited sectors from which multimedia entrepreneurs
have emerged. Examples of how individual founders entered the multimedia industry follow;
these help to illustrate the way in which founders' prior backgrounds led to the emergence of
diverse offerings in Toronto's multimedia industry.
Digital Renaissance, a 100+ person multimedia firm in downtown Toronto, specializes in
custom multimedia applications for corporate clients and is in the process of entering the
multimedia software product market. The firm was founded by Keith Kocho, whose background
training is in traditional media but who became interested in the opportunities presented by
computers and digitization. According to Digital Renaissance's Vice-president of Marketing,
Michael Shostak:
[Kocho] came out of a radio and television background, so he was more interested in the video part of multimedia at that time, it was about six years ago, and really interested in digital video and the flexibility that it offers. Based on that, then he started getting into computer mediated communications and really saw the PC [personal computer] as a vehicle to effectively transmit information. So the quote that we use is that 'there's a paradigm shift from the PC being a data device to the PC being a communications device' and that was his vision, that kind of launched the company.
A number of multimedia firms emerged as a result of entrepreneurs combining business
experience with experimental multimedia projects. Frank Abrams, President of Flying Disc
Entertainment, a company with five employees which focuses on the travel/tourism and music
industries, began producing multimedia titles as part of a hotel reservation company. The
company began developing preview videos and CD-ROMs as a unique advertising tool to
promote the hotels supported by the reservation company. Ultimately, Abrams sold the hotel
reservation company, but continued with the multimedia work as he launched Flying Disc
Entertainment.
Frank O'Hara, President of O'Hara Systems Inc., a five-person company that develops kiosk-
based systems and web sites, established a multimedia firm after experience in both audio-visual
production and sales/management. O'Hara explains that he entered the multimedia industry in
the following way:
I had another company that was an audio visual production company, and I gradually let that one atrophy as I developed this one ... I [previously] worked for a company called Moore Business Forms in sales and sales management. In that business I had a lot to do with computers but they were mainframe computers. Of course that was a good many years ago and they were more than a little bit different from what they are now. But the principles are the same, so when I saw the advent of what was called interactive video, which is now called multimedia or new media, I could see having some real potential to the marrying of computers u,ith audio visual. And I've always been particularly interested in the marketing applications of these products and services.
Random Media Core's progression from a sound production and recording studio to a
multimedia firm is representative of the experiences of firms in the cultural and content
industries that, while making the transition to digitized work processes, expanded their business
offerings. Erwin Tumangday, Project Manager at the eight-person Random Media Core
describes the firm's evolution to digital work as follows:
It was a natural progression [to multimedia] ... All the music that we scored from the start was created on analogue and then digital music tools. We ran music applications and audio applications on our Macintosh's. As we replaced our Mac's with more powerful Mac's we freed up computers for use ... We decided about two years ago that we should start a graphic design element.
Today, the company envisions that the bulk of their future work will be in web site development,
though their experience and equipment related to sound recording enables them to provide a
combination of services to their clients.
Another field which spawned the development of a number of multimedia firms is
advertising. St. Clair Interactive Media is a medium-size, midtown firm specializing in the
development of touch screen interactive kiosks. In the mid-1980s. St. Clair Interactive Media's
president was in charge of an experimental branch of an advertising firm, focusing on electronic
marketing. He eventually divided the electronic marketing branch into a separate company, thus
launching the multimedia firm.
The list of firm founders' backgrounds identified in Table 3.5 and the discussion which
follows, hints at multimedia's association with 'older' sectors such as publishing, advertising,
film/television/radio, financial services, and graphic design, in addition to linkages with 'newer'
sectors of the regional economy including software development, computer hardware, robotics
and other information technology intensive industries. Survey results highlight the fact that
multimedia and related industries are not mutually exclusive and that both types of activities can
be successfully carried out within the same firm. In fact, the majority of firms (64 percent)
reported that they combine multimedia work with other typcs of work. The most common types
of work combined with multimedia include activities such as: software development, graphic
design, printing and publishing, broadcasting and video, music, advertising and marketing, and
computer based training. Previous studies of multimedia, have identified the strong relationship
between multimedia, high-technology and cultural industries (San Francisco Planning
Department, 1997; Scott, 1998a) and the results presented here appear to support such claims.
This subject will be discussed again in Section 3.4, where the role of suppliers in the operation of
the multimedia industry is examined.
3.3.2 The Labour Force - Features and Practices of Employment in Multimedia
According to Stuart Ross of Bindernagel Ross New Media:
Multimedia is not an individual skill, it's a group skill. To really produce, to live up to the potential that multimedia or interactive multimedia offers, you have to approach it from a multidisciplinary approach. Which means you do not have a single individual that is capable of sitting behind a computer in their basement with Macromedia Director and becoming the writer, and the author, and the programmer, and the animator and the graphic designer. It's
almost a metaphor for the business itself that it requires a group of people to come together and combine all these different skills that we use to create product.
The labour force which comprises the multimedia industry varies by job type (i.e. full time,
part time, short and long term contract) and by skill. Survey data show that 1,432 persons were
employed in 84 Toronto area multimedia firms in 1997. Table 3.6 provides a breakdown of
employees by employment status"'. Overall, firms are small in size, with average total
employment of 13 persons per firm, median total employment of six persons per firm, and
median full time employment of three persons per firm. The data also show that there has been a
slight increase in the share of full time employment over the past year, with small subsequent
declines in part time and short term contract employment shares. The number of people
employed full time in the industry increased by 20 percent between 1996 and 1997, while
median full time employment in firms increased by one person during the same time. The data
show that while the majority of employment in multimedia is full time, one-quarter of all
employees (excluding the largest firm) are contract employees, with short term contract
employees (essentially freelancers) comprising the bulk of this activity.
Based on these figures, and the assumption that this represents approximately one-fifth of the
region's mu!timedia activity (based on the survey's 22 percent response rate), it is estimated that
between five and ten thousand people are employed in the Toronto area multimedia industry.
The low range of this estimate, approximates that the 1,040 persons employed in all but the
largest multimedia firm responding to the survey, comprise roughly one-fifth of the region's
"The data are presented showing employment figures for all survey respondents and also for all survey respondents excluding the largest firm. Employment figures for the largest firm are shown to skew the data quite significantly in comparison to averages for the industry as a whole, especially with respect to the proportion of full time workers and also the proportion of technical employment.
employment in multimedia. Multiplying this figure by five, results in an estimate of 5,200
persons employed in multimedia in Toronto. At the high end of the above estimate, it is assumed
that there are several firms with large staffs that, counted together, would increase total
multimedia employment in the region, beyond what might be expected if the total number of
employed persons in multimedia as reported in Table 3.6 were multiplied by a factor of five (i.e.
the assumption is that there are more than 1,432 x 5 = 7,160 persons working in the industry).
Furthermore, these estimates are based on the definition of multimedia as outlined in Chapter
One. This is an exclusive definition and therefore has a limiting effect on the total estimate of
employment in multimedia in the region. If a more inclusive definition were used (i.e. one that
included entire staffs of firms that produce multimedia material for internal use o r as a peripheral
business activity) then the estimates of multimedia employment in the region would be
exceedingly higher.
Table 3.6: Employment in Multimedia
n = 8 1 n = 7 3 n = 8 0 n = 7 2 (figures in brackets represent percentage share of employment in each column)
Table 3.7 provides information on the size-distribution of full time and total employment for
responding firms. From this table, it is again clear that small establishments are numerically
prominent in this industry. The data also show that the size distribution of full time employment
has remained relatively stable between 1996 and 1997, though there is some modest growth in
employment share exhibited by the largest firms. The proportion of firms in each full time
employment size category increased between 1996 and 1997 with the exception of 1 I to 20
person firms. Figures for total employment show declines in both the number and percentage of
one-person and two to five-person firms, and growth in the number of firms in each of the larger
employment size categories. The most prominent increase in both number of firms and
percentage share of total employment between 1996 and 1997 occurred in the six to ten-person
firms.
Table 3.7: Employment by Size of Firm
n = 7 9 n = 7 2 n = 8 1 n = 7 3 (figures in brackets represent percentage share of employment per column)
Table 3.8 presents the breakdown of 1997 employment by both employment status and
occupational category. This table shows that creative workers are the most common full time
employees (38 percent), followed by management/sales employees (3 1 percent). Technical
positions comprise about one-quarter of total full time employment. Similar proportions are
evident for part time employment, except for management/sales (which is less prominent) and
'other' (which is more prominent). 'Other' employees generally include clerical and office
support staff. Employees working on the creative aspects of multimedia projects comprise the
majority of both long and short term contract workers in the industry, followed by technical and
then managementkales employees. Overall, creative employees form the core of multimedia
employment with 42 percent of all jobs falling into this category. This is followed by the
technical and management1:iales categories, each of which comprise 25 percent of total
employment.
Table 3.8 prwides further information on the use of contract employees by skill category,
and highlights the disproportionate share of both long and short term contract employment for
creatively skilled 'freelancers.' While up to one-third of all long and short term contract
employment goes to technical personnel, management and sales personnel are hired on a contract
or temporary basis far less frequently. This reflects the fact that the nature of employment in
multimedia is such that management and sales positions are ongoing and fairly consistent in their
demands, thus resulting in a nigh proportion of permanent positions. Creative positions, and to a
lesser extent technical positions, are fluid and constantly changing. Firms frequently require
individuals with specialized skills to work on a per project basis, and this therefore translates into
a larger proportion of long and short term contract positions being created for these skill groups.
Table 3.8: Ei.tployment by Job Type and Skill Category (Excluding Largest Firm)
Interviewees indicated that the creation and development of multimedia products requires
highly trained talent and multiple skills, which generally means that there is a well-developed
social division of labour, and helps to explain the high reliance of multimedia firms on freelance
employers. These same freelancers not only work with larger multimedia firms, but also often
work with one another on projects. Brett Maraldo, Principal of Plexus Interactive, a one-person
multimedia findfreelancer, comments on the way in which he works with other multimedia
freelancers:
I have colleagues that I've met through clients and work. They've become friends to some degree, you know work-related type friends. So we go out for a beer every once in a while, just check up on what each other's doing, and then if a contract comes along we'll use each other as resources to get the work done ...
None of us say no to a contract, so if there's something I can't do I know that there's people that can do it. So I'll say 'yes' and then just subcontract out to my colleagues. And they do the same
MetroMan Multimedia, another one-person multimedia firm, has developed a slightly more
formal approach to working with other freelancers andlor one-person firms. The firm shares
office space with eight freelancers working in complementary fields including illustration, design
and programming. The close knit community of freelancers sharing office space with MetroMan
Multimedia receive the benefits of reduced rent, affordable high-speed Internet access, and the
ability to call on one another as freelancers when projects arise that require multiple skills. The
present arrangement is better suited to the eight-freelancer 'consortium' than a more formalized
firm-like arrangement because it increases their flexibility to work both individually and as a
team. Brian Hicks of MetroMan Multimedia describes the benefits of the situation as follows:
[Rather than pitch for jobs together] we just rely on each of us to get a job and then source it as we need to ... I think that's part of the reason why we're fairly successful in the arrangement that we've got here too. Because I think if [multimedia] companies that we a!so supply to got a sense that we were going in and pitching as one company then we would lose that potential relationship. We don't want to jeopardize that steady income for the sake of pitching together.
What is also interesting about the way freelancers are viewed by firms within the industry, is that
the lines between freelancer and employee become blurred when contract labour is brought in to
work on individual projects. Christopher Van Buskirk, Vice-president of True North
Technologies (TNT) Interactive, a seven-person multimedia firm owned by multinational
advertising firm FCB, says:
I don't consider freelancers to be a company or a supplier. I would consider them to be part of us: when I hire a freelancer we bring them in to work for us for a set period of time or we say 'we're going to give you this project, chances are there might be another one so really you're almost an employee of ours.' We want long term relationships with everybody.
[Freelancer relationships] are very much based on a personal relationship in some cases. And it's not personal because they're friends or buddies, it's personal because we've worked well together and we've built up trust.
Where freelancers are concerned, both multimedia firms and freelancers can be seen to be
hedging their bets with respect to dealing with one another. There is an important relationship
between the firm and the freelancer that is evident from the examples above, but the exact nature
of the relationship is somewhat ambiguous. Both want to establish long term relationships, yet
the rationale behind this varies between firm and freelancer.
In terms of the overall supply of labour for multimedia in the Toronto area, interview
respondents generally indicated that the supply of skilled labour is excellent, with two main
exceptions: senior multimedia personnel and highly skilled software programmers. The
availability of well trained creative and technical people is to a large degree facilitated by the
presence of numerous educational and training institutions in the region, many of which have
multimedia specializations (see Table 3.9). According to Michael Shostak of Digital
Renaissance:
It's [the GTA] kind of unique probably in North America because we have a very good influx of creative people and plxes like Sheridan College are putting out really good quality candidates, and you have a good influx of technical people, and you have U of T[oronto] and Waterloo and some pretty internationally well known schools that produce engineers and programmers and the two meet in the centre. So it's great for both those areas ...
There are a lot of candidates at a junior level. It's tough to find senior people, people with experience in this industry, because it is such a new industry. So there's a lot of bright, Waterloo engineering students but there's not a lot of engineering people out there with a couple years' experience in our industry, working in multimedia. Same thing with graphic design. ... Especially someone in the sales, marketing, business management areas as well. There's very few people who have combined knowledge of this industry and a business background. Really, it's part of the failure of a lot of companies in this industry, because they have a lack of people with business savvy that understand this industry.
In many respects the lack of senior level multimedia personnel is a catch-22, as the industry
has not been around for long enough to produce a significant number of senior level multimedia
personnel. For example, though the region's base in custom software development firms and
training institutions helps to support the multimedia industry's need for programmers, often these
programmers lack training and experience associated with programming for multimedia
products. Strong national and provincial education policies do indirectly support the multimedia
industry, by directly supporting both institutions and students in multimedia and multimedia-
related training programs. However, interviewees expressed the criticism that, despite the
number of educational and training institutions with multimedia and related programs in the
region (i.e. those that train people in creative design, programming, and engineering - see Table
3.9). most programs are oriented towards aiding beginners rather than towards the development
of intermediate or advanced skills. John King, Director of the Bell Centre for Creative
Communications (BCCC), a local college
Table 3.9: Educational Institutions Supporting the Regional Multimedia Industry
Bell Centre for Creative Communications C.B.S. Interactive Multimedia Training Centre Centennial College Centre for Internet & Multimedia Development International Devry Institute of Technology Digital Media Studios First Interactive Computer College George Brown College Humber College of Applied Arts and Technology Information Technology Design Centre International Academy of Design MediaLinx H@bitat Ontario College of Art & Design Qvcen's University Ryerson Polytechnic University Seneca College Sheridan College Toronto Image Works Trebas Institute University of Guelph University of Toronto University of Waterloo University of Western Ontario York College of Information Technologies York University Sourccs: IMAT, "The Education & Training Page"; Interviews; Multimediator. "Multimcdia Schools in Cnnadn."
with multimedia training pro,orams'8, acknowledges this problem, but notes that it is partly a
function of the industry itself. According to King, the people capable of teaching advanced
courses are too busy working on multimedia projects of their own. King adds that there is not
BCCC is the result of a pmnership between Centennial College (2 !ocal community college) and a group of companies involved in digital communications, including: Bell Canada. Silicon Graphics Canada Inc., Alias Wavefront and Sony of Canada.
significant demand for the advanced courses that are currently offered at BCCC as some of the
large US. industry players such as Industrial Light and Magic prefer to hire skilled, entry-level
practitioners whom they can then train on their own proprietary systems
The 'urban' contribution to the development of a successful multimedia industry with access
to a talented labour force is also widely recognized by industry players. One consideration in
firm location is the residential location of the labour force. According to Frank Abrams of
Flying Disc Entertainment the industry's labour requirements affect location as follows:
We're not really taking widgets and turning them into product, we're taking people's talents, artistic talents, programming talents and using that. Specifically with artists they tend to congregate in larger cities, they tend to not have cars, they tend to be poor, ... the starving artist thing is very much a reality and they tend to struggle in that respect. If you are located conveniently and it's a really great place to work and a great place to live, then you're likely to attract better talent to work for you.
Mackerel Interactive's president", Gord Gower, concurs, noting that "the main factor for being
downtown is that most of our employees are 'downtown people'. Creative people tend to live
downtown."
3.3.3 Financing Multimedia Ventures
While talented and skilled labour is considered to be widely available to Toronto multimedia
firms, access to capital is not. The costs of start-up in multimedia are typically low (essentially
requiring, at the least, a personal computer) thereby minimizing barriers to entry into the
industry. Intewiewees indicated that start-up costs for their multimedia firms ranged from less
than $10,000 to around $100,000. The bulk of money spent on starting a multimedia firm is
39 Mackerel Interactive Media declared bankruptcy shortly after this interview, following a merger and the subsequent demise of both the parent and sister companies, which left Mackerel without sufficient cash flow to continue operating.
spent on purchasing computer hardware and software. Such start-up costs were typically
financed through personal savings and lines of credit. Access to financing for further
development and growth, however, poses difficulties for many firms. Financing for multimedia
firms is difficult to secure for two main reasons: i) multimedia is a knowledge-based industry
making it difficult to measure the value of a firm's assets by traditional accounting methods; and
ii) as a relatively new industry without a long-term history or track record, many major financial
institutions see it as too risky an industry to invest in.
Furthermore, profits and revenues of multimedia firms are typically quite low. Table 3.10
presents figures for gross revenues of multimedia firms surveyed. The majority of survey
respondents (68 percent) indicated that their firms were profitable in the previous year. Just
under two-fifths of firms surveyed earned more than $50,000 in revenues, while 30 percent of
firms earned greater than $100,000 in revenues, and a final third of firms reported revenues of
greater than $500,000.
Table 3.10: Gross Revenues
Revenues I Percent of Firms <$50,000 1 39
Most survey respondents did not answer questions related to specific profit levels. However,
32 firms indicated their profits from sales of multimedia products for 1996. Of these, 24 firms
reported profits of between $50,000 and $99,999; five firms reported profits of between
$100,000 and $499,999; and three firms reported profits of $500,000 or more. While neither
revenues nor profits appear to be high, these figures must be tempered by the fact that most firms
are quite small in size, relatively young, and working in a field which continues to define its
boundaries, including pricing strategies, as it emerges. Low revenues and profits, however, do
not help the industry's overall stature as it is perceived by investors and financiers.
The discussion which follows addresses private responses to financial support for multimedia
firms4'. The subject is also revisited in Chapter Four through a discussion of public policy tools
and financial assistance programs targeted towards supporting multimedia production and
development.
Banks provide financing to multimedia firms in the form of loans, lines of credit and general
business banking services. Banks are traditionally conservative investors and the generally low
revenues of small. startup multimedia firms, combined with an asset base that may consist of
very few tangible assets, does not make these firms strong candidates for business loans
(Stewart, 1997, pers. comm.). For multimedia firms whose main business focus is as a producer
service, as the majority of multimedia firms in Toronto are, traditional financing in the form of
bank loans is difficult to obtain. Banks do not lend money based on the strength of a company's
ideas, they lend money based on proven track records and strong business strategies. Several
intewiewees indicated that their main source of bank financing was a line of credit, secured
either by business assets, personal assets or a combination of both. Three Canadian banks, the
Royal Bank of Canada, Canadian Imperial Bank of Commerce and the Bank of Nova Scotia,
have begun to address the growth of the new media industry (Digital Media Champion Group,
1996) by tailoring products, services and risk evaluation to the industry's needs. The Royal
'O he information for this discussion was obtained through interviews conducted with the following persons: Brian Campbell. Yorkton Securities, Director; Brendan Cunneen. Business Development Bank of Canada. Managing Director - Emerging Markets: John Eckert. McLean Watson Capital. Managing Partner; Paul Stewart, The Royal Bank of Canada, Knowledge Based Industries, Account Manager.
Bank of Canada, as noted above, has begun to target the multimedia industry via its Knowledge-
Based Industries division. The division specifically seeks to understand the needs of the digital
media industry by providing advice through a digital media discussion forum, developing
specialized leasing products, and by introducing firms to other potential funding sources,
including venture capitalists (Royal Bank, 1997).
Venture capitalists, which have been crucial in the development of numerous advanced
technology firms and industries, have been relatively inactive in the field of multimedia content
production. According to John Eckert, Managing Partner at McLean Watson Capital, a venture
capital company with a mandate to invest in technology based companies, multimedia content
production companies do not possess the potential to achieve dramatic revenue growth without
concomitant increases in costs. The business model of multimedia firms is not one which tends
to lead to the growth of very large companies and this makes multimedia a poor investment for
venture capital. Furthermore, multimedia firms are poor investments because of the importance
of creative talent in content production, which is very different from the role of technology for
the production of enabling tools. Venture capitalists invest in companies with high leverage
situations and high profit margins. The profit margins for multimedia content production do not
increase disproportionately to sales. Therefore, McLean Watson Capital and other venture
capitalists invest in the production of multimedia enabling tools and software instead, sales of
which can return high profits on the initial investment.
For similar reasons, the investment banking community is also not highly involved in
investing in multimedia content, but rather focuses its efforts on financing enabling technologies
including hardware, software and infrastructure. According to Brian Campbell, Director at
Yorkton Securities, the market for content producers is less lucrative than for enabling
technologies because of low entry barriers to the industry. The low costs of market entry lead to
disproportionately large numbers of firms setting up shop as multimedia content producers,
thereby decreasing the ability of firms to compete with one another based on price factors.
(Campbell, 1997, pers. comm.). The landscape of multimedia content producers is comprised of
large numbers of small firms that are likely to remain small, and in the early stages of the
industry's developmer~t it is perceived as too difficult to pick 'winners' from amongst the group.
Therefore, the investment industry has generally chosen to refrain from investing in this
component of multimedia production altogether.
The Business Development Bank of Canada (BDC) was formed in 1995 as the successor to
the Federal Business Development Bank. BDC is a federal corporation operated at arms length
from the government. The Bank's startup capital was obtained from the federal governme!lt and
has since been converted to common shares, on which the federal government receives a
dividend each year. Thirty-five percent of BDC's funds go towards financing knowledge-based
industries, including multimedia. The bank provides loans and venture capital to businesses
based on a variety of financing structures, including the opportunity to delay loan repayment for
up to three years. What makes the BDC different from other lending institutions is that they
provide financing from $25,000 to $5,000,000 to companies at all stages in the business cycle
based on junior (unsecured) debt. BDC calculates loan repayments secured by junior debt by
incorporating an interest rate, a variance and a sales royalty into the repayment schedule.
Multimedia companies are a growing component of BDC's emerging markets division portfolio,
and the division prefers to finance multimedia firms which are in the business to business sector
(Cunneen, 1997, pers. comm.) making it a unique funding source for multimedia firms producing
custom products for individual clients.
Another method of obtaining financing is for firms to sell shares in their companies. Aside
from a few multimedia firms in Toronto that are owned by publicly traded companies,
multimedia firms do not tend to have publicly traded shares. However, there are instances in
which multimedia firms have brokered financing agreements with other private or public
companies, generally trading a stake in the company for some level of financing, industry advice
andlor strategic alliance. Oberon Interactive, a Toronto multimedia firm with products geared
towards health-related industries, sought private financing during its start-up stage in 1991.
Despite having a sales order for $150,000, the company's partners were unable to secure bank
financing to launch the company. Oberon Interactive therefore sold one-third of the company to
Kaleidoscope Entertainment, a television program distribution company, for $400,000 (Cusipag,
1996). This financing helped to launch Oberon Interactive, growing into a 15-person multimedia
firm by 1997.
Digital Renaissance is another much touted example of a successful Toronto based
multimedia firm. Digital Renaissance is a privately held company that has sold shares to two
different public companies since the firm was established in 1991. Most recently, Digital
Renaissance sold a minority share of the company to Bell Canada, for a reported $2.5 million
(Rowan, 1997). The investment, touted as a strategic alliance between Bell Canada and Digital
Renaissance, provides "Digital Renaissance an entrie to a world of relationships that only a
company the size of Bell Canada can offer" (Rowan, 1997). while at the same time giving Bell
Canada access to leading edge new media content (Bell Canada and Digital Renaissance, 1997).
Digital Renaissance's relationship with Bell Canada is notable not only for the cash infusion
that the firm will receive, but also for the new relationships that the alliance will help foster. The
types of relationships that multimedia firms rely on to increase the success of their firms in
general, and the industry as a whole, are elaborated upon in Section 3.4.3.
3.3.4 Znfrastructural Requirements of Multimedia
It might be expected that as an industry based on computing technology and on-line
distribution methods. access to and use of advanced telecommunications infrastructure would
form a key component of the multimedia industry's operation. Surprisingly, the use of advanced
telecommunications infrastructure by most multimedia firms has been avoided.
Toronto's telecommunications infrastructure is considered to be one of the most advanced in
the world (Greater Toronto Area Task Force, 1996). However, Niles (1997) found that while
Toronto's fibre-optic network is extensive, it can he prohibitively expensive for small firms to
access, especially when the buildings they are located in are not already 'wired' for fibre-optic
connectivity. Niles surveyed a group of architectural firms in Toronto about their knowledge
and use of telecommunications infrastructure for the purposes of business development and
found that small and medium sized firms did not make wide use of Toronto's
telecommunications infrastructure for reasons that included lack of knowledge on potential
services, as well as lack of funds to pay for access to those services.
Toronto area multimedia firms exhibit similar usage of the region's telecommunications
infrastructure as did the architectural firms in Niles' study. The reason for this is not so much
because of a lack of knowledge about these services, but rather because of the high cost of
accessing the telecommunications network, especially for small firms. According to Bill
Sweetman, Principal of Electric Eye Multimedia, use of telecommunications infrastructure and
firm size are very much related. Small firms, and especially those operated out of home offices,
typically rely on dial-in connections using a high speed modem. Medium sized firms generally
have a dedicated phone line perhaps with faster service (such as ISDN); while only the large
multimedia firms have the prerequisite capital to attain the highest speed, fibre optic connections.
There are however examples of buildings in Toronto which are being rewired for access to
fibre optic networks; some of these buildings are located in the areas in which multimedia firms
are located. Metroman Multimedia is an example of a one-person multimedia firm that relocated
in order to have access to a 'wired' building in a former warehouse building west of the
downtown. Brian Hicks, Principal, can afford the cost of the service not only because his
building was already connected to a network, but also because he now shares office space, and
the cost of connecting to the building's fibre optic network, with eight others. This example
highlights two important points: i) firm location is influenced by the availability of
telecommunications infrastructure; and ii) despite their basis in technology and reliance on
telecommunications for online distribution of products, small multimedia firms have found ways
to work around their inability to pay for fibre-optic connections -either by sharing the cost or by
using less expensive (and less advanced) telecommunications technology.
3.4 Supply Conditions: Sources, Skill, and Regional Strengths
We have learned thus far that within a single multimedia firm, production covers a range of
distribution platforms and a diverse array of products. The information presented on the
backgrounds of multimedia firm principals, the relatively small size of firms, the diverse skills
required of the labour force and the reliance on freelance employees, hints at the likelihood that
multimedia firms rely on some sort of linkages with suppliers. A detailed review of the extent to
which suppliers are used, the types of supplies they provide, their location, and the structure of
relationships between multimedia firms and suppliers helps to define the role that suppliers play
in supporting multimedia production and begins to shed further light on multimedia's urban
nature.
3.4.1 'Supplies' Sought
In fact, survey data prove that multimedia firms rely on many different kinds of suppliers to
aid in the production of multimedia products. Survey results show that an average of 24 percent
of all work is contracted out to suppliers. Many survey respondents indicated that the most
critical type of supplier to their firms are freelancers or firms with particular artistic or technical
expertise. Figure 3.1 presents survey data indicating the most common types of work that are
conducted in-house andlor subcontracted out. The data show that of the most frequently
contracted out types of work, more than half of firms (69 percent) subcontract out all musical
composition; 59 percent of firms subcontract out all voice over work; and 48 percent of firms
subcontract out all cinematography. Conversely, 90 percent of firms indicate that customer
service is conducted in-house; 64 percent of firms do all their content research in-house; and 48
percent or more of firms note that all programming, artwork and illustration, and writing and
editing is done in-house.
Figure 3.1: h h k c or Buy?
Anwork& Illuamtion
Progrnmming
Wriling & Editing
Content Research
C n m Design
Public Relations
Salcs & Markctiny
Customr Service
Mus~cal Cornpos~lton
V o m Over
Clncnnrognphy
Ltvc Act~on
P a c L q n g
Stuart Ross of Bindelnagel Ross New Media says:
- I I
I I I
I I I
I I I
I
I I 1 I
We try not to be experts in everything. If there's audio work to be done we will go out to an audio post-production studio, certainly video we handle the same way. All of those are sub- trades that have their own craftspeople that we work with.
Aurel Langlois, Director of Electramedia, a mid-sized firm that has produced both corporate
An~malton I I I
products as well as a successful interactive game, classifies the firm's alliances with other sectors
as follows: the most important inputs by dollar figure are paid to outside consultants such as
designers, programmers, camera people, and sound composers. The second most important
suppliers are video and post-production services. Finally, supply relationships with producers of
raw materials and consumables such as computer hardware, software, and blank CD-ROMs
round off the linkages that support the firm's activities.
Another form of 'multimedia firm' is one that develops multimedia products to enhance their
core business. For example, Irwin Publishing is an educational publishing firm that produces
CD-ROMs which are supplementary to the core of their business, educational textbooks. Rather
than set up an in-house multimedia department, Irwin Publishing, located in a suburban
industrial area, hires or subcontracts locally based multimedia firms to do all of the technical
delivery and programming required. Ninety percent of the multimedia suppliers that Irwin
Publishing works with are located in downtown Toronto, highlighting focus of multimedia
production in the CBD frame, not only for firms located in the downtown Toronto, but also for
those located on the urban fringe. Brian O'Donnell, President of Irwin Publishing, notes that
some of their suppliers, such as replicators, graphic designers, artists, illostrators and freelancz
editors are "not necessarily associated with the multimedia industry. They work for all media
industries. So I mean they might be hired by the multimedia industry one day and a cereal
manufacturer or an ad agency the next." This statement underscores the fact that the skills
required for the development of multimedia products include both industry and non industry-
specific talent. The labour market supplying the multimedia industry is thus often shared
between other industries, including software production, advertising, print media, and
broadcasting.
Not surprisingly, it appears that large multimedia firms contract out proportionately less
work to freelancers and specialist experts than do small and mid-sized firn~s, as they have larger
numbers of in-house staff to draw upon for expertise and skill. Marketing directors for two
multimedia firms with over 100 employees each, confirmed this view, indicating that their main
outside suppliers are computer software, computer hardware and production and post-production
companies.
Finally, most firms indicate that they also work with suppliers to provide general business
services such as lawyers, accountants, and couriers. These services tend to take up
proportionately less time and money than both specialist expertise and computer hardware and
software needs, however.
3.4.2 Locatio~z of Suppliers
In Chapter Two, it was hypothesized that the production of customized goods necessitates
frequent interaction amongst suppliers, thus encouraging the location of related firms in close
proximity to one another. What types of products do Toronto multimedia firms produce? Table
3.1 1 clearly shows that Toronto's multimedia firms are strongly focused on the development of
custom products." Three-quarters of all firms indicate that half their work or more (measured
by sales volume) is developed exclusively for custom clients. Conversely, most firms produce
little to no mass market products. In other words, the bulk of multimedia work carried out by
Toronto area firms involves the development of custom products. It can be expected based on
the industrial districts literature, that multimedia firms will exhibit strong locational
agglomeration with suppliers that provide inputs to these specialized products.
'' Custom products are those that have been commissioned by a specific client and tailored for their particular needs Mass market products are those that are developed by a rnultimcdia firm with the intention of selling these products in standard form to a large number of consumers.
Table 3.11: Client Focus
Custom Mass Market 100% >50% 4 0 %
0% 25 N o ANSWER n = 85, bold =highest % in category
Firms participating in the survey indicated that on average, more than three-quarters of their
suppliers, by weighted dollar value of sales, are located in the Toronto area, with almost one-fifth
of supply purchases taking place within the same neighbourhood as the location of responding
films (see Table 3.12). Outside of the Toronto region, Ontario and the rest of Canada account
for an average of some 13 percent of supply purchases, followed by the United States at eight
percent. This research not only is the first to identify the types of suppliers to Toronto's
multimedia industry, but it also is first to show tbat suppliers to Toronto's multimedia firms
prove to be highly concentrated in the Toronto region.
Table 3.12: Location of Suppliers by Sales Volume
Interviewees noted several reasons for working with local suppliers, among these were:
Location Same Neighbourhoood
Toronto Area including Neighbourhood Rest of Ontario
Rest of Canada
United States Outside North America
familiarity, ease of access and the frequent need for face-to-face meetings. Harold Feist,
Percent of Suppliers 19
78
7 6
8 I
President of 2D Art Systems, describes an occasion in which he was looking for a distributor to
bold = highest % in category
market a children's CD-ROM series that he produced. Though he was negotiating with both a
local and an international company, he chose to go with the local company, and thus far in his
business all his clients have been located in the GTA. Feist says:
So far, physical geography has been the main thing. Proximity. Despite how easy it would be, theoretically, to collaborate long distance, I find there's a need to meet face-to-face throughout the process.
The Toronto area is acknowledged by virtually all survey and interview respondents as an
important source of expertise and suppliers to the multimedia industry. Aurei Langlois of
Electramedia, says of Toronto: 'This is the hotspot for multimedia in the country. There's a lot
of talent available here, either specific to new media or to the ancillary or the other media that
constitute multimedia."
3.4.3 Znter- and Intraindust Cooperation and Competition
The character of intra- and interindustry cooperation and competition has been widely cited
as comprising a critical factor in the successful development of particular industries and their
associated regional clusters (i.e. Saxenian, 1994; Scott, 1998a). One focus of this literature is on
the promotion of 'natural' and 'managed' benefits, which are based on the nature of interfirm
interaction, and are believed to strengthen individual industrial clusters. Storper (1995),
Saxenian (1994a,b), and Scott (1998a) all emphasize a combination of 'natural' and 'managed'
benefits that accrue to firms within an industrial cluster, based on the nature of cooperation and
competition between firms. Storper's theory of untraded interdependencies (1995) and Scott's
iteration of local externalities associated with agglomeration economies (1998a) provide
examples of benefits which occur naturally when firms agglomerate. Saxenian (1994)
emphasizes the role of social networks (among other things) in supporting localized industrial
success. The promotion of reliance on social networks, and the development of organizations
whose role is to promote inter- and intra-industry cooperation, are examples of 'managed'
activities that increase regional economic success (see Chapter Two for a more detailed
discussion of these issues).
In analyzing Toronto's multimedia industry, an evaluation of the importance placed on
intraindustry and interindustry cooperation and competition helps to indicate the balance
between individual and collective action that characterizes the environment in which multimedia
firms work in the context of Toronto's multimedia industry.
It is evident from the interviews that firms themselves place different emphases on
cooperation with other firms, and that a widely shared culture of intraindustry cooperation has
no: developed amongst Toronto's multimedia firms. Some firms, especially the larger ones,
maintain that they have developed comprehensive strengths in-house and are not interested in
pursuing relationships with other multimedia firms. Jim Latimer of Cyberpiex Multimedia says:
We're very good. We have a really good set of development teams and strategy teams in place. We just don't really need anything. I'd like to develop some more relationships with other companies in our area, but I've spoken to people that work or used to work for competitors, and all these competitors aren't people I really want to know.
However, there are some firms very interested in collaborating with other local multimedia
firms, and are pursuing relationships that could potentially lead to future business propositions.
Voytek Janczak, Principal of Janczak-Mandel design, a four-person graphic desigdinterior
desigdmultimedia firm notes:
We are quite actively meeting people from other companies. Some of them tell us 'You are our competitors and it is a waste of time to come meet with you', while others say 'I am quite impressed with your work and if there's an opportunity, I would like to work with you.'
One potential reason why multimedia firms in Toronto may be reluctant to work together and
share information is because of the competitive business environment in which firms vie for
contracts and clients, and the desire to protect valuable, talented and sought after staff. Chris
Van Buskirk of TNT Interactive indicates that "everybody's too scared in some cases to put their
companies together because they're afraid the other company is going to steal their employees
away." In an industry where the most valuable asset firms have are their employees, this is a
very real threat to firm development, and a significant barrier to high levels of cooperation
between like firms with complementary assets.
Nevertheless, firms generally recognize the importance of keeping informed of industry
developments at a minimum, and of becoming involved with ensuring that the industry as a
whole succeeds. Kevin Jackson, Principal of the two-person Nvision Multimedia, recognizes the
importance of developing rapport with competitor firms, emphasizing that:
[Collaboration] is very important. Generally it's a feast or famine situation. Multimedia is very fluid like the movie industry and today's competitor is tomorrow's collaborator, so you have to maintain a community presence.
One robust example of interfirm collaboration within multimedia, albeit between firms in
different countries, is described by Chris Van Buskirk of TNT Interactive:
We are leveraging our relationship with a high-end company in San Francisco to become experts in [dynamic html] dhtml here in Toronto. What we're trying to do is through an exchange. We're going to pursue one standard of dhtml, they're pursuing another standard of dhtml, and whichever standard wins the other has to teach, or at least share. That's how we're trying to get around this hurdle of having to commit resources to so many different standards and specifications and new technologies. We try to do it through some information sharing.
As is portrayed by the above example, and described by others working in multimedia, "the
bottom line is, if everyone does better work the industry's bound to grow" (Erwin Tumangday,
Random Media Core). As both the industry and individual firms mature, it is possible that
greater levels of trust and cooperation between firms will lead to increased levels of
collaboration between related multimedia firms that can complement one another's strengths,
especially given the fragmented nature of the industry, the generally small size of firms and the
90
varied skills of individual firms. Furthermore, local (Toronto area) firms increasingly need to
collaborate with one another in order to be able to compete for large multimedia projects that
may otherwise be contracted outside of Canada (i.e. to firms in the United States) where there are
more large multimedia firms (Sweetman, 1997, pers. comm.).
Although it is difficult to describe Toronto's multimedia firms as being very collaborative or
cooperative in their interactions with oiher multimedia firms based on the information collected
in the survey and interviews, it is evident that there is a significant amount of cooperative
activity and work towards developing alliances with firms in vertically related industries, such as
advertising and animation. In Chapter Two it was noted that industries structured along the lines
of the 'new competition' are very much dependent on linkages with related firms and industries
in order to work effectively. Interview evidence presented in this chapter thus far further
supports this notion. Principals of multimedia firms generally come from one of four
backgrounds (see Table 3.5), all of which are strongly developed in the Toronto region and
economy. Furthermore, interviewees noted the significance of relationships with related
industries and stressed the importance of these relationships over the role of linkages with similar
multimedia firms. That is, vertical interindustry relationships appear to play a more important
role in the successful management and development of local multimedia firms than do
intraindustry relationships.
Alliances with firms in related industries often take the form of ventures in which firms bid
jointly on projects and then divide the work based on the strengths of each company. These
relationships are common when different types of specialized skills, such as sound recording and
animation, are required to produce an individual project. Random Media Core has pursued
relationships with other specialized firms as the firm matures and increases the scope of its
projects.
As we grow the studio and the capabilities of the studio, we build partnerships and alliances. Most recently, we set up an alliance with an animation company because we found that clients were asking for a lot of 3-D modelling work and animation work, and these guys are just down the street from us and we're pitching on jobs together.
Several issues become clear from this discussion. First, it is evident that interindustry
interaction (or, what may be termed 'intra-cluster', in the sense used by Porter, 1990) has been
developed to a greater extent than intraindustry interaction. Second, the discussion here shows
that multimedia firms view the development of relationships, alliances and partnerships with
firms in related industries as an important method by which to expand their service offerings and
capabilities by taking advantage of external opportunities rather than by pursuing internal
changes within the firm. Finally, the types of relationships that are developed with related
industries vary considerably in terms of commitment, responsibility and intensity of cooperation.
Examining supply side issues in the production of multimedia identifies the types of supplies
sought, the location of suppliers and the method in which different types of suppliers (i.e. both
inter and intra industry) provide inputs to the work of individual multimedia firms. This
assessment has shown not only the importance of multimedia's relationships with industries
posited to be related to multimedia, but also the Toronto-centred basis for many of these
relationships.
3.5 Demand Dynamics
The final, but equally important issue that must be discussed before arriving at some
definitive conclusions about the organization and structure of Toronto's multimedia industry, as
well as an assessment of why multimedia appears to be a central city industry, is the role of
demand for multimedia products in driving the industry forward. This includes an evaluation of
client sectors and markets served, the factors driving initial and current demand within the
industry, and the manner in which select client sectors view and incorporate multimedia products
into their own firms.
3.5.1 Clients and Markets Served
What types of clients do Toronto multimedia firms serve? In terms of general market sector
divisions, Table 3.13 indicates that the overwhelming majority of firms target their products
towards more than one market sector. However, the one sector which commands the most
attention is the corporate market, with 60 percent of firms gearing more than half of their work
towards corporate products. Firms targeting the entertainment, edutainment and education
categories tend to focus on products geared towards several markets/clients. The health sector is
the one sector in which most firms do not participate. It is also however, one of the newest
sectors among those listed for which multimedia products are being developed.
Table 3.13: Market Focus
n = 85, bold = highest % in category
Table 3.14 provides a more detailed snapshot of the types of markets and products that the
local multimedia industry serves and develops. It highlights two patterns in particular: the
importance of the Internet to multimedia development, and the focus of the Toronto industry on
corporate work including advertising, marketing, intranet site design and business and
42 Edutainment products represent a combination of both education and entertainment-based content
management materials. At the same time, some forms of multimedia activity associated with the
film industry (i.e.: clip media, film editing, interactive tv, movies and tv, and special effects) and
with mass market products (i.e. games) exhibit lower than average numbers of firms indicating
low levels of participation in serving these product markets.
Table 3.14: ProductsIMarkets Served
Clip Media
Other 1 10
3.5.2 From Regional to Export Markets
Toronto's strengths as a large metropolitan area with an ample client base to serve the
multimedia industry have already been alluded to as providing a key point of customers for local
multimedia firms. Based on this reasoning, it was expected that Toronto's multimedia industry
developcd as a result of local demand for multimedia products. Survey data on client location
presented in Table 3.15 confirm this view, showing that an average of 62 percent of multimedia
firm customers by sales volume are located in the Toronto area. This finding is not all that
surprising, considering that (as noted in Chapter Two) the Toronto area is the single largest
centre for headquarters of both national and international corporations in Canada, as well as the
focal point of the national financial services industry, and many other producer and business
services. Toronto's multimedia industry also has a national and international client base, with 20
percent of clients (by sales volume) located within Canada but outside of the Toronto area, while
a further 18 percent of sales are to clients located outside of Canada. The majority of exports are
to clients in the United States, followed by Europe and Asia.
Table 3.15: Location of Customers by Sales Volume
Highlighting the motors of their respective regional economies, Scott (1998a) identifies the
Location Same Neighbourhoood Toronto Area including Neighbourhood
Rest of Ontario Rest of Canada
United States Outside North America
specialization of San Francisco area firms in the development of corporate-based multimedia
Percent of Customers 10
62
11
9 13
5
products, while noting that Los Angeles based firms are more specialized in producing for the
bold =highest % in category
entertainment sector. Similarly, the New York industry is supported through its connections to
the advertising, publishing and entertainment industries respectively (Coopers & Lybrand, 1996).
The Toronto industry is no exception to this pattern of industry specialization relative to the local
economy.
Interviewees confirmed that the growth of Toronto's multimedia industry, especially in its
early stages of development, has been largely a function of demand for new media products from
locally headquartered national and international corporations. Conditions associated with local
demand have led to the start-up of several multimedia firms, and also to the redevelopment of
firms previously working in other related fields. Gord Gower of Mackerel Interactive, a 30-
person multimedia firm, described the demand conditions which initiated their multimedia work
as follows:
About six months after we started the business [a design firm], we did an interactive piece using Hypercard to promote the design business, and more people wanted us to do interactive programs for them than do straight paper based designs. That sort of caused a change in the business. Really by about 1992-93 we weren't doing any traditional design anymore, we were doing all interface design.
Another Toronto multimedia firm, Integrated Communications and Entertainment Inc. (ICE),
was formed as a communication services firm specializing in graphic design and the production
of live events. Peter Nikitopoulos, Marketing Director of the 108-person firm, says that ICE was
launched into new media as the result of a client's request:
In 1986 when Apple Canada came on board as a client, we were producing slide shows for corporate clients. At the time they said 'We don't want you guys to use these slides any more, they're archaic. We want you to use this new thing called multimedia.' And they introduced our designers to an electronic presentation format. They trained our people on it and we created what we believe was one of the first multimedia presentations for Apple. Apple was one of our big clients back then. They really launched us way ahead of our time into multimedia and multimedia presentations.
While local demand conditions are responsible for stimulating much of the early and current
work produced by Toronto multimedia firms, local demand has not acted to support all firms in
the industry. Several interviewees commented that much of the local corporate sector is often
very slow to adopt new technologies and is averse to taking risks associated with investing in the
development of interactive products for use as business and marketing tools. Other interviewees
identified the problem of technology adoption as a challenge, as opposed to a problem, for the
industry to address, noting that the ability to communicate successfully to potential clients why
they should use multimedia as a business tool is a skill that takes time to develop and practice.
According to Stuart Ross, President and CEO of Bindernagel Ross New Media, a mid-sized
multimedia firm catering to Fortune 500 companies,
It was very difficult even to find an educated buying audience out there. So in the first two and a half to three years, the people that started these multimedia businesses essentially were subsidizing the development of skills in absence of a market because they needed to create a portfolio to try and educate a potential client base and it was very difficult.
Another commonly identified problem associated with obtaining new clients can be the low
value and high cost of initial contracts to produce single-item or 'one-off' multimedia products
for business purposes. However, companies are beginning to view this as an opportunity to
develop long term, continuous relationships with clients. Firms such as Cyberplex, a fee-for-
service web development company with 35 employees, use the philosophy that:
Instead of just saying, 'we'll do your web site and away you go', I guess in the last couple of years we've moved to a point where if you're going to do the web site, then we will start a relationship with you ... We're not just going to do one web site and disappear from your company. So, almost all of our clients we still have. (Jim Latimer, Technical Director)
Bindernagel Ross New Media takes a similar approach to developing client relationships.
We pride ourselves on having long-term client relationships. It's an interesting phenomenon, if you look at the video production business in Toronto, pretty well every company can claim to have done business with the Royal Bank. Very few companies can claim to have done business with them twice. I think that can be said to be true in the new media business as well and our goal is to have long term relationships with clients. When I look at the Royal Bank or the Bank of Montreal as a client and I may be starting with a very small project, ten or fifteen or twenty thousand dollar project, I look at that client and that's a five million dollar client for me in the next three to five years. (Stuart Ross)
Clients may also prefer to work with locally based firms, underlining the importance of
meeting face-to-face with suppliers, despite the fact that proximity to the client or supplier is
often not necessary during production. According to Bill Sweetman, a multimedia consultant
and 'idea guy' at the one-person firm, Electric Eye Multimedia:
It has been my observation that clients, and my clients, tend to pick locally. I've seen that when I've been hired by companies to recommend suppliers, I'll ask them: 'Does it matter where they are?' and they'll say, 'Well, we'd rather have a firm in our town.'
I think it's perceived as expensive to have the supplier out of town and I think they feel if they're out of town they can't keep an eye on them. I'm not saying that's true but I think that's the perception. And that's a Canadian thing too. Because I don't think that that is necessarily equally true in the States, because I know lots of Canadian companies that are servicing American clients and the Americans don't give a damn where they are located.
Developing a 'local presence' has proved to be crucial as several Toronto area firms have
begun to branch out geographically into other markets. Several of the larger Toronto firms have
found it necessary to open offices elsewhere in response to client location. For example, Digital
Renaissance opened an office in New Brunswick in order to better serve their largest client, New
Brunswick Telephone. ICE opened an office in New York's 'Silicon ~ l l e ~ ' ~ ~ to show their
commitment to one of their largest clients - IBM. In explaining ICE'S New York office, Peter
Nikitopoulos says:
Although you can do everything over the Internet, they [clients] actually want to know there's an office down the street. Some of them will not give you the business unless they know you have a presence, some sort of physical presence in the neighbourhood.
Other Toronto area firms have also opened offices in places such as Ottawa, Vancouver, San
Francisco and Boston, driven by the same concern for maintaining long-term relationships with
valuable clients. While, the overwhelming majority (92 percent) of surveyed firms reported that
43 Silicon Alley is the tern coined to describe an area in Manhattan dominated by new media firms and activity.
they were initially established in the Toronto area, 23 percent of firms indicated that they also
have offices outside of the Toronto area.
Corporate Communications Interactive (CCI) is a Toronto-based firm that was initially
located in Tampa, Florida. The firm's Florida offices were across the street from the growing
telecommunications company, AT&T, their exclusive client until the end of 1994. CCI was
launched into multimedia work as a result of their alliance with AT&T to develop
communication material for the company's newly released products.
AT&T were constantly releasing very sophisticated telecommunication and data communication products into the marketplace. So what they needed were elaborate communication tools to help explain basically how a data communication box worked, how the software was configured, and then more importantly once they became so complicated that most people couldn't understand them, they needed us to develop multimedia scenarios to show how the product would fit into the marketplace. (Paul Duffy, Managing Partner, CCI)
CCI began doing work for other companies in 1995 when AT&T temporarily reduced their
communications budget. Their primary office is now located in downtown Toronto, as the
company's principals were originally from the region and this is where the bulk of their supplier
contacts were located.
It is not the case however, that only firms with international offices will be able to branch out
into extraregional markets. Several firms cite examples of clients they have worked for both
locally and internationally where they met face-to-face only once, or never (for example, see
point iii below), and conducted all their work over the telephone, Internet, etc.
Most Toronto area multimedia firms producing mass marketed, consumer based products
have actively exported their products since establishment, as the Canadian market is generally
not considered large enough to make the expensive development process profitable.
There are a number of different experiences that have led to the pursuit of export markets:
(i) Perception of a crowded local market;
Exporting has grown quite a bit over the last three years. It's very important. There just isn't really the work in Canada to support the business, because of the size and because of the business realities that we're working in now as a larger, small company.
[Export strategies have] grown out of the Toronto marketplace only because there's a lot of really small firms and it's just easier for them to pick up the jobs in Toronto; in a lot of ways it's hard for us to compete with them because they compete on a price basis. (Gord Gower, Mackerel Interactive, 55 percent of clients located in US)
(ii) Active pursuit of export markets:
The retail market for children's CD-ROM based products is extraordinarily difficult although we've been quite successful in what we've done. Our work is I think now in 12 or 13 languages. We've had very much an international focus on what we do, but the North American market is extremely difficult as a place to market and distribute CD-ROMs. We find partners with whom we work in various countries. (Karen Anderson, President of Interlynx Multimedia, 90 percent of clients for children's products are international)
(iii) Passively developed export opportunities through local subsidiaries.
We've generally won that [European export] business ... through thz Canadian subsidiary of a company ... and won business from the parent firm based on work that we've done for the subsidiaries. That's actually a growing part of the business, which is kind of interesting because we never see these people. (Aurel Langlois, Electramedia, 20 percent of clients in Europe and Asia)
Other firms are actively pursuing exports, but find that there are some barriers which tend to
slow the process down. For instance, James Rossiter, Executive Director of Knowledge
Connection Corporation, a non-profit organization geared towards developing and disseminating
information on interactive distance-based learning, notes that:
It does take quite a long time, in my expeijence, to develop international projects. Partly it's a trust factor. I don't mean that quite as boldly as it sounds. I think it just takes time for people who are working at a long distance and over cultural divides to feel comfortable working with another organization.
Finally, there are a number of successful firms that ultimately plan to pursue export markets,
but indicate that the local market currently presents more opportunities than they can currently
exploit, further emphasizing the local demand features associated with the continued
development of the local multimedia industry.
3.5.3 Related Industries as Consumers of Multimedia
The role of local demand as a stimulant to Toronto's multimedia industry is highlighted in
the present day by the work of multimedia firms with firms in related industries. For instance, an
advertising company with a project that includes a multimedia component, such as a web site to
supplement an advertising campaign, might subcontract the multimedia work out to a multimedia
firm. As multimedia becomes an increasingly prime component of marketing and
communications strategies, multimedia firms are beginning to work for a wide variety of related
industries.
As already noted, the advertising industry has been strongly linked to multimedia, in light of
the burgeoning use of multimedia products for communications purposes. Most advertising
firms do not have the in-house capability to develop multimedia, although some firms are
beginning to develop in-house interactive departments to coordinate multimedia work (Simpson,
1997, pers. comm.). This situation leads to numerous opportunities for multimedia firms to work
with more established advertising agencies. Similar relationships appear to have developed in
other metropolitan areas with prominent advertising industries such as New York (Coopers &
Lybrand, 1996; Coopers & Lybrand, 1997).
In large part the relationships between multimedia firms and firms in related industries such
as advertising and communications are based on complementary skills andlor resources.
Vanessa Ferrari, Media Specialist at Megapix Communications, a family run pre-press and
multimedia firm with three employees, notes that:
We like working with the advertising companies because they don't do what we do and we don't do what they do, so both of us need each other. Whereas if we worked with another
multimedia firm and if they didn't like something that we did, they could say 'Hey, we do the same thing, we don't need you.'
Multimedia firms such as one-person Adrenaline Communications have begun to develop
alliances with traditional communications companies to prosper from the 'overflow' of
multimedia work. Jon Dowsett, Principal of Adrenaline Communications, describes the way in
which he structures partnerships with communications firms with complementary strengths as
follows:
These are companies that are very established in communications, that have very very strong sales forces that are all of a sudden turning over too much multimedia business for them to handle. Adrenaline will be hired to look after web development, CD-ROM training, etc ... Although Adrenaline will be paid to do the work, and it will be the Adrenaline team, their name [the alliance company's] will be splattered all over it ... there's a fair amount of that that goes on.
As the industry matures, local firms are becoming increasingly sophisticated in their
approach to seeking out and -/orking with clients, and are also becoming more ambitious in the
organization of their business practices and selling of their products. Brian Hicks, Project
Manager at MetroMan, describes the shift in his business from working as an 'invisible' third-
party supplier to a direct supplier as follows:
What's happening, especially with the web, is that traditional advertising agencies and communications/marketing companies that have had established clients for years, are being asked to develop an Internet presence for their clients. They don't have the experience in- house so they contract out to folks like myself to provide the consulting, the content delivery and information and then they take my services, mark them up and present them back ... A lot of clients, when they understand the scenario that took place, decide to deal directly with suppliers like myself as opposed to through the ad agency because they know that they're paying $250-300hour when all is said and done, as opposed to between $50-100hour depending on the contract ... I like to deal now with end clients whereas six months ago I would be a third-party supplier.
Notwithstanding this shift in work practices from third-party supplier status to a direct
relationship with the end client, several interviewees indicated that they have produced work for
clients who would not know their firm by name because the work was presented under the guise
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of another firm. To many of these firms, working as a third-party supplier is an ideal situation
because the responsibility of dealing with and selling to the end client is managed by another
firm. In other instances, such as the shift taking place at MetroMan, the disintermediation of
work increases the profile and visibility of the firm and leads to the expansion of their client
network.
BBDO and MacLaren McCann represented the top two advertising firms in the GTA by
revenues in 1 9 9 6 ~ ~ (Greater Toronto Area Economic Development Partnership, 1996).
Representatives from each of these firms were interviewed to develop an understanding of the
role that multimedia firms play in the development of the agencies' advertising campaigns and
the ways in which the firms work with the multimedia industry45. Both advertising firms have
developed moderate in-house multimedia capabilities to deal with client demand for multimedia
advertising and marketing components. Alison Simpson, Group Account Director at MacLaren
McCann estimates that 30 percent of the firm's multimedia work is conducted in-house while the
remaining 70 percent is 'farmed out.' Furthermore, Simpson estimates that of the multimedia
work subcontracted out by the firm, approximately 80 percent of the multimedia firms the
agency works with are located in the Toronto area. However, in cases where it is perceived that
local firms do not have the scope of experience or employee base required to complete a project,
the firm will work with multimedia firms outside of Canada. Additionally, when working with
US.-based clients, multimedia firms in the U.S. are often hired. While price is a factor in hiring
decisions, it is outweighed in importance by factors of expertise, experience, and quality of the
BBDO had $54,742,000 in revenues and MacLaren McCann had $37,476,000 in revenues in 1996. 45 Interviews were conducted with: Alison Simpson, MacLaren McCann, Group Account Director and Barry Teplicky, BBDO.
relationship between the multimedia firm and the advertising agency. Most advertising agencies
will continue to contract out a significant proportion of their multimedia work as it is neither cost
effective nor part of their core competencies to develop large multimedia projects in-house
(Simpson, 1997, pers. comm.; Teplicky, 1997, pers. comm.).
Advertising agencies generally develop the creative concept, structure and design of all work
in-house before subcontracting out the multimedia component. This means that despite the oft-
cited significance by multimedia firms of maintaining authority over both the technical and
creative processes, multimedia firms that work for advertising agencies are essentially carrying
out an established creative conceptldesign and providing a technical service. Agency
representatives indicate that the reasons for this work structure are twofold: i) it is the agency's
job to ensure that the client's brand image is maintained, and this image is often initially
developed and controlled by the ad agency; and ii) developing and controlling creative work is
an important part of the way in which the agency adds value to the multimedia product. If the
advertising agency was not perceived by the client to be adding value to a multimedia product,
then the client would conceivably hire the multimedia firm directly, rather than paying the
advertising agency a premium to act as a mediator between the client and the multimedia firm
(Simpson, 1997, pers. comm.; Teplicky, 1997, pers. comm.). While representatives from
advertising agencies indicated that multimedia firms are not directly credited for their work (i.e.
the firm name is not included on multimedia products), they are involved in complex meetings
with the client and the advertising firms do not take credit for work which they have contracted
out.
Information technology (i.e. computer hardware and software production,
telecommunications) is another sector which acts as an important client base to multimedia.
Companies working in these industries are seen by multimedia firms to be attractive as clients
because they understand the multimedia industry and are inherently progressive in their use of
new technology and products that emanate from it. Major international players in the computer
hardware and software industries that have their national offices in the Toronto area include
Apple and Microsoft, and representatives from each company were consulted regarding their role
in working with local multimedia firms46.
Apple Canada has downsized considerably in the past few years as the company has been
forced to restructure due to loss of market share and decreased funding for international offices.
At present, all multimedia work for Apple is developed in the US. and French translations are
added in Canada. In the past however, Apple Canada hired Toronto area multimedia firms to
produce presentations for annual sales meetings, CD-ROMs for resellers, and kiosks. The hiring
process used by Apple Canada was informal; generally the company hired either a firm that
someone at Apple knew or a firm that happened to be pitching to them at a time when they
required the services of a multimedia company. The company also prefers to work with other
companies that use Apple computers in their work. Multimedia projects developed for Apple
Canada were produced with smaller budgets than similar projects in the United States, and the
work done in Canada was not distributed in the U.S. market (Hutchison, 1997, pers. comrn.).
Future opportunities for multimedia f i n s to work with Apple Canada will depend on
direction from Apple's head office in California. Canadian personnel believe that control over
financing multimedia projects for Apple Canada will eventually be returned to the Canadian
46 Interviews were conducted with: Kris Faibish, The Microsoft Network Canada, Producer; and Heather Hutchison, Apple Canada.
head office, at which point Apple Canada will once again be looking to hire local multimedia
firms (Hutchison, 1997, pers. comm.).
Microsoft's online service, The Microsoft Network (MSN), was launched in September 1995
and presents many opportunities for Toronto area multimedia firms to work with Microsoft in
producing original multimedia content for MSN Canada. All production work for MSN Canada
is done in Canada for Canadian viewers, though Canadian content is not available outside of the
country. Furthermore, MSN Canada contracts out all production work, while conducting some
post production in-house. Given the intensity of work relationships between MSN and
subcontractors in multimedia and related media industries, in the summer of 1997, MSN moved
from Microsoft Canada's headquarters in Mississauga, Ontario (approximately 20 km from
downtown Toronto) to the west of the CBD and in the same former industrial area in downtown
Toronto as many multimedia firms (see Figure 2.3), in order to be closer to the companies they
do business with (Faibish, 1997, pers. comm.).
When the network first started, MSN Canada staff toured the major multimedia f i n s in three
Canadian cities: Toronto, Montreal and Halifax, and continue to invite firms to pitch to them.
Thus far, MSN has generated the ideas for all multimedia work developed. However, this may
change as the network becomes more established. The hiring process is fairly informal; MSN is
aware of the strengths and qualities of firms which they have worked with or evaluated, and hires
firms according to their ability to meet project goals specific to a particular undertaking. The
types of multimedia f i n s that MSN works with have evolved as the network develops, as Kris
Faibish. Producer at MSN Canada relates:
We started off with one or two production houses that were established, full service multimedia production houses. They did graphics, they did research, they did implementation, they did project management, they did the whole thing. Now what we're discovering is that, not better than or less than but another option is that we're finding much
smaller firms popping up and they co-produce with other firms ... and that's working beautifully. So you get to mix and match sometimes because there's a number of smaller houses in town.
MSN is thus responsive to working with multimedia firms of all sizes, creating greater
opportunities for small Toronto area firms with specialized skills, and creating opportunities for
intraindustry collaboration at the same time. The contracting out of multimedia work, rather than
developing multimedia capabilities in-house, will likely continue as MSN's preferred means of
developing multimedia programming because of the importance of flexibility in work patterns,
skills, technology and the ability to adapt easily and quickly when multimedia work is
subcontracted out.
Financial services is a third industry sector that represents an important client base to local
multimedia firms. Representatives from the Royal Bank provided insight into how Canada's
largest financial institution works with multimedia firms4'. At the Royal Bank's head offices in
Toronto's financial district, multimedia purchasing is not a centralized service but rather is
planned and managed by individual departments within the bank. One commonality in all bank
decisions concerning the hiring of suppliers is reciprocity. In other words, all things being equal,
the Royal Bank prefers to hire a multimedia firm that is also a client of the bank (Valliere, 1997,
pers. comm.).
The bank established its Knowledge-Based Industries division in 1994, to provide banking
services to technology industries including media and entertainment, information technology and
life sciences industries. When this unit requires multimedia services, preferences lean towards
hiring firms with an understanding of the division's work and mandate, and a general sense of
familiarity with the Royal Bank. The division also prefers to work with full-service companies
47 Interviews were conducted with: David Valliere, The Royal Bank of Canada, Senior Manager - Advanced Technologies and Suzanne Mitobe, The Royal Bank of Canada, Marketing Support Officer.
that provide all programming, creative, maintenance and management work required. The
division anticipates that the amount of multimedia work being sought will increase, and that
firms that act proactively and provide constructive criticism of new media projects that the Royal
Bank would like to pursue will be hired not only to develop projects, but also to identify
potential new media projects (Mitobe, 1997, pers. comm.; Valliere, 1997, pers. comm.).
3.6 Revisiting the Paradox of Firm Location, Clustering and Technology
Multimedia firm location is an important consideration in evaluating the emergence of the
multimedia industry. Why do multimedia firms choose to locate where they do? The evidence
presented in this chapter suggests that the location of multimedia activity is influenced by
working relationships between multimedia firms, their suppliers and their clients, and that the
nature of these relationships may be in large part responsible for the metropolitan concentration
of multimedia activity. For these reasons, multimedia is an example of an industry that clearly
represents the paradox of technological change: the industry's basis on advanced technological
capabilities have not led to the emergence of multimedia as a decentralized industry.
One of the primary factors associated with the concentration of multimedia firms in urban
centres, and in Toronto's CBD frame, is the critical importance placed on frequency and ease of
face-to-face interaction with clients. According to many interviewees, nothing can replace the
role of human interaction in selling multimedia projects. This helps to account for the strong
linkages between multimedia firms and customers in the Toronto area. Furthermore, because of
the clustering of Toronto's corporate sector and its cultural and content industries in areas in and
immediately adjacent to downtown Toronto, these same areas are prime locations for multimedia
firms.
108
Michael Shostak of Digital Renaissance notes that a downtown 'fringe' location (defined as
being a few kilometres from the central business district) provides cost savings to the firm whose
employees meet regularly with clients, 90 percent of whom are located in the downtown core.
Furthermore, as firms have in many cases had to seek out and sell themselves to potential clients,
many believe that the benefits of proximity have improved their chances for meeting people, and
that proximity helps in maintaining networks in which they learn about ongoing work
opportunities. There is also the perception that it may in fact be easier to work with firms
located in the Toronto area.
Moreover, there is further evidence to suggest that this centralizing process is growing
stronger, not weaker, especially with respect to maturing firms. Interestingly, more than half (52
percent) of survey respondents indicated that they had had at least one previous location in the
Toronto area. The vast majority (68 percent) of these firms indicated that their reason for
moving was that their prior premises were too small (see Table 3.16). Another 29 percent of
respondents had moved away from home offices. Finally, 22 percent of firms indicated that they
had moved to be in a more central location. This response suggests that the 'pull' of central
areas plays a role in the industry's location patterns, as there are circumstances in which firms
move to more central locations after their initial startup. This finding further suggests that
central locations are an enduring feature of the industry, rather than acting solely in an incubator
capacity to firms first starting out.
While it is acknowledged that rents may influence the locational preferences of multimedia
firms, less than one-fifth of moves were made as a result of firms choosing a lower rent location.
In fact, it can be assumed that at least 29 percent of movers (i.e. those who moved from home
offices) certainly faced rent increases, and furthermore, firms who moved to more central
locations also likely faced rent increases. This data does not present conclusive information on
the ability of multimedia firms to absorb high rents, but rather indicates a willingness for
multimedia firms to pay for a central city location where rents are known to be relatively high.
Again, the reasons for this likely relate to the linkages between multimedia, their clients and their
suppliers, rather than being indicative of high profit levels.
Table 3.16: Reasons for Firm Moves
Further support for the durability of CBD locations for multimedia firms can be found in the
Reasons for Firm Moves* Space too small Moved from home office More central location
Lower rent Less central location
Other
tracking of firms on the database during its development in 1996 and 1997. During this time
Percent 68 29 22
17 2 24
period, three firms had moved from suburban to CBD core and frame locations. Bindernagel
*some respondents indicated more than one reason.
Ross New Media seems to be representative of the industry's growth and locational shifts for
many non-central firms: the firm was initiated as a home-based operation which eventually
relocated to an industrial area outside of the central city. However, the firm later moved
downtown as it grew in size and desired a downtown presence as well as access to employees
(Ross, 1997, pers. comm.).
Many inte~iewees perceive that at some point in the future, when video teleconferencing
becomes more affordable and widely used, this may help in reducing some of the importance
placed on face-to-face meetings. In the meantime however, face-to-face interaction remains a
very important element in shaping industry location patterns and in encouraging agglomeration
in and around the CBD frame.
For firms located in the midtown and fringe areas of Toronto, it is clear that face-to-face
interaction with both suppliers and contacts is a less significant business issue. These firms were
typically less focused on downtown-centred suppliers or clients, generally basing half or more of
their business connections with suppliers and customers located elsewhere in the GTA andlor
outside of the Toronto area altogether. There were examples of home-based firms in which
frequent interaction with suppliers and clients in the CBD core and frame was a common feature,
however the benefit and reduced rental costs of a home office location for these firms
outweighed the costs of frequent travel. Therefore, for firms located in the midtown and fringe
areas of the GTA, the demand for frequent face-to-face interaction was either accommodated
through frequent travel to the downtown, or by virtue of the fact that a majority of the firms'
interactions were not centralized and therefore did not lead these firms to join Toronto's
downtown multimedia cluster. Reliance on advanced telecommunications technology in lieu of
face-to-face meetings was not cited as supporting the reason for any firm's location outside of
the downtown.
3.7 Toronto's Strengths as a Multimedia Production Centre
The survey and interview evidence presented in this chapter responds to the framework
presented in Chapter Two for understanding whether multimedia is a central city industry, and if
so, why? In the case of Toronto, evidence presented thus far shows that multimedia is certainly a
central city industry. Why? By approaching study of the industry based on a series of questions
about the nature of the industry overall, characteristics of individual firms, the role of
relationships between multimedia and suppliers, and the dynamics of demand for multimedia
products, the data in this chapter help to illustrate some of the reasons behind multimedia's
propensity to agglomerate, and underlying this, the industry's agglomeration in traditional urban
centres.
Despite the fact that it is the largest centre of multimedia production in the country,
Toronto's multimedia industry is not all that large: at the end of 1996, it was comprised of 319
firms employing between five and fifteen thousand persons. In terms of its economic impact, the
multimedia industry is of interest because it is expected to have an important impact on
economic growth in the future, when (and if) the industry continues to grow and mature as
predicted. An overview of the industry informs one that, in the case of Toronto, a diverse m a y
of product and service offerings characterize individual multimedia firms.
Individual firms within the industry are shown to be dependent (to varying degrees) on four
main intrafirm inputs: entrepreneurs, labour, capital and infrastructure. The industry is shown to
be driven very much by entrepreneurs, and their greatest resource is the talent they employ to aid
in the development of multimedia products. Toronto's multimedia industry is clearly shown to
have emerged from linked industries that have a strong presence in Toronto. The labour force
that supports the industry is highly skilled, and comes from backgrounds that include traditional,
creative arts and design, media and communications, programming and engineering, and
management. Interviewees indicate that the location of the labour force is one of the driving
reasons behind their urban locations. Issues associated with financial capital and
telecommunications infrastructure play a surprisingly minimal role in firm start-up, and grow in
importance as firms mature and grow in size. Traditional systems of accounting are shown to be
fairly unresponsive to the needs of multimedia firms, and the difficulties associated with
accessing funds are being overcome by only a select number of firms at this point. This situation
112
is expected to improve over time, however. With respect to the telecommunications
infrastructure required by multimedia firms, the results of this research show that while the
Toronto area is well served by fibre optic networks, most small multimedia firms do not take
advantage of this, largely because of the cost of accessing such systems.
An evaluation of the supplies sought by multimedia firms, the location of suppliers and the
types of relationships developed between multimedia firms and other suppliers, truly confirms
the nature of dependence between multimedia and supplier industries. Sectors related to
multimedia that act as important supply channels include: film and television, graphic design,
publishing, software development, and sound recording. The presence of these industries in
Toronto is of significance to the operation of multimedia firms as the bulk of the multimedia
industry's supplies are sourced locally. Ease of access to suppliers, each of whom may supply
specialized inputs for multiple industries, helps to reinforce the urban concentration of
multimedia firms in Toronto. The case of Toronto's multimedia industry also shows that
relationships with related industries are critical to the development of multimedia, and it is
further shown that relationships within the local industry are characterized largely by network
relationships between vertically linked firms.
Products and services provided by the local multimedia industry are shown to have
developed as a result of strong local demand factors. Survey data show that although Toronto's
multimedia firms cater their products to several different markets, the corporate sector emerges
as the most important client focus. Industry sectors such as media and communications,
computer hardware and software production, telecommunications and finance, represent
significant sources of work to multimedia firms. Toronto's position as the headquarters location
of multinational corporations, many of the country's largest businesses, top grossing
communications firms and innovative technology companies appears to have been of key
importance as a source for initial and ongoing clients of multimedia firms.
Toronto's multimedia industry is also shown to be strongly connected to the downtown and
to CBD frame locations because of their proximity to both clients and suppliers. Despite the
recognition on the part of firm principals that some of the work could be done from elsewhere,
there is a preference to work in an urban setting that is expected to remain a feature of the
industry into the foreseeable future.
It is the convergence of the above factors that leads to multimedia's emergence as a central
city industry. With respect to the literature on the 'new competition' detailing the restructuring
of both inter and intrafirm relationships, the survey results presented here show that multimedia
firms tend to focus on core competencies, contracting out nearly one-quarter of all work, and
adhering to flexible labour practices by maintaining 25 percent of the labour force as short term
and long term contract labour. Niche markets are certainly at the core of Toronto's multimedia
industry, with nearly three quarters of all firms developing custom products for their clients. The
benefits associated with locations that are proximate to related industries have been shown to
include: the ability for multimedia firms to work with similar and related firms on products that
require multiple inputs; the ability to access a shared labour force in the form of 'freelancers';
and the ability to take advantage of a preexisting infrastructure of related industries that existed
in Toronto prior to multimedia's emergence. Other explanations for multimedia's urban nature
include its relationships with firms in the corporate complex, necessitating frequent face-to-face
interaction, and the role of creative inputs to the industry, which have been shown to be urban in
nature as well. Multimedia is also an industry based on high-quality and flexible production
methods, which (according to Scott, 1988) is often correlated with a central location in the CBD
frame. Finally, multimedia's urban nature is expected to be enduring, and not just the case of an
incubator effect, based on the discovery that multimedia firms are moving towards more central
locations as they mature, rather than away from them.
A final notable feature of the multimedia industry that emerges from this research, is the
blurred line between supplier and client. It is not that suppliers and clients cannot be
differentiated for a given project, but rather that a supplier to a multimedia firm at one time,
might be a client of the same (or a different multimedia firm) in another instance. Expressed in
another way, the chain of multimedia production is not a linear one, but rather a recursive or
interactive chain in which suppliers can also be clients, and vice versa. This feature appears to
be unique to the multimedia industry, and may represent a distinct model of interindustry
interaction, in which backward and forward relationships with the same parts of a single industry
are common.
The presence of positive factors associated with linkages to similar and related industries,
educational institutions, talented human resources, cultural amenities, and high quality of urban
life are features that have led to Toronto's emergence as Canada's largest centre of multimedia
activity. The industry is still in its youth and its successful future evolution is tied into the role of
these factors in continuing to support the local multimedia industry, as well as the role of public
policy and associational action in helping to maintain the industry's competitive advantage in the
Toronto region.
4 ~NVESTING IN MULTIMEDIA: PUBLIC POLICY, FINANCIAL SUPPORT AND ASSOCIATIONAL ACTION
Assessing the role of public policy intervention and institutional efforts in an attempt to
bolster the success of individual industries has been the subject of much debate in the economic
geography literature of late. A substantial part of this debate centres around the forces
responsible for the emergence and resurgence of regional economies based largely upon their
development as centres of innovation and high technology production. Some have argued that
the role played by public policy, associative institutions and other forms of industrial
cohesiveness at the local level leads to the unparalleled economic strength of particular regions
(Amin and Thrift, 1994; Saxenian, 1994; Storper, 1997; Morgan, 1997; Scott, 1998a).
Moreover, while the terminology used to classify the approaches to understanding regional
economic success factors is varied, the overall message remains the same: institutions (public
and private) and established conventions matter. Storper (1997) attributes the connection
between the study of industrial districts and agglomerations and the concomitant emphasis on the
role of institutions in fostering economic success in such places, as part of the theoretical
progression in understanding the workings of industrial dynamics.
Though agglomerations could be theoretically accounted for as the way that potential external economies were realized, there was no assurance that markets alone, nor even various forms of contracts, could successfully coordinate the nexus of transactions in an industrial agglomeration. Such transactions - in labour markets, in interfirm relations, in innovation and knowledge development - tended to have points of failure in the absence of appropriate institutions (Storper, 1997, 11).
Thus, while the discussion in previous chapters focuses on the characteristics of Toronto's
emergent multimedia industry, a critical review of the policy environment in which this industry
has developed is a prerequisite to analyzing the industry's future competitive advantage in the
Toronto region.
Amin and Thrift (1994) posit that four interrelated conditions lead to a state of 'institutional
thickness' whereby local economic success is possible. The factors associated with institutional
thickness are: i) a large number of variegated institutions, including those from both the public
and private spheres; ii) high levels of interaction between locally-based institutions; iii)
collective representation of interests; and iv) mutual understanding amongst players that they are
working toward common goals. According to Amin and Thrift, institutional thickness leads to
the development of shared cultural norms, trust between players, an environment open to
entrepreneurship and increased levels of interaction amongst industry stakeholders. Morgan
(1997) sees these kinds of characteristics as separating 'learning regions' from others. In
learning regions, the organization and interdependence of public and private, formal and
informal institutions in a networked environment leads to regional economic advantage.
Furthermore, Morgan believes that the regional level is the most appropriate scale at which to
develop cooperative initiatives "because this is the level at which regular interactions, one of the
conditions for trust-building, can be sustained over time" (Morgan, 1997,500).
Developing scenarios of regional achievement in the U.S. computer industry, Saxenian
(1994a, b) asserts that the success of individual industrial clusters ultimately rests on the
development of a 'regional culture' that leads to the rise of "a regional network-based industrial
system that promotes learning and mutual adjustment among specialist producers of a complex
of related technologies" (Saxenian, 1994a. 6). Regions in which intrafirm, interfirm and firm-
institution networking relationships are nurtured have the ability to respond to external
competitive pressure as a result of the strength of relationships within the region, and equally,
because of the development of a culture that binds together the relevant players.
117
In a similar vein, Storper (1997) highlights the importance of the local institutional
environment by detailing the concept of 'untraded interdependencies' as the harbinger of
regional economic strengths. Untraded interdependencies are relationships developed amongst
firms and organizations located in close proximity to one another and which contribute to the
success of the region by strengthening labour markets, communication channels and institutional
/ cultural conventions.
Finally, Scott (1998a) suggests that associational action in the form of industry associations
and government support (of varying forms), including the contribution of public resources and
the development of public policy to help coordinate efforts between different industry players at
both the micro and macro scale, is critical to maintaining the strengths of an industrial
agglomeration in a given geographic location. Scott attributes the role of 'cultural and
institutional infrastructures' as key ingredients in the operation of industrial districts, such as
those comprising the California multimedia clusters. Infrastructural support may come in the
form of industry associations and public provisions such as responsive education and training
institutions and local policy initiatives. In the case of California's burgeoning multimedia
industry, Scott concludes that coordinated and strengthened public policy is needed for the
region to maintain the competitive advantage which it presently holds in multimedia production.
In contrast to the above approaches, an alternate approach has been proposed that is contrary
to the premise that institutions and policies emanating from the local level exert the greatest
force on regional economic development. This alternative approach suggests that regulatory
frameworks developed through policy initiatives at the provincial or national levels are the
influential factors that help to create an environment in which individual industries andlor
specific patterns of industrial organization will either flourish or be stifled. Gertler (1997) argues
that regulation at the national level greatly impacts the emergence of 'favourable industrial
practices.' The regulation of labour markets, systems of training, and industrial relations -
generally stemming from national systems of regulation - affect industrial development to an
extent that should not be ignored at the expense of focusing exclusively on regional institutional
practices. It is therefore critical to consider the influence of both national and regional or local
institutions in evaluating regionally clustered industrial patterns, despite the fact that much of the
literature on regional development excludes consideration of institutional impacts at various
geographic scales.
It is thus with an understanding of the potential role of institutions and public policy
development that the focus of this chapter now turns to evaluating the environment in which
Toronto's multimedia industry has surfaced, including a review of the role of government
regulation and institutional activities as they pertain to supporting the industry thus far, and some
discussion on the influence of this activity on the multimedia industry's existence in Toronto.
4.1 The Role of Public Policy in the Development of Canada's Cultural Industries
As emphasized in Chapters Two and Three, the intensity of interaction between Toronto's
multimedia industry and the region's cultural industries is a factor that has propelled the
industry's growth. Linkages between multimedia and other cultural industries have been forged
in the form of both supplier and client relatiofiships. Furthermore, it was shown in the previous
chapter that many founders and senior managers of multimedia firms have a background in the
cultural industries; 55 percent of multimedia firm principals interviewed had prior experience in
one or more of media, communications, art and design. Additionally, the labour market for
multimedia is supported by educational institutions that provide training in the creative sectors.
Survey results reported in Chapter Two indicate that 42 percent of all employees in the region's
multimedia industry are classified as 'creative' and this figure represents the largest proportion
of employment within the industry. Therefore, not only do the creative industries play an
important part in the development of the multimedia industry in Toronto, but also, the manner in
which these industries have been supported in their development also affects the strengths of
Toronto's multimedia industry.
Senior representatives of the sound recording, book publishing and magazine publishing
industries" in Toronto all concur that the success of their respective industries is in large part a
result of Canadian public policy. The Canadian govemment has a long history of involvement in
the country's cultural industries, dating back to the early days of the country's confederation
(Smith, 1990). The rationale for govemment intervention in the cultural industries has,
historically, been that without it, Canadians would not be able to experience their own national
culture. The large size of the country, coupled with the country's small population, led to the
government's consensus that "cultural products could have no impact - could not, indeed, even
get produced and distributed - without state intervention" (Smith, 1990, 10). These two factors,
combined with Canada's proximity to the much more populous United States and the lack of a
language barrier between the two countries' English speaking populations, led to the fear that
Canadian acceptance of American cultural influences would lead to the complete absence of
cultural production in Canada (Smith, 1990).
Government support for the cultural industries comes in three basic forms: tax measures,
direct subsidies and regulations (Phelps, 1986; Smith, 1990). Cultural industries that have
48 Interviews were conducted with: Earl Rosen, President, Marquis Records; Gary Neil, Principal, Neil Craig Associates; and James Warrilow, President, Maclean Hunter Publishing.
benefited from these policies include book and magazine publishing, radio and television
broadcasting, sound recording, and film and television production.
The book publishing industry is supported through a series of federal and provincial
regulations governing grants, postal subsidies and tax credits. Federally, Heritage Canada
administers two programs in support of the sector. The Book Publishers Industrial Development
Program assists Canadian publishers and industry associations in the promotion of books both in
Canada and internationally while the Publications Distribution Assistance Program provides a
postal subsidy for library book purchases (Ministry of Culture, Tourism and Recreation, 1994;
Heritage Canada, 1997a; Industry Canada, 1997b).
Provincially, the book publishing industry benefits from a sales tax exemption and from a
preferential buying policy implemented by the Ontario Ministry of Education which stipulates
that certain educational materials be written by or purchased from Canadian authors andlor firms.
Subsidies and grants to publishers and related trade organizations are also available to the
industry and are administered by the Ministry of Citizenship, Culture and Recreation. In 1997,
the provincial government announced a rebate program to encourage Ontario-based, Canadian-
owned publishers to publish first-time Canadian authors. The Ontario Book Publisher Tax
Credit is based on a rate of 30 percent of pre-production costs, marketing or promotion of
eligible titles, up to a total of $10,000 per title. A second tax credit covering between 15 and 50
percent of production costs in Ontario for the works of first-time authors was also announced
(Ministry of Tourism, Culture, and Recreation, 1994; Ministry of Citizenship, Culture and
Recreation, 1997).
Gary Neil, a former Executive Director of the Association of Canadian Publishers, a trade
organization supporting book publishers nation-wide, indicates that the special challenges of the
cultural industries in Canada do not exist in other industries and as a result, government policy
and funding is crucial to ensure the development of Canadian content. Neil supports the policy
approach that has ensued, noting that "The stars of the Canadian industry have only emerged
because we've had supportive programs that have encouraged the production of Canadian
material." Without the support of this framework, Canada's magazine and publishing industry
would, in his view, likely not exist.
James Warrilow, President of Maclean Hunter Publishing, describes what is commonly
referred to as the 'three legged stool' that supports the Canadian magazine publishing industry.
The three industry supports are a combination of tax, regulatory and fiscal provisions: Section 19
of the Income Tax Act provides that the cost of advertisements in Canadian-edited magazines are
deductible for income tax purposes; foreign magazine publishers are prohibited from importing
'split-run' magazines49 into Canada; and Canadian magazine publishers are eligible for postal
subsidies administered by Canadian Heritage. The first two of these supports acknowledge the
fact that magazine publishers earn most of their incomes from advertising revenues: the Income
Tax Act provision provides incentives for advertisers to reach Canadian audiences through
Canadian magazines, while the split-run prohibition reduces 'unfair' competition from foreign
magazine publishers by disallowing the distribution of foreign-content publications containing
Canadian advertising. Magazine publishers also have access to loans, grants and other funds
distributed by the Cultural Industries Development Fund (see Section 4.3), the Ontario
Publishing Centre, the Ontario Arts Council and the Canada Council. Finally, there are foreign
ownership limitations governing the distribution of both magazines and paperback books in
49 A split-run magazine is a magazine where the content originates from a foreign source while the original (foreign) advertising is replaced by Canadian advertisements.
Ontario (Ministry of Tourism, Culture and Recreation, 1994; Industry Canada, 1997b; Warrilow,
1997, pers. comm.).
Canada's sound recording, broadcast television and cable television industries, regulated by
the federal Canadian Radio-Television and Telecommunications Commission (CRTC), would
also not exist in their current form without the support of government policy and regulations that
encourage the production and broadcast of Canadian material. The CRTC, responsible for the
bulk of regulatory powers for the nation's cultural industries, mandates the minimum levels of
Canadian content programming broadcast on Canadian radio and television stations, regulates
ownership of cable television, and dispenses grants for aiding in the development of Canadian
programming. It is widely acknowledged that Canadian content regulations have encouraged the
development and expansion of the targeted industries, especially in the case of sound recording.
Evidence suggests that sound recording activity increased substantially, and that the major
Canadian record companies increased their profit levels, following the introduction of content
regulations in the 1970s requiring the broadcast of at least 30 percent Canadian content5'. To
further support Canadian broadcasting, favourable tax treatment for advertisements placed on
Canadian stations is available, while income tax deductions for Canadian advertisements placed
on US. border stations are disallowed. This income tax provision has led to higher advertising
rates being charged by Canadian broadcasters, leading to higher revenues within the industry
(Globerman, 1983; Globeman, 1987; Ministry of Culture, Tourism and Recreation, 1994).
Canadian public policy has been shown to support not only the distribution and broadcast of
cultural material, but also the production of cultural products. This is especially true for the case
of the Canadian television and film industry. The production of Canadian content in film and
Canadian content regulations were first introduced for AM radio in 1971, and for FM radio in 1975 MacDonald,l998).
television has been stimulated by the CRTC content regulations, and has also been supported by
a number of agencies including Telefilm Canada and the National Film Bowd (NFB) at the
federal level, and by the Ontario Film Development Corporation (OFDC) and the Ontario Tax
Credit (OTC) provincially. Telefilm Canada, the NFB and the OFDC all provide direct financial
support to the sector, while the OTC (replacing the prior Ontario Film Investment Program)
entitles investors to a rebate of 20 percent on eligible labour costs associated with a film or
television production, which may account for up to 48 percent of total production costs.
This is in addition to the federal film or video tax credit for 25 percent of labour costs in
Canadian productions, where labour costs may not exceed 48 percent of production costs
(Industry Canada, 1997b).
Prior to the introduction of the federal tax credit program in 1995, a Capital Cost Allowance
(CCA) for film investors was in effect, allowing a 100 percent tax write-off of investment in
Canadian film production (Ministry of Culture, Tourism and Recreation, 1994; Industry Canada,
1997b). The CCA, initially set at 60 percent, raised to 100 percent in 1974, and reduced to 30
percent in 1988, before its abolition in the early 1990s. led to dramatic expansion of the
Canadian film industry. The total annual dollar volume of the industry increased from $19
million in 1977 to $165 million a scant two years later. Concurrently, average film budgets
increased from $526,000 to $3.3 million between 1977 and 1980, while the number of film
production companies rose from 232 in 1979 to 302 in 1983 (Globeman, 1987). By 1990, this
figure had more than doubled, with a total of 700 firms in film production in Canada, the
majority of which were located in Ontario (Ministry of Culture, Tourism and Recreation, 1994).
In 1997, the number of movies and television shows made in the Province of Ontario reached an
all-time high, attributed in part to the generosity of provincial and federal tax credit programs
(Arts Ink, 1997).
Nevertheless, and despite the success of public policy in helping to create and support the
development of Canadian cultural industries, Canada's cultural environment remains largely
influenced by American imports.
Most of the books Canadians read are written by Americans, most of the periodicals Canadians peruse come across the shared border, 90 percent of the films Canadians see are made in the United States as are the majority of T.V. programs they watch ... Only regulations that govern television advertising, control of newspapers, along with major support for the publishing industry and film industry, make it possible for Canadians to read, or see, or experience their peculiar and varied realities on this continent (Pitman, 1994,5-6).
It is the threat of American domination over the Canadian cultural environment that motivates
the continued intervention of federal and provincial governments in supporting the country's
cultural industries (Harris, 1998). The Canadian government's emphasis on continued
intervention in the cultural sector is thus likely to continue into the future, as the U.S. population
remains ten times larger than that of Canada [as it also was at the time of confederation] (Smith,
1990) and American dominance over cultural offerings in Canada continues. However, the
protected environment under which the cultural industries in Canada have developed is by no
means guaranteed, as the protectionist nature of Canadian cultural policies is being continually
challenged with the signing and implementation of international free trade agreements (Scoffield,
Furthermore, successive waves of technological change make the transmission of cultural
products into Canada increasingly easier. When this has happened in the past, with the advent of
railways, steam-powered presses, the telegraph and later on cable, satellite broadcasting, and
advanced telecommunications, the Canadian government has stepped in to protect the nation's
cultural industries from formidable competition from cultural imports brought into the country
with the help of these new technologies (Smith, 1990). To some extent, Canadian public policy
has continued to support the development of the cultural industries as new technologies emerge.
For example, with the widespread use of the Internet as a new means of distributing cultural
content, policy development related to the use of the information highway in addressing means
of developing Canadian content and achieving crossCanada access to the Internet has ensued
(see Section 4.2.1).
Though neither as prominent nor as powerful as the federal or provincial initiatives, the
(former) City of Toronto was also a strong supporter of arts and cultural industries and in this
sense, should be acknowledged for its role in indirectly supporting the multimedia industry's
emergence in Toronto. The Toronto Arts Council (TAC) was the ms-length municipal
organization responsible for granting funds to arts organizations, individual artists and
community arts activities as well as conducting research and providing advice to the city on arts
and cultural policies. Established in 1974, the TAC was one of only two arms-length municipal
arts funding organizations in North America and has been an aggressive supporter of arts and
culture in the city. In 1996, the City of Toronto budgeted nearly $5 million to be distributed to
arts programs and artists in the city by the TAC (Toronto Arts Council, 1997). During the
present transition towards amalgamation of the metropolitan regional governments, the TAC
continues to grant arts funds within the former City of Toronto. In addition to suppotting the
city's arts and cultural industries through generous and responsive funding programs, the City of
Toronto also amended the zoning bylaw in 1995 to allow artists the ability to work from home,
provided they meet certain conditions (City of Toronto, 1997).
It is within the context of a strong, supportive policy framework for the cultural industries
that multimedia-related public policy has developed. As will be shown in the following section,
government actions pertaining to the development of a Canadian multimedia industry have been
reactive in nature, and have had minimal effect on the multimedia industry's development.
However, the nature of public policy surrounding the cultural industries in both Canada and
Ontario, and to a lesser extent the City of Toronto, have had a significant impact on the
multimedia sector's rise and its ability to draw upon links with well developed cultural industries
that have benefited from the support of government cultural policy more broadly defined.
4.2 Nurturing Multimedia's Growth: Public Policy and Associational Action
The emergence of the multimedia industry has not gone unnoticed by governments and
policymakers at the federal, provincial and local levels. Public policy approaches to supporting
the industry however have thus far been largely limited to information gathering and consultation
processes, with some support also going towards export market development.
4.2.1 Federal Government Initiatives
The federal government's early responses to the emergence of multimedia, the Intemet and
the government's initiative to create equal access to new forms of information and cultural
products, was initiated through work by the Information Highway Advisory Council (IHAC).
MAC was mandated by the federal government in 1994 to develop a strategy related to the
emergent 'Information Highway'. The advisory council reported back to the government with a
series of recommendations, some of which related to multimedia. Most significantly, the MAC
report states:
Creators of content must have equitable access to production funds, distribution opportunities and fiscal incentives. The Council recommends funding or tax incentives to encourage Canadian multimedia products, continued support for Canadian publishers and other cultural industries, and a strong role for the government in promoting export opportunities for Canadian content (Information Highway Advisory Council, 1995,5).
Explicitly recognizing the role of multimedia in Canada's cultural industries, and particularly as
a key component in the development of the 'Information Highway', is an important step towards
raising the profile of the industry and ensuring that it will be the subject of future policy and
funding decisions. T o date, this recommendation has been acted upon through an agreement
between MAC and Stentor (Canada's telecommunications alliance) which led to a $50 million,
two and a half year fund for multimedia development, described further in Section 4.3.
Industry Canada recognizes the increasing role of multimedia as a means of content
development which contributes to both Canadian culture and the Canadian economy overall, as
part of the growing emphasis on knowledge-based industries. A strong Canadian multimedia
sector is expected to contribute to the country's competitive advantage in electronic commerce;
development of advanced technology and related skills; and operational efficiency in education,
health, government and business (Industry Canada 1997d-f). The federal government has
announced its intention to help promote the industry's development, though little concrete action
has taken place to date.
In 1995, Industry Canada conducted the first survey of Canadian multimedia firms in
conjunction with the Interactive Multimedia Arts and Technologies Association (IMAT). In part,
this study was motivated by the fact that collecting data on the size and activities of the
multimedia industry remains difficult in Canada as there is no SIC code for multimedia, there is
no collectively used definition of multimedia, the size and location of firms fluctuates rapidly,
and firms are constantly emerging, merging and going out of business. During the spring of
1997, Industry Canada commissioned Statistics Canada to develop a business data registry and
administered a survey of multimedia firms in the country, though the results have yet to be
released (Industry Canada, 1997a). In addition to collecting data on the industry, Industry
Canada supported the development of a promotional CD-ROM listing Canadian multimedia
firms which was distributed at MILIA '97, an annual multimedia conference held in Cannes,
France.
In an effort to further support the development of Canadian multimedia exports, the
Department of Foreign Affairs and International Trade posts information officers with
multimedia industry expertise in American centres of multimedia activity, including New York,
Chicago, Boston, Los Angeles and San Francisco. Officers in these foreign centres work to
identify ways in which Canadian multimedia companies can more effectively target their skills
and products to American businesses, assisting Canadian companies who are interested in
becoming more active in export markets for multimedia, and raising awareness of the quality and
cost advantages to American companies of hiring Canadian multimedia producers. From mid-
1996 to mid-1997, the Canadian Consulate in New York tracked a total of 30 business
partnerships developed between Canadian and New York technology companies, fostered in part
as a result of the consulate's efforts (Raposo, 1997, pers. comm.).
Industry Canada also supports the multimedia industry through the activities of the New
Media and Entertainment Industries Directorate of the Information Technology Industry Branch.
This office was initiated to assist the growth of the Canadian multimedia industry by focusing on
the industry's educational capacity, commercialization of new products, internationalization of
markets, content production and other general issues. Industry Canada has also established an
Internet presence where users can review information on multimedia firms in the country,
conduct searches to look for specific types of firms, and access current research results released
by the Directorate. While the department has a broad mandate with respect to multimedia, very
little in the way of concrete results have been achieved, in part due to data collection and
dissemination problems, and in part as a result of the department's emphasis on developing
awareness and understanding of industry developments prior to engaging in active policy
development.
Industry Canada also provides support to the development of a national communications
infrastructure through the CANARIE (Canadian Network for the Advancement of Research,
Industry and Education) program. CANARIE is a non-profit, industry-led organization created
in 1993 as a collaborative effort between the federal govemment, the research community and
the private sector (Groupe Secor, 1997; Digital Media Champion Group, 1998). CANARIE's
mission involves three goals: "to facilitate the development of Canada's communications
infrasuucture; stimulate next generation products, applications and services; and, communicate
the benefits of an information-based society" (CANARIE, 1998). It is through CANARIE that
the federal govemment is supporting the development of a 'second generation' Internet. In
addition to working towards the development of new communications infrastructure and
technology with CANARIE members, CANARIE also provides funding to researchers and
product developers in the public and private sectors. One such funding program, the Technology
Applications Development Program, provides funding to firms working on the development of
broadband multimedia networking applications (CANARIE, 1998). CANARIE's work tends to
help multimedia production firms indirectly, by improving the infrastmctural, networking and
informational environment in which they work.
4.2.2 Provincial Government Initiatives
The NDP government (ruling Ontario from 1990 to 1995). as part of its Industrial Policy
Framework, stimulated the development of a series of 'sectoral strawgies' along broadly
corporatist lines. These involved participation of firms, organized labour and other major
industry stakeholders (Wolfe and Gertler, 1997). Among the various strategies to support
individual industrial sectors, three (in computing, culture and telecommunications) addressed
issues related to the support of a multimedia industry. The cultural industries strategy had an
express goal "to develop an industrylgovernment framework that will enable Ontario's cultural
industries to take a lead role in developing new multimedia products and in using new systems to
distribute traditional cultural products" (Ministry of Culture, Tourism and Recreation, 1994.46).
The cultural industries strategy recommended the creation of a centre to promote strategic
alliances and other collaborative initiatives between local industry players and to develop
Ontario's reputation as a leader in the development of world-class multimedia content.
However, with the election of the Harris (Conservative) government in 1995, shortly after the
development of the sectoral strategy plans, very few of the recommendations were ever fully
implemented.
Currently, at the provincial level, the Ministry of Economic Development, Trade and
Tourism is working in conjunction with the Ministry of Citizenship, Culture and Recreation to
implement recommendations for public policy initiatives in support of the multimedia industry.
The current government's approach to economic development is considerably less activist,
preferring to 'eliminate barriers' for businesses to grow, rather than to financially support
business development. Therefore, the two Ministries have worked with a group of multimedia
industry leaders, termed the Digital Media Champion Group (DMCG), in an effort to create a
framework by which to address policy directions for the industry. "Playing to Win" (1998) the
recent report of the DMCG, lists a total of 29 recommendations that address the following three
strategies: i) strengthen coordination and partnerships within the industry; ii) eliminate barriers to
growth by improving access to financing and human resources, and through the development of
a supportive regulatory environment; and iii) increase opportunities in domestic and international
markets. The report acknowledges a current lack of interaction between firms within the
industry and emphasizes the need for responsive, multi-sectoral institutional structures to help
manage the industry's development. Whether or not an effective government reaction to the
report will ensue remains to be seen.
However, in its May 1998 budget, the provincial government announced that it plans to
introduce initiatives to support the province's interactive media industry through a 20 percent
refundable tax credit for qualifying labour expenditures incurred by small, Ontario-based firms
creating interactive multimedia products. At the same time, the introduction of a $10 million
Interactive Digital Media Small Business Growth Fund, to be distributed over a five year period,
was announced (Government of Ontario, 1998). The government has yet to announce the criteria
to be used in determining precisely which activities will qualify for the tax credit or the $10
million fund. This is however, a first step in recognizing the role that new media firms play in
supporting the regional economy, and in attempting to support their further growth.
A provincial tax credit was also introduced in May, 1997 for firms working in the field of
animation. The credit applies to work on computer animation and special effects projects that
are geared towards commercial use, and provides a 15 percent tax refund for labour expenditures
in the province (Digital Media Champion Group, 1998). In November 1997, the tax credit for
animation and special effects was increased by the provincial government to 20 percent
(Ministry of Finance, 1997). Other ways through which the government supports the industry's
growth and exporting efforts are through the development of promotional materials touting the
success of the multimedia industry in Ontario and by the sponsorship of booths in international
trade fairs, thereby reducing participation costs and increasing international networking
opportunities for participating firms.
4.2.3 Local Government Initiatives
At the local level, intentional efforts by governments within the GTA to stimulate the
development of a multimedia sector 'from scratch' indicate just how difficult a task this is. They
also indicate just how distance-sensitive are many of the activities performed in the production of
multimedia products. As Figures 2.1 through 2.3 in Chapter Two indicated, Toronto's
multimedia industry is strongly focussed on the districts immediately adjacent to the downtown
Toronto. These areas offer an attractive array of physical and locational assets: an abundance of
vacant, relatively cheap and funky 'loft-style' space in old industrial buildings; proximity to
major customers in the downtown corporate and financial districts; easy access to key suppliers
and potential collaborator firms in the visual arts, graphic design, software, video and audio
production sectors.
Against this overall pattern, consider the case of East york5', a former borough of the
Municipality of Metropolitan Toronto whose principal industrial zone is located a mere 10
kilometres from downtown Toronto. Government officials in the area are currently pursuing an
economic development plan aimed at revitalizing its industrial areas, in response to the loss of
traditional industry. One of the largest firms to leave in recent times was Alcatel, a company
whose East York wire and cable plant employed over 400 people and occupied over one million
square feet of space (Pme, 1996). East York devised an economic development plan aiming to
create a "New Media Village" by promoting the existence of fibre optic cable in the area and
'' Prior to amalgamation in January 1998, the Borough of East York was the smallest municipality in the GTA, and adjacent to the (former) City of Toronto.
waiving development charges for businesses (Godfrey, 1996.2). Thus far, however, these
attempts to trigger the relocation and indigenous development of multimedia firms in the area
have failed to produce the desired result.
4.2.4 Associational Action
Overall, it would appear from the preceding analysis that explicit attempts by public agencies
to build an environment resembling Amin and Thrift's version of 'institutional thickness' have,
thus far, yielded little in the way of concrete results. It is important to distinguish between
associational action, which refers to formal interaction amongst organized groups or
associations; and associative behaviour, a term that indicates there is cooperation and
collaboration between individuals or between groups of individuals, but on an informal, irregular
basis. Evidence presented in Chapter Three indicates that there is a fair amount of associative
behaviour amongst industry players, especially along vertical production lines. National,
provincial, and regional industry associations discussed below (some of which have been
mandated through government policy initiatives) have had somewhat greater success than 'pure'
government initiatives in their attempts to build networks and establish cross-sectoral
relationships amongst stakeholders working in multimedia and related industries, though the
associational environment in Toronto cannot yet be likened to the theoretical and practical
examples provided in the introduction of this chapter.
Table 4.1 shows that there is certainly no shortage of technology-related organizations and
associations in the Toronto area whose mandate might help shape the multimedia sector.
Table 4.1: High Tech Associations in the GTA
Association of Internet Marketing and Sales Association of Professional Computer Consultants Canadian Association of Internet Providers Canadian Advanced Technology Association The Canadian Information Processing Society Toronto Section Canadian IT Law Association Communitech ConnectJT Electronic Commerce Council of Canada Greater Toronto Marketing Alliance Institute of Electronic and Electrical Engineers Interactive Multimedia Arts and Technologies Association Information Technology Association of Canada Information Technology Association of Canada for Ontario Local Area Network Dealers Association Mississauga Technology Association North York Software Network Ontario Aerospace Council Ontario Centres of Excellence Personal Computer Club of Toronto Professional Engineers of Ontario Smart Toronto Software Process Improvement Network Toronto Biotechnology Initiative Toronlo Technology Network Toronto Venture Group Viatech York Technology Association Source: Silicon Valley North - GTA edition, 1998.
The breadth of high-technology associations present in the region contributes to the
multimedia industry's potential access to a broad range of linkages, and several of the
organizations listed in the table below have direct connections with the multimedia industry,
including: Interactive Multimedia Arts and Technologies Association (IMAT), Ontario Centres
of Excellence, Smart Toronto and Connect.IT.
IMAT is a national organization headquartered in Toronto that represents the multimedia
industry. Despite its national focus however, the industry's members are highly concentrated in
the Toronto area. IMAT was established in January 1995, as a result of the merger between the
Canadian Computer Graphic Artists Association and the International Multimedia Development
Association. Its mandate is to: "generate jobs for the multimedia and cultural sectors; to create
an environment for economic development; to bridge the gap between information technology
(IT) and culture; to foster Canadian content; and to represent emerging technologies" (IMAT,
1996,6). To this end, IMAT holds monthly meetings in Toronto, publishes a quarterly
newsletter, and advertises jobs within the industry. IMAT currently has over 600 members; 85
percent of IMAT's members are located in the Toronto area, and a further 10 percent are in other
parts of Southern Ontario (Froman, 1997, pers. comm.).
Several interview respondents praised IMAT for catering to new entrants to the industry by
providing a forum for learning about working in multimedia, but criticized it for failing to
support established firms, or to provide a strong voice for the industry in public policy matters.
IMAT is hoping to address this problem, with the refocusing of the association to deal with two
major, and sometimes competing, responsibilities: i) providing a central, community-based
organization for individual members; and ii) representing the industry in broader policymaking
and interaction with other related industry sectors. The hope is that IMAT will continue to serve
the needs of its individual members by organizing and coordinating meetings and networking
opportunities, while at the same time broadening its role in matters that affect the industry as a
whole such as public policy initiatives (Froman, 1998, pers. comm.).
IMAT is a recent recipient of seed money from the federal Department of Human Resources'
industrial adjustment fund, which is intended to help the association initiate its activities. The
organization is also beginning to work with other local groups in a collaborative effort to address
issues faced by the local multimedia industry. For instance, M A T , Smart Toronto and the
Toronto Venture Group are working together to develop cross-sectoral events that may
ultimately improve the availability of venture capital in new media production (Froman, 1998,
pers. comm.).
The remaining organizations that have relationships with the multimedia industry, support it
as part of their larger mandates. Four such organizations are: Communications and Information
Technology Ontario (CITO) [formerly the Information Technology Research Centre (ITRC)],
Smart Toronto, Knowledge Connection Corporation and Connect.IT.
CITO is a provincially funded Centre of ~xcellence~', which brings university researchers
together with private companies to share information and collaborate on research in the areas of
telecommunications technology, computer networking, computer hardware and software design,
and digital media. CITO produces a monthly new media newsletter and sponsors 'web
breakfasts' where speakers discuss current research and state of the art technology related to the
developmentof the web. The centre is also working to include multimedia content producers in
its program offerings of annual meetings, training seminars, and special events (Putterman, 1997,
pers. comm.).
Smart Toronto is a public-private organization, initiated to promote the development of
information technology industries in the GTA. Smart Toronto is bringing together industry
players to work on improvements to the technological infrastructure in the region, through
52 The Ontario Centres of Excellence program was established by the provincial government in 1987. Today, there are four Centres of Excellence and each aims to make connections between university research and the needs of various sectors of Ontario industry. A total of $32.3 million in provincial government funding has been committed to the centres for the five year period beginning in 1997; the centres also leverage substantial amounts of funding from the private sector through memberships, special events and educational programs (Ontario Centres of Excellence, 1997).
initiatives such as increasing the availability of high-bandwidth services, working on programs to
link investors with new media firms, and promoting the strength of the GTA's information
technology industries worldwide at conferences and conventions such as MILIA (Walter
Stewart, 1997, pers. comm.).
Both Knowledge Connection Corporation (KCC) and Connect.IT are offspring of the
provincial government sectoral strategy initiatives reviewed earlier, though public sector funding
has now ceased and each organization has completed the transformation to becoming self-
sufficient. KCC was launched in 1995 as a spin-off of TRIO, another Ontario Centre of
Excellence (now part of CITO). KCC's mandate is to "support the efficient development and
implementation of world-class distance learning products through collaborative initiatives and
information services" (Knowledge Connection Corporation, 1996.4). Therefore, an important
part of KCC's work involves collaborating with multimedia producers to develop educational
products for distance-based learning, in addition to providing advisory and consulting services to
other companies producing technology-enabled learning products (Rossiter, 1997, pers. comm.).
Connect.IT was also initiated following the NDP government's sectoral strategy process, as
an opportunity to catalyze growth within the largely small and mid-sized information technology
firms in Ontario. ConnectJT identifies Ontario as the fourth largest centre of software
production in the world (measured according to number of firms), and eighth by software firm
revenues (Pritchard and Associates, 1997). The organization focuses on helping to connect small
and medium-sized software developers to appropriate sources for marketing, management and
financing. Connect.IT's interest in multimedia stems from the linkages between multimedia and
software and the increasing convergence of software development and multimedia production
(Connect.IT, 1998). As an organization which is geared towards supporting SMEs, the potential
for ConnectJT to aid the multimedia industry's development certainly exists, though this
remains largely untapped, to date (Kavanagh, 1997, pers. comm.).
Despite the work of these organizations, many of the employees and principals interviewed
in multimedia firms were unaware of the existence and efforts of these organizations to support
the regional multimedia industry. This suggests that the more formalized and public forms of
associational action have, to this point, tended to lag rather than lead the multimedia industry's
development. This finding may not be all that surprising given that Wolfe and Gertler (1998)
observe that such producer associations typically focus on relatively 'superficial' activities like
lobbying governments whereas in places such as Germany or Italy, producer associations take on
more activist roles by i) helping to shape and deliver training programs and apprenticeship
programs; and ii) coordinate interfirm cooperation on R&D and joint production ventures. While
each of the organizations discussed above has made some attempt to take on one or both of these
roles, they have not yet been able to substantively impact the state of the region's multimedia
industry in a measurable way. To some extent, such as in the case of CITO and Connect.IT, this
inability to positively shape the multimedia industry may be more a function of the peripheral
role of these organizations to the multimedia industry; their main focus, to this point, has been on
other technology-related sectors. Furthermore, associations in the Toronto region may aspire to
promoting 'networks' but they do so only in a shallow sense for the most part, often using the
terms 'networking' and 'socializing' interchangeably.
4.3 Non-Traditional Means of Access to Capital
Chapter Three emphasized the fact that one of the biggest obstacles to the growth of
multimedia firms is a lack of access to capital. The difficulties experienced by multimedia firms
in raising capital are directly related to the youth of the industry, the size of firms and the nature
of their work. Most multimedia firms are less than five years old, and are working in a new field
for which the boundaries and uses are constantly being redefined. The overwhelming majority
of firms are small and medium sized enterprises whose greatest asset is their knowledge base.
Most multimedia firms in Toronto gear the majority of their work to the corporate market and as
such they are akin to a component of the producer sewices sector. The combination of these
three factors culminates in a situation whereby multimedia firms have difficulty obtaining
financing.
Multimedia firms have difficulty accessing traditional forms of capital both from the
conservative banking industry and the more progressive investment capital sector. Major banks
and financial institutions are reluctant to invest in multimedia because it is a new industry that
lacks any sort of investment or credit history. Furthermore it is difficult to account for the assets
of individual firms because they are largely based on knowledge rather than goods. Multimedia
production does not generally represent an area of interest to venture capitalists because the
industry is not perceived to have the potential for high profit margins such as those reflective of
the computer hardware industry.
While multimedia firms and multimedia projects are eligible for a variety of federal,
provincial and private sector funding initiatives, the financing environment for multimedia
remains relatively weak and has not been in place long enough for a detailed analysis to be
carried out. The discussion which follows highlights the individual sources of funds available
from federal, provincial and private sources, to which Toronto-based firms have access.
Two federally-administered sources of funding for multimedia projects are Telefilm
Canada's Pilot Program for Multimedia Production and Publishing Assistance and the Cultural
Industries Development Fund (CIDF). Other funds available at the national level and
administered by public-private and private partnerships are the Stentor New Media Fund, the
Canadian Independent Film and Video Fund and the Shaw Children's Programming Initiative
(Heritage Canada, 1997b; Groupe Secor, 1997; Stewart, 1997; Telefilm Canada, 1997).
Telefilm Canada, a product of Canadian policy to support an indigenous film and television
industry, introduced a pilot program in 1996 to provide financiai support for the development,
production and marketing of Canadian multimedia material geared towards the general public.
This fund was initiated as one of the first funds geared solely towards the production of Canadian
multimedia content. The fund allows financing for a total of up to 50 percent of budgets, with a
maximum interest-free advance of $50,000 for project development funding, and interest-free
unsecured !oms of up to $150,000 for production, and $75,000 for marketing (Telefilm Canada,
1997). The total annual budget of the Telefilm pilot project is $1 million (Groupe Secor, 1997).
The Cultural Industries Development Fund (CIDF), sponsored by Canadian Heritage and
administered by the Business Development Bank of Canada, provides financial assistance in the
form of prime-rate loans to businesses in the cultural industries including: book publishing,
magazine publishing, sound recording and music publishing, film and video production, and
multimedia and CD-ROM production. A total of $52.2 million is available from the fund, which
is self-sustaining over a five year cycle. The fund began with $26.7 million in 1992 and the
current figure is a reflection of the fund's growth as a result of capital and interest repayments
that are reinvested in the CIDF. Slightly greater than 10 percent of the fund has been allocated to
multimedia firms, in amounts ranging from $20,000 to $250,000 for initiatives that are geared
toward bolstering the long-term success of firms (Business Development Bank of Canada,
1997a; Business Development Bank of Canada, 1997b; Heritage Canada, 1997b; Groupe Secor,
1997).
141
During the CRTC's information highway proceedings in January 1995, the Stentor Alliance,
an alliance of Canadian telecommunications companies, made a commitment to invest $50
million over a two and a half year period in Canadian cultural, broadcasting and new media
projects. The funding commitment was dependent upon a CRTC decision to permit competition
in cable services, and when passed by the federal government, members of the Stentor Alliance
were allowed to apply for broadcasting distribution licenses (Stentor Alliance, 1997a). The
majority of the funds are to be distributed by the individual telecoms across the country (see Bell
New Media Fund below), though a small portion of the funding ($2.5 million) has been placed in
a national fund. The Stentor New Media Fund is intended to provide funding for content
production, research and development and training and education for multimedia projects that
are national in scope, subject matter or impact (Stentor Alliance, 1997b). The first round of
funding support, a total of $600,000, was allocated by competition and was awarded in
December 1997 to eight Canadian companies (Stentor Alliance, 1997~).
The Shaw Children's Programming Initiative is geared towards television producers
requiring the final 10 to 15 percent of their total production budgets, and applies to six categories
of production, including multimedia. A total of $10 million was contributed to the fund by Shaw
Cable. Distributed funds take the form of top-up equity loans, with a maximum of $200,000.
The fund's express goal is to encourage the development of television programming aimed at
children 13 and under and is administered by Shaw Cable. The fund was initiated in 1994 as part
of CRTC regulations governing the production of tangible benefits in the cable industry
(Heritage Canada, 1997b; Media Awareness Network, 1997; Yakemchuk, 1998, pers. comm.).
Both the Stentor Alliance's new media fund (and those of its members) as well as the Shaw
Children's Programming Initiative, were developed as a result of negotiations between the
CRTC and powerful industry stakeholders in telecommunications, broadcasting and cable
television. The establishment of these funds may represent a conscious strategy on the part of
the CRTC to leverage private sector support for the development of Canadian content and
cultural production, in exchange for rights at the industry level that permit andlor ease entry into
Canadian broadcast markets. As such, the establishment of these privately generated funds
represents another method by which the Canadian government has helped to support the nation's
cultural industries.
The Canadian Independent Film and Video Fund provides non-equity financial assistance to
interactive multimedia projects, among other film and video ventures, that fall under one of the
following categories: education, information, or edutainment. Under the funding guidelines, up
to 49 percent of a project's direct costs may be funded (up to a maximum of $60,000) at the
development, prototype and production stages. The fund is administered independently by the
Canadian Independent Film and Video Fund executive, and initial funding was received from
Telefilm Canada. Currently, the fund's administrators are actively seeking private funds (Digital
Media Champion Group, 1998; Froman, 1998, pers. comm.).
At the provincial level, funding for new media projects is limited. One fund that has
supported non-profit multimedia organizations such as IMAT and Smart Toronto is the
province's Cultural Strategic Development Fund. The fund was established by the provincial
government in 1996 to partially offset some of the negative impacts associated with financial
cutbacks to the arts and cultural industries that were implemented when the Conservative
government took office in 1995. However the fund is small with less than $1 million. Its funds
are targeted towards the strategic development of the provinces' cultural industry groups and
organizations (Ratchford, 1997, pers. comm.; Parsons, 1998, pers. comm.). A traditional source
of funding for the film industry, the Ontario Film Development Corporation (OFDC), developed
a provincial new media fund after careful research of the industry's status and needs in 1995
(Giurata, 1995; Wujec et al; 1995). However, the fund was frozen in 1996 and has not been
reinstated since.
The one provincial-level fund that does support new media production in Ontario is the Bell
Broadcast and New Media Fund, as part of the Stentor Alliance's commitment to the CRTC.
Bell Canada's Broadcast and New Media Fund will allocate $12 million over the next two and
half years to broadcast and new media projects in Ontario and Quebec (Bell Canada, 1997a).
Sixty percent of the funding will go towards English language projects while the remainder will
be targeted to French language productions. All projects must have both a new media and a
broadcast component, with a total of up to $250,000 in eligible funding per project for the new
media component (Bell Canada, 1997b).
Supplementary sources of finance for multimedia firms are thus administered through a small
number of national and provincial funds and funding organizations. While most multimedia
firms in Canada gear the majority of their multimedia work towards the corporate sector (IMAT,
1995; see also Chapters Two and Three), the bulk of the funds available for project financing are
geared towards entertainment and edutainment products. The CIDF is an exception however;
lending money for "working capital, expansion projects and various other initiatives geared to
long-term growth and viability" (Business Development Bank of Canada, 1997a). However, the
money in this fund is limited and by November 1997, all funds had been awarded for the fiscal
year, beginning on April 1 (Cunneen, 1997, pers. comm.; Business Development Bank of
Canada, 1997b). The criteria for the $10 million Interactive Digital Media Small Business
Growth Fund announced by the provincial government in their May 1998 budget have yet to be
announced, but this fund does have the potential to support a variety of multimedia activities at
the provincial level. Furthermore, with respect to funding opportunities, Toronto area
multimedia firms may be at a disadvantage relative to firms in less well-developed multimedia
clusters, as national-level funding tends to be divided between the provinces, in an attempt to
overcome traditional barriers to industrial development nationally, and to account for regional
disparities in economic opportunities. Finally, the overwhelming emphasis of funding programs
on the development of multimedia material for broadcast purposes can be contrasted against the
gap in financing mechanisms for the majority of multimedia firms, whose work lies in a field
other than broadcasting.
4.4 Assessing Responses to Multimedia's Emergence
Governments at both the federal and provincial levels recognize the potential for the
multimedia industry to become a key feature of the country's and especially Toronto's industrial
landscape, and its ability to contribute to employment growth, exports, and overall economic
vitality. Reviewing only the well intentioned, but limited direct actions of government and
associations with respect to fostering the growth of the multimedia industry would be
misleading, however.
This research has shown that it is crucial to consider the impact of the federal, provincial and
to a lesser extent, local governments' longstanding and supportive cultural policies on the
multimedia industry more generally; it is these cultural policies that have - indirectly -had the
greatest positive public sector impact. The multimedia industry in Toronto was shown in
Chapters Two and Three to have important supplier and client relationships with locally based
cultural and content industries that have been the target of Canadian cultural policies. It is a
widely agreed upon fact that these cultural industries would not exist to the extent they do had
they not benefited from government intervention and regulation. Therefore, while most cultural
policies do not relate directly to multimedia, their indirect effects on the growth of the industry
cannot be underestimated. Furthermore, it is in the context of an atmosphere in which cultural
industries remain supported by government policy, that much multimedia-related policy will
ultimately develop. Examples of this can be seen in the introduction of provincial tax credits for
multimedia which mimic preexisting tax credits for the film industry. Witness also the number
of funds available to the multimedia industry (albeit in limited amounts) that draw their
sustenance from CRTC regulations, Telefilm Canada and other federally-led cultural policy
initiatives.
Of much interest to the discussion on the influences of public policy on regional economic
prosperity, Toronto's multimedia industry has developed in spite of the fact that there is no
textbook example of institutional thickness occurring here. It appears that the industry's growth,
to this point, has not been a function of 'thickness' amongst associational structures - with the
exception of supportive cultural policies. This exploration has shown that the Toronto region's
multimedia industry enjoys many of the outcomes of institutional thickness on a micro-scale, yet
it lacks strength in several of the inputs that are supposed to lead to institutional thickness, as
detailed in the beginning of this chapter. Interaction amongst players at the local level can
certainly be described as being associative, but formal associational action is rather weak. This
seemingly paradoxical finding contradicts Amin and Thrift's suggestion as to which factors and
conditions are prerequisite for regional economic success in industrial sectors and will be
explored further in Chapter Six.
This research shows that the multimedia industry in Canada, and in Toronto, shares many
similarities with the country's cultural industries. As such, the sector's continued success is
dependent not only on the economics of multimedia production and on market outcomes, but
also on the continuation of supportive government policy, direct and indirect. There are other
features of Toronto's multimedia industry that also merit attention with respect to the industry's
continued growth. Certainly, this research provides evidence of both traded and untraded
interdependencies - intefirm and intraindustry - and this includes the importance of untraded
interdependencies between multimedia and other local cultural industries. The development of
these untraded interdependencies is also indirectly supported by the state - especially through its
strong support of culture. In addition, the role of education policy was noted in Chapter Three as
an area in which government policy contributes to structures that reinforce multimedia's regional
strengths. However, whether or not the industry can maintain its competitive advantage without
further strengthening at least some of its formal institutional structures, is uncertain, given the
competition the local industry will increasingly face as other centres of multimedia production
continue to emerge and mature. The nature of this competition as it has emerged in other centres
of multimedia production, and the role of public policy, associational and associative action in
this process, are the subject of Chapter Five.
5.1 The Multimedia Industry in a Global Context
At the global scale, a hierarchy of multimedia centres appears to have emerged. The largest
and most developed are located in some of the world's most dynamic cities; cities which have
been characterized as global centres of production in other industries such as advertising,
computer hardware and software production, entertainment, finance and publishing. The most
well-renowned centres of multimedia production are also located in highly developed
metropolitan areas, where this activity clusters in and around the CBD frame. This phenomenon
has been observed in Amsterdam, Los Angeles, Munich, New York, San Francisco, and Toronto.
However, large metropolitan areas are not the only ones to have attracted the development of
multimedia firms; smaller agglomerations of activity are being pursued as part of economic
development programs in regions with a prior history of industrial strength in computer hardware
and software production andlor cultural industries; Brighton-Hove, Cardiff and Kuala Lumpur all
represent examples of this type of multimedia agglomeration (Tang, 1997; Cooke and Hughes,
1997; Multimedia Development Corporation, 1997a).
This chapter examines the state of development of multimedia centres at a global scale as a
way of providing a set of benchmarks and a wider context for an analysis of Toronto's
multimedia sector. The experiences of Australia, Asia, and Europe are highlighted using the
limited research available on multimedia activity and its impact on national and regional
economies. This is followed by a more detailed discussion of the multimedia industry's
emergence in North America, home of the world's largest and most dynamic multimedia
production centres. In-depth analysis of multimedia industries in San Francisco and New York
details the size, structure and organization of the multimedia industry in these two cities, which
contain two of the largest multimedia clusters worldwide. The chapter concludes with some
further observations on the multimedia industry at a global scale and attempts to answer the
question: Does the existing spatial distribution of multimedia activity, in which the most
significant and dynamic industries have emerged in large urban centres, present an enduring or
ephemeral attribute of the multimedia industry? This begs a further question that will be
addressed in Chapter Six: What are the long-term prospects for Toronto's status as a centre of
multimedia production, in light of this?
5.1.1 Multi~nedia Development in Australia and Asia
Australia appears to be one of the first nations to have recognized the potential value of
encouraging the growth of a strong national multimedia industry, with government-
commissioned studies of the industry published as early as December 1994. In that year,
revenues from interactive multimedia products accounted for $50 million5br approximately 10
percent of annual revenues in the traditional media industries in Australia. An estimated 130
firms were active in producing interactive multimedia content at the time, and Australia led the
Asian countries in terms of the number of CD-ROM content developers, followed by India,
Taiwan, and South Korea respectively. Recognizing the importance of pursuing the
development of a strong multimedia sector as part of a larger export strategy, Cutler and
Company (consultants to the Australian government) recommended that Australia seek to
maintain its interactive multimedia leader status within Asia by encouraging the development of
export-oriented multimedia firms and products (Cutler and Company, 1994).
53 $50 million Australian was equal to approximately $54.4 million Canadian on December 31, 1994 (Oanda - The Currency $ire, 1998).
Service industries account for almost 70 percent of the Australian economy, but only six
percent of Australia's international trade. A multimedia export strategy is seen as a way to
increase the role of exports for service-based goods (Allen Consulting Group, 1997). Therefore,
Australia has sought to stimulate both domestic and international demand for multimedia
products through the development of both mass and custom based markets for multimedia
(Coopers and Lybrand, 1995). Specific export opportunities that have been identified and
pursued to date include telemedicine and online education services; these are both areas in which
government has a major market share in Australia and can therefore be proactive in encouraging
their export (Allen Consulting Group, 1997). There are however, two significant barriers with
respect to the development of Australia's multimedia industry: i) the high cost of accessing the
Internet compared to other countries such as Hong Kong and the United States; and ii) high
capital gains taxes that have the effect of curbing entrepreneurialism and subsequently limiting
the development of multimedia products by small, innovative companies (McKinsey and
Company, 1997).
Government support for the development of Australia's multimedia industry is generous
however, with the initiation of a $84 million (Australian) fund in 1995 to be spent over a four
year period on five digital media initiatives including: development and commercialization of
interactive multimedia products and services for domestic and export markets; export and
educational market title development; digital media forums for multimedia and software
developers; a program to exhibit Australian culture via CD- ROM; and financing for the
traditional cultural industries to distribute to film, training and education projects (The Digital
Media Industry in Ontario, 1996).
Malaysia, currently one of the largest producers of disk drives and electronics parts in the
world, is attempting to shift its economic base beyond electronics assembly by pursuing a
government-initiated high technology and multimedia development program through the
development of the Multimedia Super Corridor (MSC) (Clifford, 1997). The corridor runs 15
km wide and 50 km long, starting from Kuala Lumpur City Centre and running south towards
the international airport. Along the way, two 'smart cities' are being developed. One - Putrajaya
- is an electronic government centre, while Cyberjaya is a city geared towards multimedia firms,
research and development activity, and headquarters locations with advanced multimedia
capabilities (Multimedia Development Corporation, 1997a).
Labeled a 'multimedia utopia' by the government-initiated Multimedia Development
Corporation, the government's goal is to develop the Multimedia Super Corridor within a 20
year time period. In order to be permitted to locate in and take advantage of the advanced
technology infrastructure being developed in the corridor, companies must meet the following
criteria:
1) They must be a provider or heavy user of multimedia products and services;
2) They must employ a substantial number of knowledge workers; and
3) They should be able to outline how they will transfer technology andlor knowledge to Malaysia or otherwise contribute to the development of the MSC and the Malaysian economy (Multimedia Development Corporation, 1997b).
In return, companies will be allowed unrestricted work permits for foreign knowledge-based
workers, exemption from local ownership requirements, ten year income tax holidays, and duty-
free imports of capital equipment (Clifford, 1997; Multimedia Development Corporation,
1997~). The focus of the MDC is decidedly on attracting foreign investors to Malaysia, which it
is hoped, will in turn lead to the development of indigenous multimedia activity. Thus far,
international marketing efforts, including promotional tours to the United States, Japan, the
United Kingdom and Canada, have yielded over 1,000 registrations of interest by foreign
companies, both individually and in joint ventures with Malaysian companies. Of a total of 105
applications for MSC status, 38 were approved by late August 1997, by the Multimedia
Development Corporation, the body appointed to administer, provide advice, market and shape
the legal, policy and operating environment of the MSC (Multimedia Development Corporation,
1997~).
5.1.2 Agglomerations of Multimedia Activity in Europe
Opportunities for utilizing and promoting multimedia development as an economic
development tool are not only being pursued in newly industrialized Asian economies such as
Malaysia, but also in post-industrial European economies. Here the focus has been on promoting
multimedia as an economic redevelopment strategy. Furthermore, there are also examples of
European centres of media, culture and advanced technology where multimedia is emerging
more spontaneously as an important new industry.
Tang (1997) cites an unidentified directory of multimedia firms that lists approximately
1,200 multimedia firms in the United Kingdom. Of those, nearly 30 percent are located in the
South East of England, with 170 firms located in the London area and 105 in the Brighton-Hove
region, located about 75 km south of London. Tang focuses on the Brighton-Hove region, which
she characterizes as the fastest growing segment of England's South East high-tech corridor.
Tang's study of 3 1 electronic publishing54 companies in Brighton-Hove concluded that the
firms benefit from "proximity to a wide research base, an arts legacy, and a well communicated
"Tang defines electronic publications as "multimedia products in CD-ROM and online formats, including applications for the Internet" (Tang, 1997.2) and uses the terms electronic publishing and multimedia interchangeably.
infrastructure to London and other parts of the country" (1997, 18). The industry's development
hzs also been encouraged by local economic development policies aimed at rejuvenating the
area, and by lasting support for the creative arts. However, according to Tang, the region, and
Britain in general, lacks the kind of culture associated with business risk and venture capital
which are significant factors that have propelled the American high technology cluster, Silicon
Valley, into a place which other regions hope to replicate. Tang emphasizes the role that
regional development policies can play nevertheless, to help sustain the role that the Brighton-
Hove region has developed within the sphere of multimedia production in the UK.
Cardiff, the capital city of Wales, provides another example of a regionally significant
multimedia industry that has developed in conjunction with the largely regionally, but also
nationally and internationally oriented traditional media, computer software, and creative arts
industries of Wales. Cooke and Hughes (1997) review the role of clustering in Cardiff's
multimedia industry. In a study of 300 multimedia and media, animation, graphics, creative arts
and services firmss5 in Cardiff, Cooke and Hughes (1997) evaluate the propensity for multimedia
and related firms to relocate to a heritage area with high vacancy rates and offices and
warehouses built in the 19th century located on Cardiff Bay. Redevelopment schemes for the
area envision it as a 'cultural quarter,' with firms working in multimedia and related industries as
attractive potential tenants.
During the course of their study, Cooke and Hughes (1997) found that firms valued locations
where clusters of similar and related firms were located as these provided opportunities for
formal and informal interaction, information sharing and cooperation. Firms surveyed were
receptive to the idea of further developing the proposed cultural quarter as a distinctive
55 Multimedia production was the core activity for 16% or 48 of the 300 firms (Cooke and Hughes, 1997).
multimedia centre, with 21 percent of survey respondents already located in the district. Cooke
and Hughes further conclude that Cardiff s multimedia sector is likely to experience continued
growth in conjunction with the local media industry that spawned the development of the sector
and that "for the present, the key element of proximity 'capital' for the Cardiff multimedia
cluster resides in the intangible capital derived from tacit-knowledge exchange and sharing of
expertise amongst complementary firms coalescing and disengaging around specific projects as
market opportunities evolve" (Cooke and Hughes, 1997.19).
Not all locations are suitable for pursuing multimedia as an economic development or
economic revitalization strategy however. In his evaluation of promoting the development of a
multimedia industry in the North East of England, Comford (1997) indicates that, based on his
analysis, the region is not suited to the development of multimedia as it does not contain
strengths in the related industrial sectors that appear to support the multimedia industry. The
North East lacks strengths in traditional media; computer hardware, software and systems;
telecommunications; and technical research and development, thus making it a poor location for
multimedia firms. "For the North East of England, as with many other regions, the absence of
anything that can act as a 'hub' firm or institution (as perhaps the BBC can in London ...) means
that there is little chance of a substantial multimedia business emerging in the region" (Comford,
1997, 19).
Cornford further rejects multimedia as an economic development panacea for the region
based on the belief that multimedia is a composite of traditional media industries and therefore,
"the location of the multimedia industry is destined to replicate that of the existing media,
organized around a small number of large hub firms and institutions" (Cornford, 1997,4).
Comford concludes that the multimedia industry is already highly concentrated geographically,
that this development pattern will likely be reinforced rather than diminished, and that only weak
development of multimedia firms will ensue in regions peripheral to the major media centres.
The theme of uneven development continues in studies of the multimedia industry, with the
largest centres consistently containing a disproportionate share of multimedia firms, relative to
the rest of a nation. The Netherlands is no exception to this phenomenon, as Naylor (1997)
points out in his study of the country's Internet industry. Of a database of 381 companies
working in Internet-related areas in the Netherlands, Naylor found 168 connectivity and network
solutions (i.e. Internet service providers), 158 presence solutions (i.e. content enablers and
providers), 50 business services (i.e. consulting, training, and project management) and five
Internet cafes.
A sample of 281 firms provides a general breakdown of the location of Internet suppliers in
the country, with the largest number of firms (72 or 36 percent of the sample) located in
Amsterdam, the nation's largest metropolitan area, and the second largest number of firms (16
percent) located in Rotterdam. Amsterdam was home to more than double the number of
Internet suppliers than any other Netherlands municipality, and accounts for 44 percent of the
country's Internet firms focusing on connectivity and network solutions and just under 42
percent of presence solutions companies. Within Amsterdam, the spatial agglomeration of firms
is further evidenced by two distinct areas of multimedia activity. Agglomeration of Internet
products and services firms in the country's largest cities, concludes Naylor (1997), is a defining
feature of the industry that is likely to expand rather than contract in importance over time,
largely due to the significance of supply and demand conditions (i.e. availability of a skilled
iabour force, well-developed telecommunications infrastructure, concentration of business
activities and corporate headquarters) that led to the development of the industry in these two
regions in the first place.
In Munich, Germany, one in ten people in the labour force were employed in the media
industries in 1995. Munich's orientation as a centre of media, communications and computer
based employment appears to bode well for the potential of Munich's multimedia industry. The
city contains an estimated 122 multimedia firms with 3,000 employees, and its multimedia sector
is more than twice the size of the multimedia sectors in Berlin, Hamburg and Cologne (Strater,
1997).
The development of Munich's multimedia industry is related to: its strengths in education
and research, with a total of 100,000 university students in the region; a book publishing industry
which ranks second in the world behind New York; the nation's second largest magazine
publishing centre; the country's leading location for film and television production; and the
generally urban nature of the region. One important multimedia-related industry in which
Munich has a relative weakness compared to other German cities, however, is in advertising.
The region does have a number of associations that support the multimedia industry, as well as a
political framework which has recently begun to support the development of the regional media
and telecommunications industries through financing and policy programs (Strater, 1997).
Strater (1997) indicates that Munich's multimedia industry has crystallized as a result of the
urban, industrial and political strengths of the region, and that the local multimedia industry will
continue to become embedded in the success of Munich's regional economy.
5.1.3 American Centres of Multimedia Production
Globally, the multimedia industry is centred around the North American centres of
multimedia production. Furthermore, there is a "prevailing view that North America will
continue to dominate content production" (Price Waterhouse, 1995, vii). The largest
agglomerations of multimedia firms in the world are located in the United States. Fortune (1996)
indicates that over half of all U.S. multimedia firms are located in Southem California and the
San Francisco Bay Area. Scott (1998a) has identified the San Francisco industry as being
marginally larger than the Los Angeles industry, while Schmit (1997) identifies Los Angeles as
having the largest number of multimedia jobs. Other US. cities identified as competitor cities to
San Francisco's multimedia industry include: Austin, Seattle, and Boston (Arthur Andersen
Consulting Ltd., 1996). Estimates from a Price Waterhouse (1995) report on new media firms in
the Seattle area, indicate that there are between two and three hundred new media companies in
the region. New York City also vies for a spot in the top three centres of multimedia production
in the US., though it is impossible to say exactly where it falls because of discrepancies in the
definition of multimedia employed in studies of each city's multimedia industry.
It is problematic to compare the size of multimedia industries in each of the above cities
using exact numbers, because of different definitions of what constitutes 'multimedia' and the
lack of a definition of 'multimedia' in many reports. Furthermore, the use of different sources
for identifying multimedia firms also leads to vastly different numbers for individual regions.
For instance, Scott's (1998a) initial analysis is based on a directory identifying 431 multimedia
firms in Califomia, while his later analysis is based on a population of 875 multimedia firms in
the state derived by combining several information sources. A press release from the Bay Area
Multimedia Partnership (BAMP) dated March 1995, estimates that there are "more than 2,200
firms engaged in multimedia activity throughout the nine counties in the (Bay area) region."
This number represents more than twice the number of multimedia firms that Scott (1998a)
counts in the entire State of California. In New York City, estimates of employment in
multimedia range from around 10,000 (Krantz, 1995) to more than 27,000 (Coopers 8: Lybrand,
1996). There may be instances in which it is advantageous to exaggerate the number of firms or
jobs in multimedia to attract attention, new firm startups and financing.
In what is likely the first comprehensive study of the emergence of regional multimedia
agglomerations, Scott (1998a) conducted a study of the multimedia industry in Califomia. Scott
notes that the multimedia industry is particularly complementary to Califomia, based on the
state's strong high technology and cultural industries sectors. There are significant numbers of
multimedia firms in two metropolitan regions, the San Francisco Bay area and Southem
California. Not surprisingly, Scott's survey of multimedia firms in these two areas found that
Southern California firms were strongly aligned with the local entertainment and cultural
industries; whereas the Bay Area firms were more connected with Silicon Valley high
technology firms and local corporate enterprises. It is because of the presence of these
preexisting industries that multimedia developed its strongest presence in these two Califomia
regions. Furthermore, Scott asserts that the agglomerations of multimedia firms in these two
locations present examples of industrial districts in which the linkages and interrelationships
between firms drive the industry further than if the firms worked individually and in isolation of
one another.
In his study of the California industry, Scott found that most firms were small in size with
fewer than nine employees, though there are a small number of firms ranging in size from 250 to
over 1000 employees. More than half of all the firms surveyed were established after 1990.
People working in multimedia firms had previously worked in positions that were "close in
functional terms to the core tasks of multimedia production" (Scott, 1998a, 149) including sales
and marketing, motion picture/tv/video production and the computer industry. The employee
base of most firms consisted of a small group of full time workers complemented by part time
and contract workers hired on a per project, per need basis. Employees came from three basic
skill sets: creative workers (the predominant type), technical employees and
managementhusiness. The majority of firms surveyed were independently owned, while just
over one quarter were owned by larger companies, usually involved in traditional media
industries such as television, broadcasting or publishing. Despite the fact that both global and
local relationships existed between firms and their suppliers and producers, subcontracting
relations were highly concentrated in the local area, as were joint venture initiatives. With
respect to joint ventures, Scott's survey identified the significance of joint venture activity in
more than half of all firms interviewed. Joint ventures tended to link small multimedia firms
bi th larger, established media firms.
Scott believes that the muitimedia industry in California remains competitive in part due to
the increasing returns associated with agglomeration economies. The policy recommendations
that Scott proposes relate to increasing public support and industry coordination in an attempt to
maintain the global position and stature of the Bay Area and Southern California multimedia
industries. Despite its current strengths, Scott argues that policy initiatives to support the growth
of the multimedia industry are required. He asserts that to achieve:
the rise of a new economic strategic order where firms develop mastery of markets not just as a function of their individual competence but also on the basis of the competitive advantages of their local milieu, disciplined public policy attention to the need of California's multimedia industry is essential if it is to preserve its lead over the long run (Scott, 1998a, 161-162).
5.2 Close-Up: Multimedia in San Francisco and New York
The remainder of this chapter will focus on documenting the emergence and current status of
two of the largest multimedia centres in the U S . (and the world) - San Francisco and New York
City. It is based on interviews with principals of multimedia firms, association leaders and
government representatives in each of these two multimedia centres56. The multimedia
industries in these cities has commanded a significant amount of attention due to the impact of
their emergence on each of these cities' respective urban environments, linkages to well
developed clusters of related industries, and the potential to provide significant economic
development opportunities.
5.3 San Francisco - Convergence and Multimedia's Emergence
Reports on the total number of multimedia firms in the Bay Area vary from 198 (Scott,
1998a) to 2,200 (Bay Area Multimedia Partnership, 1995) while the San Francisco Planning
Department (1997) estimates that there are 727 multimedia firms located in the city, using a
fairly broad definition of 'multimedia firm'57; and that 56 percent of these firms focus on core
multimedia activities including content and service provision. The most recent study of San
Francisco's interactive media industry finds that there are 379 multimedia firms in the city that
produce interactive multimedia products or services for sale to third parties (MDG.org et al,
1998).
Most multimedia firms in the city were established in 1990 or later, with average
employment per firm of approximately 7 persons (San Francisco Planning Department, 1997).
Forty-four percent of firms have ten employees or less. San Francisco's multimedia firms rely
on freelance employees, supplementing their full-time workforces with temporary, freelance
personnel by up to 24 percent during periods of high workloads and to obtain specialized
services (MDG.org, 1998). The focus of work carried out by multimedia firms in San Francisco
56 Refer to Appendix D for a list of interviewees in San Francisco and New York. See Appendix I: for a copy of the guide used to interview multimedia firm representatives in San Francisco and New York.
differs from that conducted in Los Angeles, where the industry is more strongly affiliated with
the entertainment industry, while the work of San Francisco area firms serve business markets to
a great extent (Scott, 1998a). Egan (1997.20) characterizes the Bay Area's multimedia industry
as one that "consists primarily of multimedia development tools companies, title developers,
specialized multimedia service providers, freelance artists and musicians, and large for-profit
educational institutions, who form a classic industrial district."
What sets San Francisco's multimedia sector apart from any other centre of multimedia
activity worldwide, is its proximity to one of the world's most economically envied places:
Silicon Valley. While Silicon Valley's influence on the technological capabilities of the
multimedia industry is undeniable, other key factors such as a strong arts culture, presence of
multinational headquarters and the 2nd largest financial industry in North America (Slasor and
Whitehead, 1997), highly regarded educational and training institutions, large base of suppliers
in the creative sector and favourable climate, are also features of the Bay Area and their impact
on the development of the region's multimedia industry should not be underestimated.
5.3.1 From Silicon Valley to Multimedia Gulch
Proximity to Silicon Valley was stressed as a critical factor in the development and continued
strength of San Francisco's multimedia industry by every firm interviewed theress. Silicon
Valley provides San Francisco's multimedia firms with numerous advantages. These include:
access to state-of-the-art technology and software as soon as, and sometimes before, they reach
commercial markets; renowned educational institutions including Stanford University and the
"The San Francisco Planning Department breaks down the number of multimedia firms in the city into the following categories (numbers in brackets represent number of firms in each category): Core multimedia activities (407); Multimedia tools and applications (1 19); Support services (201). 58 A total of eight interviews were conducted in San Francisco - 5 with principals and senior managers at multimedia firms; 2 with local government representatives; and 1 with the leader of a local multimedia organization. See Appendix D for further details.
University of California at Berkeley; an abundance of entrepreneurs and venture capitalists; and
a culture of enterprise, innovation and success that is the envy of much of the rest of the world.
This environment links to San Francisco's multimedia industry in the form of both backward and
forward linkages.
The development of mutually beneficial relationships between content developers in San
Francisco and hardware and software developers in Silicon Valley is enabled by their proximity
to one another. For instance, San Francisco's multimedia firms often serve as testing grounds for
innovative software and high-tech hardware developed in Silicon Valley. A number of
interviewees indicated that their firms are 'beta testers' for new products corning out of
technology firms located in Silicon Valley. Anita Corona, Director of Communications at
Ikonic (an 80 person multimedia firm established in 1985) notes that "We tend to become beta
testers because we're the companies that are creating and using the products the most.
[Companies] come to us and they say 'Okay here's an earlier version of it, tell us what you think,
how can we improve it?"' The San Francisco Production Group is another firm that has acted as
beta testers in the past, but found that the costs outweighed the benefits. On the positive side
"you get to give a lot of input, but the bad part is it doesn't work for six months to a year ... It's
just too costly. You have to weigh the cutting-edgeness against the ability to pay the bills"
(Debra Robins, President and CEO).
Silicon Valley also acts as an important client base to San Francisco's multimedia firms.
There are several reasons for this: first and foremost is that technology companies are natural
users of multimedia products in addition to being early adopters of new technologies by virtue of
the business they work in. According to Theresa Bui, Marketing Manager of Red Dot
Interactive:
The companies that are located in Silicon Valley are leaders in technology, so they more easily adopt new technology that comes along. They were early adopters of the use of the web or interactive technology within their core business operations ... when you are with other companies that are historically eager to adapt to new things, it's easier to approach them with new ways of commerce or new ways of communication.
5.3.2 Location, Clustering and Technology
In San Francisco, the widely recognized centre of the new media industry is in an area
termed 'Multimedia Gulch' where the biggest concentration of the region's multimedia firms are
located (San Francisco Planning Department, 1997: Business Week, 1997b). This area is part of
the larger South of Market Area (SOMA) neighbourhood, a former industrial manufacturing area
adjacent to the city's downtown that has been transformed into a popular location for arts and
cultural institutions, garment manufacturing, artists' residences, and a prime location for
multimedia firms (Vivid Studios, 1996; San Francisco Planning Department and the South of
Market Foundation, 1997). The City of San Francisco Planning Department (1997) estimates
that 360 multimedia businesses, or 49 percent of the city's total, are located in SOMA.
One of the most prominent ironies associated with the multimedia industry is its propensity
to form in geographically defined clusters despite the ability of the technology upon which the
industry relies and its supposed ability to facilitate interaction across distance, thereby
eliminating the importance of physical proximity. In reality, however, proximity of multimedia
firms to one another, to suppliers and to clients is one of the defining characteristics of the
industry. Amit Ghosh, Chief of Comprehensive Planning at the City and County of San
Francisco Planning Department, describes the seeming paradox as follows:
[The multimedia industry] likes urban areas. It's an urban industry but at the same time it has this dual character ... it uses equipment and tools that allows it to be completely free of any spatial definition but on the other hand it loves to be in geographically identifiable areas that have their own unique characteristics.
John Evershed, CEO of Mondo Media, a 50 person company owned by two Canadians that
focuses on producing multimedia for games and other entertainment products, reinforces the
importance of physical and urban features associated with the firm's offices located in a former
factory in Portrero Hill, an industrial area adjacent to SOMA:
It's just a comfortable space. It's kind of wide open, we prefer a wide open setting to a cubicle thing. This is an old candy factory - it's just got that right mixture of windows and space, proximity to the city, and public transit.
In addition to demonstrating their preference to be located in spaces that are both urban in nature
and flexible in layout, representatives from San Francisco's multimedia industry confirm the
importance of being in close proximity to suppliers and clients, acknowledging that their
intensive use of technology does not eliminate the barriers to personal interaction created by
distance.
Anita Corona of Ikonic describes the importance of having freelance suppliers hired by the
firm work alongside the company's full time employees at their Multimedia Gulch offices, rather
than communicate via computer:
It's important to us to have this cohesive team of people working on a project, feeling full understanding of the clients' needs and working together. That ability to walk up and tap on somebody's shoulder contributes to a successful project [more] than email correspondence.
The preference to interact face-to-face not only applies to dealing with employees and
freelancers, but also, and possibly more so, when interacting with clients. The importance of
face-to-face client meetings is constantly stressed both as a way to introduce a firm to potential
clients, and as a critical facet in maintaining long-term client relationships. Debra Robins of the
San Francisco Production Group indicates that despite the opportunities to 'meet' electronically,
traditional face-to-face meetings are invaluable to the company's success.
I think a face-to-face meeting is always preferable, especially when you're presenting concepts. We do that less and less because what we end up doing is putting our concept
designs up on our website and then we'll talk the client through it [over the phone]. But there's just nothing like having a face-to-face meeting with a client. It's just much more intimate, you get an opportunity to bond. The more often you can spend time with your clients, the more successful the company is going to be in the long run.
Henri Poole, CEO of Vivid Studios, a 50 person multimedia firm focusing on developing online
products for large corporations, echoes the above sentiment, noting "it's a highly personal
business that we're in. There's a lot of personal contact, there's a lot of education and
handholding that goes along in this new field. Being in close proximity to a client is pretty
important."
Theresa Bui of Red Dot Interactive says that the firm recognizes a noticeable difference in
terms of how their clients use technology and the level of face-to-face contact that's required
between the company and their clients during the process of selling and implementing a new
interactive product:
If they're a very sophisticated company in terms of how they use technology we're finding that they seem to require less face-to-face contact. But if they are a smaller company or if they are a bigger company that hasn't used Internet technology before ... then they like us to come down and really show them and walk them through the process.
The importance placed on personal interaction and proximity to suppliers and clients does
not appear to have been nullified by the introduction of new technologies enabling
communication without proximity. Not only do the regions with the largest numbers of
multimedia firms appear to have formed distinct clusters of firms in urban neighbourhoods with
access to related industries and activity, but also, it appears that the role of interpersonal
interaction is increasing rather than decreasing in importance in the perception of multimedia
industry representatives. Susan Worthman, Executive Director of MDG.org (formerly the
Multimedia Development Group), a non-profit organization supporting market and business
development for the interactive industry, provides a summary of the future potential for
multimedia clustering:
If it were the case that all this network technology would mean that people would be dispersed and could be anywhere, then what one would expect to see is the deconcentration of clusters, that the clusters would not be as strong. What I believe we're seeing is quite the opposite. Because this industry relies so much on convergence and cooperation and collaboration and the confluence of technology and tools with creative content and infrastructure, you're naturally going to form clusters. And the people who will be most competitive are companies that are in a cluster or in a community.
Indeed, MDG.org is itself contributing to the increased intraurban clustering of multimedia
activity by moving their offices from an adjacent neighbourhood to the heart of Multimedia
Gulch in 1998 (MDG.org, 1998).
5.3.3 Clients
Table 5.1 describes each of the five multimedia firms interviewed in San Francisco and
highlights their industry and geographic focus. The data presented indicate that the range of
clients targeted by multimedia firms in San Francisco spans the spectrum of industry sectors that
typically purchase multimedia products: advertising, communications, consumer products,
entertainment, games, finance, technology and publishing; all of which are present in the Bay
Area and beyond. San Francisco area multimedia firms interviewed tended to indicate that their
firms are regionally-focused rather than city-focused in terms of the location of their clients. Of
all firms interviewed, the firm with the highest proportion of clients in the downtown estimated
that 10 percent of their clients, by sales, are in the city centre. Conversely, no firm had less than
30 percent of their clients in the San Francisco Bay Area, and four of five firms indicated that
fifty percent or more of their clients have offices in California. MDG.org et a1 (1998,6) provide
further evidence of San Francisco multimedia firms' regional focus, stating that "nearly one-half
of company revenues from products and over one-half of service revenues were generated in the
Bay Area." This regional, rather than local, concentration, is related to the highly urbanized
character of the region, and its proximity to several large cities in the densely populated State of
California, which contains
Table 5.1: San Francisco Multimedia Firms -Industry and Geographic Focus
Mondo Media San Francisco Production Group 38
1981 Size Year Established Industry Focus
Main Geographic Focus Other U.S. Markets Served International Exports
Advertising Consumer Products Finance Technology
Northern California
50
1988
Entertainment, Games
San Francisco, Los Angeles
Minimal
Rarely
San Diego, Chicago, Denver Asia (minimal)
Ikonic
Consumer Products Education Entertainment Finance Publishing California
New York and rest of country
Asia, Canada, Europe, Latin America (10%)
Vivid Studios
Communications Finance Technology
San Francisco Bay Area
West Coast and rest of country
UK, South America, Sweden (5-10%)
Red Dot Interactive
18 1991
Consumer Products Technology
San Francisco Bay Area Rest of country
Asia, Europe
(5%)
four of the fifteen largest cities in the Urited States (Hartshorn, 1992). The regional dispersal of
both population and economic activity is evidenced by the fact that the population of the City of
San Francisco was estimated to be 723,959 in 1996 (US. Bureau, 1997b), while the population
of the consolidated metropolitan statistical area was 6.24 million (US. Census Bureau, 1997a).
The data presented in Table 5.1 also show that San Francisco area firms, after focusing on the
Bay Area and the State of California as their primary regions, have the vast majority of the rest
of their clients elsewhere in the United States, with a very minimal role placed on exports
(maximum of 10 percent of total sales).
In helping to explain the pattern of local and regional concentration evidenced in the market
focus of these firms, Debra Robins of the San Francisco Production Group says:
Our sales focus is local. And that's only because it's a good place to start and the area is booming ... we don't really need to go look in other areas at the moment. The stuff that we're doing that's outside the market has been referred to us from other clients outside the market.
It is interesting to note that while San Francisco's multimedia firms have attracted attention
at a global scale, there is very little focus on the part of firms to directly seek out clients in
international markets. This may be due in large part to the lucrative market for multimedia
products that exists in the region and in the United States in general.
5.3.4 Suppliers
The most commonly cited types of suppliers to San Francisco's multimedia firms included:
artists, database developers, designers, engineers, programmers, special effects experts,
technicians, and writers in addition to the less frequent hiring of commerce solutions providers,
program testers and translators. Interviewees generally indicated that they tend to hire
freelancers as suppliers, rather than firms. However, and as noted in the discussion of
cooperation and competition amongst the region's multimedia firms in Section 5.3.6, multimedia
firms do work with other companies in related or supporting industries, often in the form of
strategic partnerships and joint ventures. Theresa Bui of Red Dot Interactive indicates that, over
its seven year history, the firm has established a repertoire of preferred freelancers that it hires as
suppliers.
Usually we work with individuals, only because we've been in this business for so long now as compared to others, that we have a nice repertoire of contractors and freelancers and consultants that have worked with us for years now that we keep going to again and again.
To add to that though, like any company in this industry, we are involved with organizations where we can meet new people who are entering the field and who provide fresh blood in terms of talent.
Noting the importance of freelancers Ikonic's Anita Corona says that the firm tends to hire
freelancers to add to their existing talent pool, when needed. The firm prefers to have
freelancers working at Ikonic's offices, and tends to hire freelancers with design, technical and
engineering skills, in that order. Corona notices that there is a shift occurring within the
freelance community, and that people are working as freelancers by choice rather than by lack of
a full time position.
What I'm seeing now are people that prefer to do freelance than tie themselves down to one single company. I think it's starting this whole job of the nineties type of thing, new millennium jobs ... and there's that ability here to do that because there's such a strong need.
Other firms however, are not as keen to utilize mobile freelancers as an important source of
supplier, because, as Debra Robins of the San Francisco Production Group says:
When you use freelancers, not only is there no loyalty but let's say they help you develop a look, they might not be available the next time, your competitor can pick them up. Our business model is to keep our talent - talent being both technical, production management and design - on staff. We use freelancers on occasion but it's usually to fill in short term just because we have more business than we can handle.
The geographic range of suppliers is sometimes related to whether those suppliers are freelancers
or firms. When hiring freelancers, most firms prefer to hire freelancers located in the San
Francisco region to ease face-to-face communication and interpersonal contact with the firm's
employees with whom freelancers work closely. However, when multimedia firms hire another
firm, proximity to the supplier is not always a critical issue, particularly when the working
relationship is based less on interpersonal and face-to-face contact and more on receiving an end
product or service from the supplier.
Overall, San Francisco's multimedia firms rely heavily on the area for both supplies and
suppliers. Eighty percent of respondents to a 1997 survey of the city's interactive media firms
indicated that more than half of their expenditures remained in the local economy (MDG.org et
al, 1998). According to Scott (1998a, 146), "the vigorous growth of the multimedia industry in
the Bay Area and Southern California is related to the prior existence in the two regions of large
computer, software and entertainment industries and the consequent presence of ready-made
pools of technologies and skills directly relevant to the needs of the multimedia sector".
5.3.5 Labour Market
Industry commentators generally view the labour market available to multimedia firms in
San Francisco as adequate to serve the needs of the industry, and the pool of local talent related
to the multimedia industry is perceived to be highly skilled relative to the rest of the country. In
the larger, more established multimedia firms, interviewees indicated that they generally prefer
to hire staff with a few years of work experience as opposed to new graduates. There are a
number of highly regarded multimedia training programs in the region with a total of 10
educational institutions providing multimedia training andlor research programs in the Bay Area,
16 in Southern California, and another seven throughout the rest of California in 1995 (Scott,
1998a). Although interviewees indicated that they did not have a preference for hiring graduates
of one school or program over another, several indicated that they particularly benefit from being
located in proximity to Stanford University, from which several firms hire interns enrolled in the
school's MBA program. San Francisco's artist community also lends strength to the region's
multimedia industry by providing the requisite labour pool required to fulfil the creative needs of
the industry (San Francisco Planning Department, 1997).
While there is a large pool of labour to draw talent from, interviewees did indicate that there
are shortcomings in the labour force. Henri Poole of Vivid Studios sums up the situation by
commenting that:
There are shortcomings across the board: project managers, designers, technologists, strategists ... there's not enough of them and there aren't enough good ones. The field itself is so new, no one really gets it, not even us. So it's hard to find people that are sharp and creative.
Busiiiess leaders working in multimedia are not only interested in finding talented and hard
working employees, but also in attracting people that fit into the established culture of the
individual firms.
There's a lot of people out there, but I think really good people are hard to find. That's also because you're not just looking for really good skills but you're looking for a cultural fit within the organization as well. (Debra Robins, San Francisco Production Group)
While there are some exceptions, most employees at the firms interviewed were already
living in or relocating to the San Francisco zrea when they were hired. John Evershed of Mondo
Media says that the firm "can't afford honestly to do a real serious recruiting effort anywhere
else but locally" which means that for someone who would like to work in San Francisco's
multimedia industry, it is difficult to learn about employment opportunities if they are not
already in the region.
5.3.6 Cooperation and Competition
Saxenian (1995) identifies a culture of cooperation in Silicon Valley that does not exist in the
same manner on the East Coast and indicates that the network approach to organization leads to
greater regional economic success than does a system of autarkic firms. Has this cooperative
culture also permeated San Francisco's multimedia industry, with its strong ties to the Valley? It
would appear from information collected during interviews that indeed, San Francisco's
multimedia industry is characterized by some degree of cooperation at both the intra- and
interindustry levels, although there are important limits to this.
The reasons why firms share information and experiences with one another were identified
by interviewees in simplistic terms: "This is an evolving and new technology and when you have
a powerful tool like this that's changing really from day to day it's nice to have a support
network, people who share ideas and share experiences" (Theresa Bui, Red Dot Interactive).
Another explanation for the cooperation of San Francisco's multimedia firms with one another is
their interpretation of the role of the Internet, and the vast amount of multimedia work that is
desired by firms in the region. Comparing San Francisco to New York's multimedia industry,
Henri Poole of Vivid Studios notes that:
We're not competitive !ike they are in New York . .. the general feeling in the community in San Francisco, especially that came out of the Internet, is that this is an open space and the market is expanding so rapidly that there's enough room for everybody. You don't have to kill your competitor, you can actually be friends with them. It's really nice.
Furthermore, due to the proximity of multimedia and related firms to one another, especially
in the SOMA area, frequent opportunities for informal networking are created and pursued.
In this multimedia field, all of these people relate m d interact with one another so they may work at these different companies and do different types of jobs but they go out at night and they play together. And they share news, they share information, always talking about the latest technologies and being involved in groups like Women in Multimedia or the Multimedia Development Group or Webgrrls [sic]. There's a certain and definitive hub that's been created in San Francisco. (Anita Corona, Ikonic)
However, there are limits to the type of information sharing and cooperation that ensue in this
unique cultural environment. Anita Corona at Ikonic acknowledges that boundaries do exist with
respect to intrafirm interaction.
We do not share necessarily, proprietary information, because who does that? But there is a need to share things that you've created in order to establish some son of thought leadership or direction within the industry.
In addition to valuing the sharing of information between like multimedia firms, San Francisco
area firms also work closely with firms in related industries, whether by partnering with 'best of
breed' technology firms to access cutting edge technologies, or by establishing joint ventures
with related engineering, communications, or entertainment companies to leverage each
company's individual strengths in jointly created multimedia products. John Evershed of Mondo
Media appreciates working in partnerships because "everything's moving so fast, and you can't
possibly be excellent at all of the things that are going on right now. Through partnering you can
learn and build scale that is really hard to do otherwise." Susan Worthman of MDG.org, further
highlights the role of partnerships between multimedia and related firms as an important part of
the region's success in multimedia.
Strategic partnering can be vital in this industry ... strategic partners can speed market entry or ease market entry and lower the risks associated with it. Strategic partners can also provide capital and complementary resources where they may not exist within one company. It's the kind of situation where 2 plus 2 make 5.
This discussion clarifies the significance that both multimedia firms and organizations in the San
Francisco area place on cooperation, as well as their understanding of the role that information
sharing, joint ventures and strategic partnerships play in catapulting the region's individual firms
to greater levels of success than they could achieve individually.
5.3.7 Addressing the Multimedia Industry through Public Policy in San Francisco
Recent discussion and studies of multimedia have highlighted the problems of inner city
industrial land decline, and have linked the emergence of multimedia to the revitalization of San
Francisco's older urban industrial areas. For instance, the San Francisco Partnership is a public-
private partnership that has been initiated with the goal of attracting and retaining business in the
city and to increase employment to pre-1990 !evels. A recent Partnership report focuses on ways
of attracting and maintaining three 'industries of the future' in San Francisco. These industries
include multimedia, as well as life sciences and financial services. "Capturing the Opportunity
for Economic Vitality" (Arthur Andersen, 1996) distinctly recognizes multimedia as a growth
industry in which San Francisco has a comparative advantage and which can help to revitalize
the city's declining industrial and employment base.
The San Francisco Planning Department released a report entitled "Multimedia in San
Francisco" in August 1997 which provides information on the diversity, size, business practices
and the urban nature of the city's growing multimedia industry. According to the report, there
are just under eight hundred multimedia firms in the City, which provide somewhere between
two and three thousand jobs. Though not a large industry in terms of number of firms or size of
establishments, there is a great deal of interest on the part of local public policy makers in
leaming more about the industry, especially with respect to how it can be expected to contribute
to the city's continued economic development through job creation, urban revitalization,
development levies and taxes.
Amit Ghosh at the City and County of San Francisco notes that:
[The multimedia industry] is not large but it's still a very important industry because it's still in the process of defining itself ... Right now even though it's three thousand jobs it still is a highly visible, dynamic sector that is developing linkages with other parts of the economy almost overnight.
Furthermore, the City is interested not only in the contributions that the industry can make to the
city's economy in terms of job creation but they are also keen to understand the ways in which
the multimedia sector can contribute to San Francisco's tax base and public infrastructure.
In San Francisco, there's a tradition of the private sector bearing the burden of some of the
infrastructure support that the industry needs. Office space pays for housing, pays for public art,
pays for open space, pays for child care ... Can you burden this industry with the obligations of
regular office space? Where do you draw the line? ... If you start burdening it and you start
making it so difficult that it finds other locations, then you're losing the baby with the water.
(Amit Ghosh, City and County of San Francisco)
In San Francisco, it appeared that the strongest public sector support for the multimedia
industry was in the form of creating industry awareness, through such initiatives as the
Multimedia Task Force of the San Francisco Partnership (San Francisco Partnership, 1996a;
1996b). There is also, however, a certain level of distrust on the part of business owners where
government involvement is concerned. According to Debra Robins of the San Francisco
Production Group,
The strongest will grow and flourish if left to our own devices. I just feel like every time the government steps in, they screw it up. Because then the people who know how to work the government are the ones that grow and prosper and survive and they're not necessarily the ones with the best product.
Susan Worthman of MDG.org, also notes the minimal role of public policy in initiating the
multimedia cluster:
This cluster did not grow up because of public policy. It grew up driven by this confluence of factors but driven largely by private industry. Public policy can only either get out of the way or look at what they're doing that may get in the way and then not do that. Whether it can stimulate it or not remains to be seen.
MDG.org is a non-profit member-based organization for the interactive industry. Their focus is
on market and business development for the multimedia industry, rather than on lobbying for
policy and standards development. The organization's focus is shaped by the belief that because
the industry is largely driven by entrepreneurs and startups, market and business development are
prime concerns for the people that are driving the industry's growth. The majority of
MDG.org's 300 member companies are from California, with 70 percent located in the Bay
Area. The organization provides three types of services to members: education, networking
opportunities and industry promotion. They have also helped fund a survey of the local industry,
in conjunction with financial support from the City of San Francisco, conducted by Coopers &
Lybrand (MDG.org et al, 1998).
Susan Worthman demonstrates the manner in which MDG.org understands and supports the
components that make up the multimedia industry, and the role that MDG.org plays in helping
bring the various players together as follows:
Because this is a convergent industry, there are many constituent parts, and each of those constituencies needs the other in order to push the industry forward. By facilitating communication and collaboration throughout this network - tools and technology providers; creative developers, content developers, integrators, aggregators; infrastructure providers, education, public policy makers; all of these people have a role to play in the development of the industry. The best way to get everyone to work together on this is to provide a forum through which and by which all these groups can get access to one another. That's our basic mission.
5.3.8 Regional Strengths
If it has not already become clear, the prime advantage of San Francisco's multimedia
industry is its proximity to Silicon Valley, a 50 mile long corridor which is home to 7,000
electronics and software firms as well as 20 percent of the world's 100 largest companies in
these fields; which garnered 37 percent of investment in U.S. information technology between
1993 and 1997; and which boasts an average per capita income 34 percent higher than the
national average (Business Week, 1997a; Reinhardt et al, 1997; Elstrom et al, 1997). Silicon
Valley's high technology industries, as well as the area's concomitant history of venture capital
and entrepreneurship have a regional spillover effect which has helped lead to the growth and
success of San Francisco's multimedia industry.
Yet, it is not just the influence of Silicon Valley that has led to San Francisco's emergence as
one of the largest (and possibly the largest) centres of multimedia activity globally. San
Francisco also has a history of being a media centre for: the print and publishing industries;
photography, video and film; design and graphic design; painting, illustration, and crafts; music
and audio production; and writers, illustrators and artists (Worthman, 1997, pers. comm.). With
the simultaneous presence of computer technology and the content, creative and cultural
industries listed above, San Francisco was a natural location for the early development of
multimedia. According to Susan Worthman of MDG.org, San Francisco's multimedia industry
has grown naturally in situ.
With all those elements there once they form, if stars arise, then those stars tend to strengthen that cluster, especially in an industry that's driven by entrepreneurs. People are working with star companies and then they go off and form their own companies. Well where are they going to go? It's unlikely that they were going to leave the network that they built to go to some other geographic !omtion.
Firms located in the region perceive that San Francisco's positive regional attributes have
played a critical role in the development of the multimedia industry and they continue to
appreciate the region's strengths as a multimedia hub. Some also recognize, however, that the
very strengths of being located in San Francisco's 'Multimedia Gulch' also lead to weaknesses in
their vision of where the multimedia industry really stands. Debra Robins of the San Francisco
Production Group sums up this notion by stating:
With Silicon Valley here and a lot of our clients coming out of Silicon Valley, we have the opportunity of kind of getting a feel for what's coming down the pipe a lot earlier. That in addition to the fact that Wired Magazine is right across the street, as are Organic Online, Vivid and others. You meet on the street, you meet in the park, so there's a good talent pool there to pull from. It becomes your universe. I think it makes you stronger in what you're delivering. I don't know that it's always really good because I also think it skews our perception of what's really happening.
5.4 New Media in New York
New York City stands as one of the three largest centres of multimedia production in North
America, together with San Francisco and Los Angeles. New York's new media industry differs
from that of San Francisco's in that its emergence is much less a function of proximity to centres
of technological development and innovation, but rather draws many of its strengths from
connections to the traditional media industries such as advertising and publishing that are
clustered there.
According to a study conducted by Coopers and Lybrand (1997a), the new media industry
employs 105,771 persons in the tri-state region encompassing New York, New Jersey and
Connecticut. This figure represents a 48 percent increase in industry employment in only 18
months. Employment growth in the industry during the past year and a half has favoured New
York City, which has experienced an increase of 105 percent, while new media jobs increased by
approximately 13 percent outside of the city during the same time period. Coopers and Lybrand
claim that in Manhattan alone, there are 2,128 new media businesses employing 48,828 persons.
It may be clear from these numbers that either New York has a tremendous advantage in terms of
the number of new media firms and employment in comparison to any other place in the world,
or that the Coopers and Lybrand definition of new media is tremendously inclusive and
incorporates figures from both new media firms and traditional media firms engaging in some
new media a ~ t i v i t i e s ~ ~ . The latter explanation is the most plausible. These numbers help to
underscore the problen~s associated with comparing the size of new media industries in different
places, as the definition of new media and inclusion/exclusion of firms is thus dependent on the
research agenda (which, in this case, is partially to promote New York's new media industry).
The report is most useful in terms of what it tells us about the characteristics and organizational
structure of the industry in New York as well as the relative geographic clustering of firms in and
within New York City.
59 Coopers and Lybrand includes the following types of services in their definition of 'new media' firm: content design and development, content packaging and marketing, content distribution, electronic commerce, software developmenUgeneric applications, content creation tools, and enabling services to new media companies. Survey figures are based on estimates of 430 responses to a telephone survey, and 39 face-to-face interviews (Coopers and Lybrand, 1997).
The Coopers and Lybrand survey of New York's new media industry has been conducted
twice thus far, in 1995 and again in 1997, eighteen months apart. The studies show that the new
media industry in New York serves publishing and advertising more than any other industry
sector and that "access to intellectual capital in the form of editorial and creative talent remains
New York's key strength along with access to customers and the image and credibility afforded
by a New York location" (Coopers and Lybrand, 1997b). This is in line with Egan's (1997)
evaluation of the industry in New York as representative of a 'content region' which develops
unique products by using multimedia tools developed elsewhere and customizing them by adding
creative multimedia content.
New York possesses both strengths and weaknesses as a global centre of multimedia
production. New York's most touted strength in supporting and developing a strong new media
industry rests on the city's history as a centre of media, including advertising, radio, broadcast
television and telecommunications. As the media capital of the United States, New York is
home to four major daily newspapers, 15 non-cable television stations, 15 AM and 23 FM radio
stations (Heydebrand, 1997). Seven of the world's largest media firms are located in New York
City, including Time-Warner, National Broadcasting Co. (NBC), the Columbia Broadcasting
System (CBS) and Dow Jones & Co. (Heydebrand, 1997). Some of the benefits and linkages
between the new media industry and the existing media infrastructure in New York are: the
availability of local creative talent to support the new media sector, the presence of educational
institutions to train newcomers and develop programs which help firms adapt to emerging
technologies associated with new media, and the presence of the established media industry as a
source of potential and target clients to the emerging new media industry. A recent Business
Week (Berman, 1997) article argues that New York's strengths in the creative aspect of media
also presents a weakness in the development of the city's new media industry:
It's that same creative emphasis, however, that casts doubts on the chance that Silicon Alley
will ever become a technology hotbed. Artists and writers account for an estimated 48% of the
Alley's new-media workforce, while programmers and engineers total less than a quarter. And
though the New York area is home to dozens of universities, none of them possesses the
computing prowess of Palo Alto's Stanford or Austin's University of Texas (Berman, 1997,l).
Other potential weaknesses in the continued development of New York's new media industry
are the lack of venture capital being attracted to New York (companies located in New York
State received approximately one-tenth the amount of venture capital in the first half of 1997 as
those in California) and the lack of experience in funding new media companies within the
existing venture capital and angel funding community. Furthermore, established advertising
agencies are beginning to develop more substantial in-house multimedia development capacity
as a way of competing for advertising funds geared toward new media marketing campaigns.
This could have a potentially devastating impact on new media startups (Berman, 1997). With
respect to this latter point, the 1997 Coopers and Lybrand study maintains that 30 percent of
surveyed firms were established in the past 18 months, and that 17 percent of firms surveyed in
1995 have exited the market during this same time period.
Summarizing the strengths of New York in the field of new media, Pavlik (1997,3) notes
that:
Porter's (1990) notions of regional factor endowments and regional demand factors are particularly evident in the case of new media industry clusters in New York. A variety of resources including human, intellectual, physical, capital and infrastructure all reflect the regional factor endowments endemic to New York and supportive of a growing new media industry.
It remains to be seen whether the city's strengths will continue to outpace its weaknesses in
an effort to maintain its status as an important centre of multimedia production. Some clues as to
how the industry is faring, however, are evident as a result of interviews carried out with
stakeholders in the industry6'.
5.4.1 Location, Clustering and Technology
Coopers and Lybrand (1997a) identify that the New York metropolitan area contains 68 percent
of all new media firms in the tri-state area comprised of New York, New Jersey and Connecticut.
Further concentration of firms is identified in New York City, with nearly 65 percent of all New
York metropolitan area firms located in Manhattan and 52 percent of these in an area that has
been coined 'Silicon Alley' (see footnote 43). located in close proximity to and surrounding Piew
York's financial district. As is evidenced by these figures, the case of New York presents yet
another example of a sizable metropolitan area, with a highly centralized cluster of multimedia
firms in the CBD frame.
The emergence of Silicon Alley as the centre of New York's new media industry is the result
of a combination of factors. First, an abundance of vacant, inexpensive space is available in the
area due in large part to massive restructuring and downsizing that occurred within the financial
industry in the early 1990s (Krantz, 1995). Second, it appears that initial recognition of the area
as the 'place to be' for New York multimedia firms has had a ,nowball effect on other firms'
location decisions, with several firm principals citing the area's image as a centre for new media
"A total of nine interviews were conducted in New York- 6 with principals and senior managers at multimedia firms; 2 with representatives of related industries; 1 with the leader of a local multimedia organization (who was also a multimedia firm principal); and 1 with a rep1,esentative of the Canadian Consulate. See Appendix D for further details.
activity as a key factor that drew them to locate there. Third, the area is in especially close
proximity to clients in the financial services industry, as well as to financiers (albeit most of
whom have little experience with new media), and is also close to suppliers and clients working
in the traditional media, arts and cultural industries that concentrate throughout distinct pockets
of activity in Manhattan. Finally, a series of government-sponsored initiatives such as tax
incentives (detailed in Section 5.4.6) to encourage multimedia and other technology-based firms
to locate in the area have also been instrumental in contributing to the redevelopment of several
buildings targeted towards high-tech tenants.
An interesting characteristic of New York's multimedia community is the propensity for firm
principals to indicate a preference to be located in close proximity to like firms, cited more
frequently than proximity to clients or suppliers as part of the location decision. Connie
Connors, CEO of Connors Communications and President of the New York New Media
Association, says of her company's office location:
Right here you walk out on the street and you almost cannot not run into someone in this industry. It's just a great central location. A lot of companies in new media are right here.
Further emphasizing the importance of face-to-face interaction with suppliers rather than
utilizing technology to overcome the need for face-to-face meetings, Connors notes that "even
though there is technology, it's very tough to think about working with people outside of New
York."
At Renaissance Multimedia, located in the heart of Silicon Alley in a converted 'smart
building', CEO Andrew Edwards differs from the conventional approach of holding constant
face-to-face meetings with clients, preferring instead to work electronically with customers after
the initial meeting. Nevertheless, approximately 90 percent of the firm's clients are located in
New York City. Furthermore, despite the firm's widespread use of email and the Internet to
conduct business, the firm's central location was inspired by the culture and image of the
multimedia industry in New York and a desire to be associated with that culture via firm
location:
This is becoming known as the place where interactive firms are relocating to ... I like the whole buzz that surrounded that, in terms of a marketing standpoint I think that was important for us. (Andrew Edwards, Renaissance Multimedia)
In New York, the multimedia industry's work is enabled through the development of
interactive technology. However, the industry's focus is clearly one of urbanity, image and
culture, starting from the choice of office location in densely developed spaces and leading to the
content production which is largely geared towards image-producing industries. No interviewee
in the New York so much as mentioned the possibility, much less the desire, to be able to work
from any other location.
Suburbia is by definition a bedroom community. And whereas this could be built out of someone's bedroom, no matter how virtual this all is, you need that face-to-face communication. And the reason it works in the urban setting is because it's easier to have parties, it's easier to get that sense of you're not alone struggling, trying to eke out a living in this brave new frontier and there's a camaraderie that takes place that's necessary for survival (Steve King, President, Virtual Growth).
5.4.2 Clients
Table 5.2 highlights the industry and geographic focus of five multimedia firms interviewed
in New york6'. The most commonly served market was identified, not surprisingly, as consumer
products. This includes marketing and advertising work for individual corporations directly, as
well as multimedia work subcontracted out by marketing and advertising firms. The second
most common industries cited by firms interviewed were finance and technology, followed by
publishing, pharmaceuticals, and manufacturing.
A 6th firm, Mediapartners, was excluded from this table as the firm's multimedia activities had not yet been launched at the time of the interview.
183
All multimedia firms interviewed in New York noted that their main geographic focus was
the New York area, with one firm indicating that 90 percent of their clients were located in the
downtown area, while another indicated that only 10 percent of their clients were located
downtown. The geographic focus of New York multimedia firms thus ranges within the
downtown area, but remains focused on the metropolitan New York region. The same-city focus
of most New York multimedia firms is linked to the large number of multinational corporations
that have high order office functions in the New York area; the fact that the city is home to most
major media companies and is the centre of the U.S. advertising industry (Coopers & Lybrand,
1997a); as well as the role of New York's massive financial services industry as both client and
financier of multimedia.
Table 5.2: New York Multimedia Firms - Industry and Geographic Focus
Focus Products Finance Pharmaceutical
Geographic Focus
Markets Served
Znternation Head office in a1 Exports Canada
Sixth Gear Interactive Solutions 10 1993
Consumer Products
New York area
North America
Canada, Europe (minimal)
Connors Communica tions 713
Consumer Products Technology
New York area
Midwest, California (office in San Francisco)
Canada, Europe
Multimedia
Finance Manufacturing Publishing
, Minnesota, Connecticut
Together, these three factors represent many of the sectors which New York multimedia
firms are geared towards supporting, and help to explain the New York client focus of the city's
multimedia firms. Futthermore, the New York metropolitan region stands as both the single
largest metropolitan area and city in the United States, with an estimated 1996 population of 19.8
million people in the consolidated metropolitan statistical area ( U S Census, 1997a), and 7.38
million people living in New York City ( U S Census, 1997b).
Outside of serving the New York and tri-state area including parts of New Jersey and
Connecticut, New York multimedia firms interviewed tended to have clients in disparate regions
ranging from California, the Midwest, New England, and the rest of the United States. Once
again, and similar to the San Francisco firms interviewed, exports outside the United States
(largely to Canada and Europe) did not account for more than 10 percent of revenues, with two
firms noting that they do not pursue export markets, nor do they plaii to.
Being located in New York benefits startup multimedia firms because proximity to a wide
array of large companies in varying industries that utilize multimedia work and products enables
startups to easily interact with and pitch projects to potential clients. This explanation is in large
part responsible for the initial 'New York focus' of Sixth Gear Interactive Solutions, a 20 person
multimedia firm located in Silicon Alley:
We mainly were regional in the beginning because for a big job it takes a long time to get the job and it takes a lot of personal interaction with a potential client to develop a personal relationship. We haven't had the resources to be flying all over the place attending meetings, so we've tried to keep with big companies but most large companies have a headquarters in New York or around here. It's been good for us to have the ability to just hop on the subway to go to a meeting but also to be dealing with an international company. This location, being in this city, is really beneficial. (Christopher Sousa, Sixth Gear Interactive Solutions)
While firms such as the one described above have begun to branch out to markets outside the
immediate New York region, most New York multimedia firms interviewed do not actively
pursue markets outside the U.S. At Dynamind, a 10-person firm that initially began in
Connecticut and later moved to an incubator office in New York before relocating to their
present location in Silicon Alley, the rationale behind the pursuit of U.S. markets over
international markets, is that "there's too much to be done in the States and the United States is
the leader with Internet developments" (Thomas Kwon, CEO, Dynamind). This sentiment was
not echoed by all firms interviewed however, as Connie Connors of Connors Communications
comments that while her firm does not currently export to any significant extent, she needs to be
increasingly aware of export opportunities for her firm.
5.4.3 Suppliers
The Coopers and Lybrand (1997a) study found that just under one-quarter of all employment
in New York's new media industry is comprised of freelance employment6'. The types of work
contracted out to freelancers varies and ranges most often from: arthllustration, design,
marketing, music, photography, programming, video editing and special effects, and writing, and
on a less frequent basis to telemarketing, accounting, and legal service professionals
In interviews, firms indicated varying degrees of reliance on, and reasons for, hiring
freelancers. At Renaissance Multimedia, Andrew Edwards says:
We don't use any firms as suppliers, we're pretty much the supplier to our clients. Occasionally we'll maybe hire a freelancer to do some special programming or if we're really in a pinch to get a job done on time, maybe I'll hire someone to do a music track.
As indicated above, there are firms who work only with other freelancers as suppliers, and not
with other firms. Furthermore, one strategy many firms adopt is to hire freelancers when project
deadlines are tight in an effort to decrease production time. Another strategy, commonly used in
62 Freelance employment i s quantified in terms of full-time equivalent employment; the actual number of freelance employees relative to full time employees is therefore most likely to be somewhat higher than 25 percent.
working with freelancers, is to subcontract out work to a specialist in an area in which the firm
does not have sufficient expertise. Several firm principals spoke of this as being the main reason
for seeking out freelancers:
Part of what we do, and I think what a lot of companies in new media do is, we know when we don't know something, or if it doesn't make economic sense, so we know to job it out. Certain companies specialize in particular aspects of what we're trying to provide, and it makes no sense for us economically to try to develop that service. [Outsourcing] is very acceptable in this industry. (Connie Connors, Connors Communications)
A third way in which freelancers are used is to supplement the staff of the firm on a per project
basis. ICE is a Toronto based firm with an office in New York that is staffed by some New
Yorkers as well as by Toronto staff that travel to New York to work on specific projects. The
firm's full time staff of six is frequently increased temporarily through the hiring of temporary
freelancers:
A lot of our business is contract/freelance work. We typically try and staff our projects with a core team of staff people, but many times some of our projects will have up to 40 people on them. Quite a few of the different branches of a project are freelancers. (Mei Dickerson, Vice President - Business Development, ICE)
Suppliers (i.e. freelancers) hired to work on individual projects tend to be located in the New
York area as there is frequent face-to-face interaction required between the freelancer and the
firm. In some cases, freelancers work full time in the firm's offices during the duration of their
contracts, while in other instances, freelancers make periodic visits to the firm but work from
another location. As Christopher Sousa of Sixth Gear Interactive Solutions puts it: "We try to
keep it [suppliers] local within the New York area, because there are times when we need them
to come in." At ICE, Mei Dickerson comments: "If we have a project that's going on, they're
[freelancers] in all the time. They basically come on staff almost for a period of time."
5.4.4 Labour Market
With a regional population of nearly 20 mihion persons (US. Census, 1997a), access to a
large labour pool is clearly a benefit of a New York location for multimedia. The labour market
for multimedia in New York is fragmented, however, despite the size of the labour pool. The
quality of the local labour force mimics the strengths and weaknesses of the New York economy:
the availability of skilled labour for creative, finance, and marketing positions makes these jobs
relatively easy to fill while programming and technology management positions prove much
more difficult to staff (Coopers & Lybrand, 1997a). Interview respondents confirmed this
problem, noting, as Connie Connors of Connors Communications does:
People complain there aren't programmers here. We're not the centre of technology, we don't purport to be the centre of technology. But I think in terms of the centre of media and creativity you can't beat it. The energy here is, as always, great.
Interviewees were consistently emphatic about the strengths of New York in the cultural
industries and how this translates into labour market strengths for multimedia, where creative
personnel are concerned. According to Thomas Kwon of Dynamind, New York's strengths in
other industries bode well for multimedia firms looking to hire staff, because they help to draw
people into the region that can then be hired by multimedia firms:
New York has always been the publishing capital of the country. It has the highest concentration of creative production in the United States because of the advertising industry. The trendiness and the hipness of New York makes people come here.
Interviewees indicated that with respect to hiring staff, most prefer to hire experienced
employees rather than those directly leaving college programs. While no one college was
consistently cited as providing a significant source of labour to firms, institutions that were
named as helping to supply labour to firms were New York University, Pratt Institute and the
Fashion Institute of Technology. Finally, firms indicated that they tend to limit their search for
labour to the local region.
5.4.5 Cooperatio,? and Competition
If you've met someone and you've had a beer with them and you've commiserated at an event it helps to connect you with your competitor and not see them as a competitor but see them as an ally or a resource. (Steve King, Virtual Growth)
The above comment, made by the president of a small New York accounting firm that
primarily serves multimedia firms, reflects the popular impression that New York's socially
active multimedia industry personnel view their peers as cooperators as opposed to competitors.
However, in interviews with principals and senior management of multimedia firms, another
picture emerged, one in which a different emphasis is placed on cooperation and competition in
relationships within the multimedia industry and in relationships with firms in related industries.
In reference to the interaction between multimedia firms doing similar types of work,
relationships are described as competitive by those working in the industry. The competitive
nature of interfirm interaction is asserted to be a function of working in New York: a fast-paced
city filled with energetic but aggressive businesspeople. Mei Dickerson at ICE says that:
In New York, you have to move fast and be smart, if you snooze you lose. It's a very, very aggressive market and you have to be aggressive about it ... It's a very competitive business; other people in the business are basically my competitors. We wouldn't necessarily collaborate with them on what they're doing and what they're developing and they wouldn't want to share that information with us. There is a comn~unity out there and there is certainly some interaction within the community but I don't know that I would necessarily call it coilaborative.
This sentiment is echoed by Andrew Edwards of Renaissance Multimedia who summarizes the
general state of cooperative versus competitive relationships and assesses them relative to inter-
and intraindustry connections:
I would say that cooperation is important. However, amongst companies that are very much like ourselves, there is no cooperation at all. There is competition. But there is nevertheless a whole pool of photographers and musicians and writers and publicity people and other digitally minded people, both as suppliers to us and who we supply sometimes that sort of forms this community which I would say is very important.
Thus, the community of individual multimedia firms and potential suppliers is strong,
multimedia firms require the services of other specialists and therefore emphasize the importance
of interindustry interaction. Some interviewees indicated that in addition to the importance of
cooperating with specialist freelancers working in fields related to multimedia, that alliances
were being forged with supplier firms in related industries with a particular area of expertise
relevant to multimedia production such as translation services or database specialists. There was
however, very little mention of these alliances as being critical to the development, work
capacity and potential of individual multimedia firms.
5.4.6 Public Policy and Associational Action
Initiatives to support the local multimedia industry in New York have been pursued by both
local and state governments and also by associations that have emerged to support the industry's
growth and development. The organization which stands out as having played the most
significant role in creating awareness and promoting the industry's strengths is the New York
New Media Association (NYNMA). NYNMA is perceived by interviewees as an exemplary
industrial organization because of its success in growing its member base and in bringing
together the various stakeholders working within and peripheral to the multimedia industry.
NYNMA was founded in 1994, and its membership grew to more than 2,000 people from
over 1,300 companies by mid-1997 (NYNMA, 1997). When it first began, NYNMA's mission
was to help foster the development of new media as an industry in New York. Andrew Edwards
of Renaissance Multimedia succinctly describes the role which NYNMA fulfils and how this
translates into benefits for the new media industry as follows:
[NYNMA] has helped to raise the consciousness of every business person in New York who's listening to the whole issue of new media as a business. Them and people like them have helped put new media on the map as a legitimate line of business which went totally unrecognized until recently.
The organization's focus has changed somewhat now that the industry has received wide
recognition as an important player at the global level. NYNMA is currently focusing on ways to
further support the players who comprise the industry, especially entrepreneurs and creative and
business professionals. The association continues to hold monthly networking events, called
'cybersuds', attracting several hundred members each month. In addition to providing
networking opportunities for members, NYNMA offers seminars, panel discussions and product
presentations. Additionally, NYNMA has introduced an "angel investment" breakfast series to
help new media entrepreneurs gain access to potential funding. At each monthly angels
breakfast, 2 companies looking for less than $500,000 in investment capital present their
business plans to approximately 25-30 angel investors who are committed to investing at least
$25,000 each (Connie Connors, President, NYNMA). NYNMA has clearly helped to create an
environment of networking, information, and collaboration between new media stakeholders and
players. However this should not be mistaken for evidence of a widescale culture of information
sharing and cooperation between the city's multimedia firms, as the strongly competitive
intraindustry focus described in the previous section attests.
A non-profit organization, NYNMA's operating expenses are covered by membership fees;
corporate sponsorships from five corporations including Coopers and Lybrand, Microsoft, and
Sun Microsystems; and periodic grants from government and government agencies. Although
the organization does not receive regular funding from city or state governments, it has received
a total of $100,000 in grants in the past, including a $50,000 start-up grant. Government and
corporate sponsorship also help to pay for an annual industry survey conducted by Coopers and
Lybrand (Connie Connors, NYNMA). When asked about the role that government plays in
supporting the multimedia industry, Connie Connors of NYNMA, says:
[Government] plays very little role, and I don't know that we want it to play too much of a role, except maybe for it to get out of our way and make it easier for us to do business.
While part of NYNMA's mission is to worn: closely with and to help educate govemment
regarding the possibilities and opportunities of new media, the organization is not, strictly
speaking, a government lobby group. Despite this, however, govemment actions have been
instmmentnl in the clustering of multimedia firms in downtown Manhattan through a series of
policies designed to help revitalize the area. Local and state governments have been active in
supporting the multimedia industry in New York, in the form of financial incentives such as tax
reductions and infrastructure improvements to individual buildings. These initiatives are aimed
at encouraging multimedia firms to continue to locate in, and help contribute to, the revitalization
of downtown areas which were devastated following the 1987 stock market crash and the
subsequent bankruptcy and downsizing of several financial institutions leading to a vacancy rate
of 23 percent in Lower Manhattan (Krantz, 1995). In 1995, the governor of New York signed
into law real estate and commercial rent tax reductions, energy rebates and other incentives to
encourage the revitalization of Lower Manhattan and the area surrounding Wall Street, New
York's financial district developed through a public-private collaborative effort (Krantz, 1995;
Institute for Technology and Enterprise, !1;97).
In addition to financial incentives to encourage firms to locate and remain in downtown
Manhattan, a program was developed to encourage information technology firms tn locate in the
area by offering discounted leases in newly rewired buildings (Berman, 1997). Labeled the
Plug'n'Go Program, six buildings in the Wall Street area have been wired for high-speed Intemet
connections, where rents have been capped at $15.00 per square foot for the first year of leases,
and small office spaces are available (Alliance for Downtown New York, 1997). The program is
sponsored by several city-organizations, including the Alliance for Downtown New York [a
downtown business organization seeking to attract new business to the area (Alesandrini, 1996)],
the New York City Economic Development Corporation and landlords.
The first building to benefit from the program is the New York Information Technology
Centre located at 55 Broad Street in Lower Manhattan. The building housed the investment firm
Drexel Burnham Lambert until its demise in 1990, following which it sat vacant for several years
(Krantz, 1995). When it first reopened in 1995, seven tenants occupied 25,000 of the building's
400,000 square feet (Krantz, 1995). By mid-1997, the building's occupancy rate was in excess
of 80 percent (Conway, 1997). At present, there are 73 tenants in the building, including offices
of Sun Microsystems, IBM, Ernst & Young, Nokia, Ericsson and the London Business School
(NYITC@55 Broad Street, 1998).
5.4.7 Regional Strengths
If you do something in New York you get a lot of attention because it's a media centre. The attention you get here can serve you well in the long run, you get more exposure, and people read about you on the other side of the country. New York is a magnet for creative talent, it's a big media hub and so people come here and everyone is thriving off of each other. When you're in a hotbed of creativity it just lends itself to more creativity. New York is a financial centre, a cultural centre, a media centre, and a publishing centre; it follows that it's a natural birthplace for new media. (Tony Raposo, Commercial Officer, Canadian Consulate)
The emergence and rapid growth of the multimedia industry in New York are explained
somewhat by the comment above. New York's multimedia firms have been shown to be
strongly tied to traditional media/content/image producing industries in New York such as
advertising, publishing and entertainment. The substantial presence of the financial services
industry in New York has also helped to support the development of the industry, from the
perspective of both financier and client. The multimedia industry's development and success in
New York is further explained by the sheer size of the New York City region in terms of
population and in terms of its focus as a global business centre, providing the city's multimedia
firms with a tremendous supply of both labour and clients. Multimedia firms in New York
recognize the size and scope of New York as providing a distinct location advantage over other
potential locations. As Andrew Edwards of Renaissance Multimedia indicates:
I don't think this kind of company would be able to be in business anywhere else in the way that it's in business in New York, simply because of the seemingly endless number of possible clients that are here. There just seems to be a bottomless pool as far as I can see. Every day you hear of some company that you never imagined possible and they're a $500 million company and that's clearly a major business advantage.
The combination of the above factors led many interviewees to comment on the energetic
environment in New York, and the unique atmosphere which they associated with the city that
could not be replicated elsewhere. According to Miles Rose, Principal of Mediapartners:
New York is New York. You don't find energy like this anywhere else in the world. There's a
lot of intellectual capital here, there's a lot of excitement, and a lot of people are willing to take
chances and fail.
The case of New York shows that it is possible to develop a strong multimedia industry
without having concomitant and superior strengths in technology. While New York's
multimedia industry may be described as a multimedia-rich environment driven by content and
corporate might in the media industries, it has nevertheless achieved a considerable amount of
success and recognition as a global centre of multimedia production geared towards serving the
well-developed economic sectors present in the region, many of which have linkages throughout
the United States, North America and globally.
5.5 Accounting for Multimedia Clusters in Global Cities
Noting the connection between multimedia, telecommunications, technology based industries
and cultural industries, it is no surprise that the largest centres of multimedia production have
developed in the same places that boast these qualities - large metropolitan areas. The presence
of multimedia clusters in global cities has implications at two spatial scales - inter-regional and
intra-regional.
At the inter-regional scale, multimedia clusters have formed in cities that are at or near the
top of their respective national urban systems. Unfortunately, little information with respect to
the inter-regional dispersal of multimedia firms in Asia and Australia is available. However, and
without great exception, the largest centres of multimedia production in both Europe and North
America coincide with the largest metropolitan areas in those regions - London, the largest city
in the United Kingdom is the centre of the largest number of multimedia firms in that country;
Amsterdam contains the greatest number of Internet-industry firms in the Netherlands; and the
largest metropolitan area in the U.S., New York, represents one of the top three centres of
multimedia production in that country.
At the intra-regional level, there are a number of studies, including this thesis, that indicate a
propensity for multimedia firms to locate in or around the downtown of the traditional CBD, and
in older industrial areas (Barad et al, 1995; Arthur Andersen, 1996; Coopers & Lybrand, 1996).
These downtown locations are linked to the industry's need for access to clients, a large labour
pool of artists, technicians, and managers, and proximity to cultural activities and amenities.
Again, we see patterns associated with this phenomenon in Cardiff, Wales, where multimedia
firms have clustered in the city's 'cultural quarter', in San Francisco's Multimedia Gulch and in
New York's Silicon Alley.
With respect to the multimedia industry in New York and San Francisco, the information
presented here highlights the different industry 'types' present in each city. Representatives of
the multimedia industry in San Francisco indicate that their proximity to Silicon Valley's rich
network of computer hardware and software producers has had an immeasurable influence and
impact on their ability to succeed as a centre of multimedia production. Conversely, New York
intemiewees noted that despite the lack of a well-developed connection to the more technical
aspects supporting multimedia production, the industry there has flourished in large part due to
strong linkages to the arts, media, finance and international corporate headquarters that abound
in New York. This suggests that the location of centres of multimedia production are not
consistently dependent on the presence of nearby technology firms. Other supportive conditions
in the form of: highly skilled creative and technical labour, proximity to related supplier
industries, telecommunications infrastructure, and proximity to critical niche markets and clients,
have been shown to be influential factors in the development and rise of multimedia industries.
Based on this analysis, the prospects for Toronto's multimedia industry, and whether or not it
measures up to the multimedia industries in New York and San Francisco, will be elaborated
upon in Chapter Six.
6.1 Overview
The multimedia industry is one of the last 'new' industries that will emerge in the 20th
century. This thesis provides a starting point from which to understand the emergence,
organizational structure and economic geography of the multimedia industry both in Toronto,
and worldwide. Multimedia presents a challenging field of study because of the industry's
youth and the rapid, dynamic change which characterizes multimedia production.
As stated in Chapter One, the overarching question driving this thesis is: Are there a set of
pre-existing conditions or endowments in the locales that appear to have emerged with a
competitive advantage in multimedia at the early stages of the industry's development? The
research presented in this thesis shows that the largest, most prominent centres of multimedia
production are those in which the multimedia industry has developed a series of strong backward
and forward linkages with related industries. The question which follows is: If multimedia is a
path-dependent industry, reliant on a region's pre-existing strengths, what does this say about our
ability to create, from scratch, an environment in which a multimedia industry can flourish?
While the answer to this question remains somewhat uncertain, this research would suggest that,
no, a multimedia industry cannot be created in a region that does not have a pre-existing
industrial base of hardware andlor software, media and communications, arts and design, and
linkages to corporate headquarters and financial service centres. There are, however, many
instances of governments attempting to regenerate economic growth with high skilled,
knowledge-based employment through investment in the multimedia industry6'. Achieving
For instance, the Government of Quebec recently announced a $360,000,000 plan to lure 10,000 multimediajobs to the City of Montreal by the year 2008 (Canadian Press, 1998).
196
success through such approaches, given the economic geography of multimedia described in this
thesis, is unlikely unless the pre-existing base of economic activity is such that it will act to
support the development of multimedia; nevertheless, attempts to foster a multimedia industry in
a place where one might not 'naturally' emerge, could provide for an interesting case study in
further research.
While it is difficult to capture all of the elements which comprise multimedia through a
simple definition, the classification of multimedia activities as outlined in Chapter One enables
the development of a clearly organized approach towards the study of this new field. The
database, survey and interview results presented in Chapters Two and Three comprise the first
in-depth study of the Toronto area multimedia industry, and also provide useful information on
the background history of the industry's emergence, the significance of backward and forward
linkages with local area firms, and insight into the locational agglomeration of firms in older,
traditional industrial areas. Chapter Four reveals the impacts of public policy and associational
action on the industry's evolution, concluding that policy development and institutional
responses directly geared towards multimedia have lagged rather than fed the industry's
emergence. Acknowledging the limitations based on developing assumptions regarding the
industry's emergence using the example of a single case study approach, Chapter Five reviews
the evidence available on other centres of multimedia production worldwide, delving into greater
detail for the cases of San Francisco and New York City, two of the world's largest centres of
multimedia production. These data enable the development of a response to the question: How
does Toronto's multimedia industry compare to those in other centres of multimedia production?
6.2 Toronto: Anomaly or Norm?
Comparison between Toronto and other centres of multimedia production provides further
insight into the operation of multimedia industries, revealing both similarities and differences,
summarized in Table 6.1. Toronto, New York and San Francisco are each populous centres that
possess major concentrations of corporate headquarters, vibrant cultural and corporate activity,
traditional media and communications industries, and have strong, vital central business districts.
The locational pattern of multimedia in each of these cities is remarkably similar: former
industrial and warehousing areas in the CBD frame, in close proximity to both the central
business district and neighbouring arts communities comprise the focal point of multimedia
production in Toronto, New York and San Francisco.
Linkages between multimedia firms and firms in related industries such as media and
communications, art and design, and computing are common in each city. The nature of linkages
however, appears to be dependent on the regional economy. New York's multimedia firms are
strongly aligned with the city's advertising industry, while San Francisco firms emphasized their
linkages to Silicon Valley technology firms over most other relationships. Toronto's multimedia
industry shares an important attribute with New York in this respect - neither centre shares
strong linkages to centres of hardware innovation and production, though their linkages to Iocal
and well-developed custom software supplier industries helps both cities boast multimedia
industries that have effectively emerged as two of the largest centres of multimedia production
globally. Both cities also share a position of dominance as national (and in New York City's
case, international) media centres, as well as an abundance of local customers in corporate
headquarters, advertising and finance.
199
Table 6.1: Toronto, New York and San Francisco -- Similarities and Differences
Size (metro) National Rank Intraurban Geography Urban Clusters
Geography of Clients
Key Geographic Strengths
Nature of Cooperation
Policy Focus
Toronto 4.5 million Largest metro area in Canada 62% of multimedia firms in central city CBD frame - 48% of all multimedia firms in City of TO City-focused
Centre of both corporate headquarters and cultural industries in Canada
Competitive at intraindustry level Coc?erate with supplier firms in related industries
Federal and provincial cultural policies most significant Information gathering stage
New York 20 million Largest metro area in U S .
65% of multimedia firms in central city Silicon Alley - 52% of all multimedia firms in City of NY
Centre of U.S. advertising, media and financial services industries
Highly competitive intraindustry Cooperate with freelancers and specialists
Local and state government Implemented tax reductions and infrastructure improvements
San Francisco - 6.5 million 5Ih largest metro area in U S . Not available
Multimedia Gulch - 49% of all multimedia firms in City of SF Regionally-focused
-- Proximity to Silicon Valley technology firms and culture of entrepreneurship and information sharing Cooperate at intraindustry and interindustry levels Emphasize role of partnerships Local government Information gathering stage
This finding leads to implications for both policy and theory with respect to the type of industrial
environment required to 'nurture' a strong centre of multimedia production. Toronto's
multimedia industry also appears to have less of a 'specialist' function than either New York or
San Francisco - the industry is supported by the region's rich network of cultural and content
industries, but also &aws many of its most important customers from the city's focus as the
centre of Canadian corporate headquarters for national and international firms alike. This
comparative data appears to indicate that multimedia's emergence in particular locales is
dependent on the pre-existence of related industries, including, but not exclusively, hardware and
software production, arts and design, media and communications, and finance. Also of
importance here is the nature of relationships between multimedia firms and their
suppliers/clients: many multimedia firms interviewed noted the recursive nature of the forward
and backward linkages reflective of the industry's organization. Unlike other industries, the
chain of production in multimedia is such that a supplier to multimedia production may also be a
client of multimedia.
Firms interviewed in each city indicated similar types of business practices that enabled them
flexibly to adjust the human resources at their disposal based on project and skill requirements as
well as the development of interindustry relationships to enhance product and talent offerings.
The three multimedia centres diverge, however, when it comes to the nature of cooperation and
competition that characterizes the environment in which they operate. San Francisco firms
placed greater emphasis on the cultural practice of information sharing than firms in New York
or Toronto; conversely, interviewees in New York provided powerful descriptions of the
competitive business environment that characterizes the intraindustry relationships in that city.
Where the individual centres studied differed most was in the type and focus of public policy
and associational action. These multimedia industries appear to have emerged 'naturally' in each
city, and not as a result of deliberate policy intervention or guided associational action.
However, the extent to which the local industry has been supported by local and regional public
initiatives varies widely, with the greatest amount of direct local support being levied in New
York, where the industry has been supported by local and state government under the assumption
that multimedia firms can help to revitalize central cities in decline. Governments in Toronto
and San Francisco have become involved in reviewing the industry's impacts on local and
regional economies, but have yet to take much direct action to support the industry.
Based on this comparison it is reasonable to conclude that the emergence of Canada's largest
multimedia industry in Toronto is not an unexpected outcome. Toronto's multimedia industry
does not represent either an industrial, locational or organizational anomaly insofar as centres of
multimedia production are concerned. Acknowledging this however, does not preclude the
Toronto multimedia industry from demonstrating a series of unique qualities. One such quality
is the policy environment through which the industry has developed, especially with respect to
the indirect role that federal, provincial (and to some extent, local) cultural policies have played
in the industry's development. Toronto's multimedia industry also stands apart from the U.S.
multimedia centres studied with respect to the fact that Toronto's industry appears to have
developed in response to a generalist focus, while the industry in New York and San Francisco is
more significantly tied to a particular aspect of their respective regional economies (advertising
in the case of New York and Silicon Valley in the case of San Francisco). The Toronto industry
also stands out as being more internationally focused than the American centres; this can be
partially explained by the small size of the Canadian market which encourages local firms to
target their products to a broader marketplace, and perhaps also by a cultural environment which
is both more susceptible and more open to global influences.
6.3 Gaps and Challenges for Policy and Institutions
The evidence presented here suggests that the broader, macroregulatory framework of
Canadian (and Ontario) cultural policies has provided the most important public sector stimulus
to the development of Toronto's multimedia sector. In light of this observation, one of the most
crucial tasks for policymakers is the need to address the manner in which existing policy and
regulations geared towards the cultural industries in general can be applied specifically to
support the multimedia industry's development.
Furthermore, this research suggests that the simple targeting of multimedia firms alone for
assistance is not enough to support the development of a multimedia industry. This finding is
contrary to the belief that multimedia represents an opportunity for outlying regions to capitalize
on a new industrial sector. The development of the industry has been shown to be strongly path-
dependent, relying on capabilities and talent from diverse backgrounds that is not ubiquitously
distributed. The industry continues to rely on the services of specialized expertise in computer
programming and software development, traditional media, programming, arts, and related
fields. The presence of multiple and diverse education and training institutions, and access to
cultural amenities and services, has also helped the industry to develop in Toronto, a
characteristic this region seems to share with New York and San Francisco. It is difficult to
imagine a competitively structured multimedia industry that is not supported by these same
features. The structures required to support the industry run far deeper than the availability of
technology and related infrastructure. Therefore, public policy initiatives need to address a wide
range of multimedia and related support linkages in an effort to encourage the industry's
existence. Additionally, and in light of these issues, it seems fair to say that multimedia alone
cannot be a panacea for economic development. The richly developed supplier and client
networks on which the industry's emergence and continuity rely are an integral part of any
regional multimedia sector.
It appears that institutional support for the industry, to this point, has been largely a function
of favourable policies supporting cultural industries nationally, provincially, and locally, rather
than strong institutional structures (apart from education and training centres). The impact of
Canadian cultural policies on indirectly supporting the emergence of multimedia in Toronto
cannot be underestimated. Without this policy framework, the multimedia industry would most
likely not exist in its vigorous form. The associative behaviour that is directed solely at the
multimedia industry however, exists primarily in an informal environment, in the form of loose
associations between cooperating firms. Whether or not the industry can maintain its
competitive advantage without further strengthening its associative institutional structures is
uncertain. Indeed, in the face of current and future threats to the integrity of Canada's cultural
policies, arising from increasingly common challenges emanating from the United States, Europe
and the World Trade Organization (Scoffield, 1998), the industry may soon be forced to pursue
more associational strategies with greater vigour.
6.4 'New' Media Prefers 'Old' Urban Areas
According to Egan (1997,201 "Multimedia appears to be unusual among information
technology industries for its propensity to locate in central cities as opposed to suburbs." Both
the survey and interview results presented in this thesis emphasize the fact that the multimedia
industry remains strongly linked to locally based suppliers and clients, frequently in close
proximity to the multimedia firms under study. Central city locations appear to be a critical
variable for firm development due to the importance ascribed to ease of access to related and
supplier industries, freelancers, potential employees, amenities, educational and training facilities
and for facilitating interaction and networking with clients. This helps to explain the clustering
of multimedia firms in older industrial areas of the CBD frame as evident in Figures 2.1 through
2.3. Firms which do not appear to place as much significance on locations in the central city are
those with stronger linkages to export markets than local markets, firms producing mass
marketed goods, or firms with networks of suppliers not centred on Toronto. These firms
comprised the minority, rather than the majority, in the Toronto case study. These findings are
similar to the conclusions of previous studies on the location patterns of producer services (Ley
and Hutton, 1987; Michalek and Fairbairn, 1993).
Stemming from the convergence of technology and creative industries, multimedia firms
have emerged in regions supporting both of these sectors, and indeed the principals of
multimedia firms have often reincarnated themselves and their businesses into multimedia
producers from prior backgrounds including software development, advertising and graphic
design. The industry continues to rely on strong connections and alliances with entertainment,
publishing, traditional arts and media as well as computer hardware production and software
industries. The networks that the managers of multimedia firms describe as being critical to their
development and survival are not so much networks of multimedia firms, but rather networks of
related firms and institutions.
Multimedia's urban character, and the propensity of firms to locate in traditional industrial
and warehouse areas surrounding the central business district, also present real opportunities for
economic revitalization in formerly declining CBD frames. Furthermore, multimedia's urban
propensities are likely to be enduring, in part because of the industry's linkages with other
sectors of the regional economy that have withstood the various forces leading to
decentralization.
There is however, a potential downside to the industry's success and propensity to form
clusters in older industrial neighbourhoods: as demand for land increases in these areas, rents
rise, and frequently results in the displacement of firms, especially those with low profit margins.
This phenomenon has recently been observed in San Francisco, where "rising rents in SOMA
(South of Market Area) have already encouraged the development of clusters in adjacent areas"
(MDG.org, 1998, 14). Similarly, at Toronto's King and Spadina, an historic manufacturing
district that today attracts numerous multimedia firms on the westem portion of the CBD frame,
rents increased by 144 percent between 1982 and 1988 (Lisle, 1998). A subsequent recession
that depressed Toronto's real estate market in the early 1990s helped to make this m a affordable
to multimedia firms. However, new development is once again occurring in the area spurred on
by recent changes to 'industrial' zoning that effectively widened the land uses permitted in the
neighbourhood, and the extent to which this may negatively impact the local multimedia industry
remains to be seen.
6.5 Implications for Theory on the Geography of Economic Activity
Storper (1997,21) identifies the 'principal dilemma of contemporary economic geography'
as "the resurgence of regional economies and of territorial specialization in an age of increasing
ease in transportation and communication of inputs and outputs and of increasingly scientific
organizational rationalities of managing complex systems of inputs and outputs." The
emergence of the multimedia industry embodies this dilemma - it is an industry which has
developed paradoxically strong patterns of spatial cohesion despite the advanced
communications technologies upon which multimedia is based. As well, multimedia firms have
forged innovative ways of maintaining small firm structures while at the same time developing
organizational patterns that enable them to remain both competitive and connected within their
respective regions.
This research definitively supports and extends the conclusions of earlier research (Capello
and Gillespie, 1993; Coffey, 1996; Graham and Marvin, 1996; Graham, 1997) which argues that
industries based on information and communications technology still rely heavily on
interpersonal networks and strong backward linkages which reinforce continuing agglomeration
in urban centres. The convergence of technology and creative sectors, and the history of large
city-regions as centres for the production of cultural products (Scott, 1997) further reinforce the
importance of urban locations for multimedia activity. Egan (1997, 15) concurs, emphasizing
that "the content regions (essentially, those with an existing media industry) have a prior
familiarity with the markets in question and already attracted talented and creative workers and
the necessary supporting services and institutions" thereby facilitating the emergence of
multimedia industries in these centres.
Kutay (1989,364-365) asserts that there are three prominent factors that shape the geography
of high technology industries: i) a concentration of highly skilled workers; ii) strong
organizational infrastructure; and iii) pre-existing regional clusters of high technology industries.
Where multimedia is concerned, a fourth factor is inherently critical for the industry's
development, in the form of an arts or cultural presence. This fourth factor is what differentiates
locational patterns of multimedia from other high technology industries. Furthermore, the
combination of these four conditions is typically characteristic of metropolitan centres and
generally lacking in non-metropolitan regions.
Related to Kutay's description of high technology industrial districts is one of the key aspects
of the literature on agglomeration economies and industrial districts. The premise that industrial
sectors become successful in a particular region because of a combination of factors, generally
including some level of interdependence on similar and related industry clusters in close
proximity, comprises a crucial part of this literature. Furthermore, the labour practices and
reliance on freelance workers that are so much a part of the multimedia industry, also lead to its
concentration. The shared labour pool that multimedia firms draw upon provides economic
advantages to all firms within a multimedia cluster. "The entire industry benefits from a high
number of multimedia firms in the same city. The high concentration of firms enables them to
share the same floating labour pool, which an individual firm could not support" (San Francisco
Planning Department, 1997, 15).
Fuchs and Wolf (l997a) posit that the emergence of multimedia in particular centres is
influenced by the existence of prerequisite conditions associated with three key factors: (i)
location, (ii) positive environmental factors and (iii) innovation networks. The conditions that
Fuchs and Wolf attribute to being supportive locations for multimedia at the regional level are:
spatial proximity to supplier networks, ease of face-to-face contact, a suitable and accessible
labour pool, proximity to users, and access to supportive services, institutions and governments.
They also identify a series of regional factor endowments or characteristics that support the
development of multimedia at the regional level - the availability and affordability of human,
physical, knowledge, and capital resources; an environment in which local demand for a product
or service will help to drive the industry's growth; and related industries to act as suppliers and
partners. Finally, they assert that efforts to develop innovation networks in which intra- and
interindustry cooperation is stimulated through guided public policy, will lead to the
development of a regional economic structure which is 'multimedia-rich'. The research
presented herein, and especially the Toronto case study, provides powerful evidence to support
each of the first two assertions made by Fuchs and Wolf. However, the role of innovation
networks (or lack thereof) has not, to this point, had a significant effect on the emergence of the
multimedia industry in many of the centres studied.
The findings of my research run counter to Amin and Thrift's 'conventional wisdom' on
institutional thickness. Whereas Amin and Thrift (1994) contend that four interrelated
conditions (see Chapter Four) combine to create an environment in which local economic
success is possible, this study indicates that, at least in the case of Toronto, Amin and Thrift's
preconditions for institutional thickness are present in only the mildest form; and yet the
outcomes associated with institutional thickness (e.g. shared cultural norms, informal interaction
amongst industry stakeholders, and an environment open to entrepreneurship) are present. These
findings suggest that greater inquest into the importance of strong associational conditions is
required, and that perhaps Amin and Thrift are incorrect in assuming that regional economic
success is dependent on such factor conditions. Clearly these conditions are only partially met in
the Toronto case study, and yet the industry itself is vibrant and growing, suggesting that there
are ways by which to promote regional economic success that do not emphasize the role of
formal, associational interaction.
Finally, and somewhat contrary to Storper's claim discussed at the beginning of this section,
is that of Arnin and Thrift (1994) who contend that globalization, and not regional specialization,
is driving the geography of regional change. They conclude that "the economic success of
localities in a global economy will increasingly depend upon the articulation between
institutional thickness and 'economic' variables which make it worthwhile for industry to remain
in a locality" (Amin and Thrift, 1994, 16). The Toronto case seems to be a story of locally-
grown firms and not of global actors testing the waters in one of many potentially attractive sites.
This suggests that in the case of multimedia, at least, the variables which have made it
'worthwhile' for firms to establish a strong regional presence, are not, as a rule, well connected
with the forms of institutional thickness that Amin and Thrift promote. Whether this situation
will change as the industry continues through the maturation process remains to be seen. For the
time being however, the presence of 'worthwhile' economic variables far outweigh the role of
institutions in centres of multimedia production.
6.6 Issues for Further Study
While the research presented here begins to answer the questions outlined in Chapter One of
this thesis, a number of issues remain either unresolved or unstudied and therefore warrant
further attention in the future.
One of the greatest difficulties encountered in studying the multimedia industry is the lack of
a universally-accepted definition of what constitutes multimedia. In early studies of the
multimedia industry, rarely was a definition even provided. Today, most studies define the
activities that are perceived to comprise multimedia, but this definition generally varies from
study to study. This not only makes it difficult to compare multimedia industries in situ (when
research is conducted by different agents) but also makes it extremely difficult to make
comparisons between centres of multimedia production. Without an accepted standard by which
to measure the number of multimedia firms, it is also difficult to assess accurately and compare
the level of employment in multimedia and to measure the economic impact of multimedia by
dollar value. One way to circumvent this problem would be to develop and implement an SIC
code for multimedia. This would enable more precise comparison of multimedia within regions
and nations, as well as providing the means for cross-national comparison. Furthermore, data
collected on an even basis would also permit the careful evaluation of change in multimedia
activity and in the relative predominance of particular centres of multimedia production over
time.
Longitudinal study of this 'new' industry will also help to identify whether or not the most
prevalent themes associated with current research on multimedia are enduring. For instance,
what impact will further technological change have on the industry's location patterns? As noted
in Chapter Three, interviewees indicated that they anticipated the increased adoption of video
teleconferencing technologies to enable the dispersal of some activity (e.g. frequent face-to-face
interaction) which is currently highly centralized. Will this technology become widely used? If
so, what impact will it have on the organization and locational patterns of multimedia
production?
Furthermore, the comparison of multimedia's emergence and linkages in San Francisco, New
York and Toronto showed that different combinations of 'positive' regional economic factors
were held responsible for the success of each city's multimedia industry. San Francisco's
strengths in hardware and software production, and relative weaknesses in media presence (i.e. it
is not the country's leading centre of media activity) contrast with New York and Toronto's
weaknesses in hardware production, and strengths in custom software and media industries. In
further study, it would be useful to determine the relative role of each type of activity in
contributing to a region's probable success in multimedia. This type of work would also help to
identify whether or not there are different classifications of multimedia industry agglomerations,
and what the distinguishing background characteristics of these might be.
North American centres of multimedia activity have been shown to dominate the global
landscape of multimedia production at present. Whether or not this pattern will change as newly
emerging centres of multimedia production in Europe and Asia become more prominent also
remains to be seen. The level of international exports from centres of custom-based multimedia
production is likely to rise as firms target their services to global markets, pursuing export
strategies as a means of fending off the threat of international competition. The dominance of
particular locales as centres of multimedia production, once the industry reaches a more mature
state, is also likely to depend on the efficacy of public policy and institutional action in
supporting the multimedia industry's continued growth. At the public policy level, this may
include zoning, infrastructure andlor tax incentives which encourage firms to remain in a given
area. In the realm of institutional action, supportive institutional structures that are perceived to
add value to a firm's activities through the development of educational programs, networking
opportunities, and support in other areas deemed critical for the industry's growth, can also be a
driving force in the endurance of existing locales as dominant centres of multimedia activity and
production as the industry matures.
Many features of the industry's organization (e.g. small firm size and reliance on freelance
employees) which have been sustained over the early years of multimedia's emergence are
subject to potential change if firm ownership moves from the hands of entrepreneurs to large
corporations. There are recent examples of both advertising agencies and multimedia firms
pursuing the purchase of established multimedia firms (@NY, 1998). While acquisitions of
multimedia firms have been most prominent in some of the U.S. centres of multimedia
production such as New York, there is not, as yet, widespread evidence of this occurring in the
Canadian market. If this pattern does ensue, the question of whether multimedia remains a
'distinct' industry or becomes subsumed by related industries will arise.
7 APPENDICES
APPENDIX A: Multimedia Platform Definitions
CD-ROM Abbreviation of Compact Disc-Read-only Memory. A CD-ROM is a disk that can hold large amounts of data (the equivalent of 700 floppy disks). The data on a CD-ROM can only be read using a CD-ROM player. As their name suggests, CD-ROM's can only be read. Once recorded, the data on a CD-ROM cannot be erased and/or filled with new data (Glossary of PC & Intemet Terminology, 1997; PC Webopaedia, 1998).
Example: Encyclopaedia on a CD-ROM - text, pictures and audio files of a multi-volume encyclopaedia can all be placed on a single CD-ROM.
Internet A world wide computer network, connecting more than one million computers, and with more than 50 million users as o i February 1998. Using the internet, people from around the world can send electronic mail, exchange data and news, look up information, and make purchases. The Internet is accessed via computer using on-line services such as America Online, or through an Internet Service Provider like the University of Toronto's UTORdial (Glossary of PC & Internet Terminology, 1997; PC Webopaedia, 1998).
Example: Email sent from a person at the University of Toronto to someone in Australia, is sent over the Internet.
Intranet A network that belongs to an organization and which is only accessible to authorized persons (e.g. employees, members). Unauthorized access to an intranet is prohibited by the presence of a firewall, a hardware and software system that acts to protect a network by ensuring its privacy (Bell Advantage, 1997; PC Webopaedia, 1998).
Example: An intranet at a bank, which allows an employee in Toronto to send a message to an employee in Montreal, or to look up a bank account balance, via the bank's internal computer network
Kiosk Stand-alone computerized systems custom designed for a specific product and use. Kiosks often use touch-screens and are designed for ease of use that does not require training or documentation (PC Webopaedia, 1998).
Example: Automated Bank Machine (ABM).
Floppy Disk A magnetic disk that is used to store computer data. Floppy disks come in two sizes, 5 114 and 3 112 inches; 3 112 inch disks have been more commonly used since 1987. These disks are inserted into a computer's disk drive and are portable. They have far less storage capacity than hard disks (up to 1.44 megabytes), but are also significantly less expensive (Glossary of PC & Internet Terminology, 1997; PC Webopaedia, 1998).
Example: Microsoft Windows 3.1 was distributed, and installed on computers, via a floppy disk.
Hard Disk A magnetic disk upon which computer data is stored. Hard disks are faster and hold more data than floppy disks. Hard disks are not as portable as floppy disks, though there are certain types of removable hard disks (Glossary of PC & Internet Terminology, 1997; PC Webopaedia, 1998).
Example: When a computer is described as having a 2 gigabyte (GB) hard drive, this is the hard disk.
Game Console Cartridges used to store game titles. Consoles must be used in conjunction with a proprietary game system (i.e. Nintendo) in order to operate.
Example: Pac-Man
APPENDIX B: Multimedia Applications and Use
Table 7.1 highlights some of the sectors in which multimedia applications are used and
identifies the ways in which multimedia enhances or enables the work carried out by these
sectors.
Table 7.1: Digital Media Enabling Effect on Other Sectors of Economy
Financial Services
sites, customer
Training service, training modules
Service 1 banking Delivery
Automotive Health
environments for product testing
Product On-line
Corporate training modules; assembly training modules
NIA
Virtual reality surgery; distance learning
telemedicine I--
Tourism
NIA
On-line vacation destinations; event listings; maps
Corporate training modules for travel agents
On-line travel booking: on- line event booking
Aerospace
Virtual reality for product testing; modeling software On-line schedules; flight promotions
Flight simulation models for pilot training
On-line bookings
Source: Digital Media Champion Group, 1997
APPENDIX C: Questionnaire Administered to GTA Firms Survey of Toronto's Multimedia Industry The purpose of this survey is to classify and assess the organization and location patterns of the multimedia industry in the Toronto area. Please take a few minutes to answer the questions below regarding your firm's multimedia activities. The results will be used to help develop a detailed picture of Toronto's multimedia industry, and to help inform understanding of emerging high technology industries in metropolitan areas.
This survey is being conducted with the support of SMART Toronto, the Information Technology Research Centre (ITRC) and Multimediator: Canada's Multimedia Guide. It is the first in-depth study of the multimedia industry in the Toronto area, the largest centre of multimedia activity in Canada. Survey participants may choose to receive a summary of the results by checking off the box at the end of the survey.
You may also fill out this survey on the Intemet at: http:\\www.multirnediator.com\survey. Alternatively, if you would prefer to receive a mailed copy, please contact me at [email protected] and I will be happy to send one with a retum-addressed stamped envelope. You may also print a copy of the survey and return it to me at the address below or by fax to: (416) 944-1029.
Please provide your firm's address at the end of the survey -- it will be used to map the intraurban location of Toronto's multimedia industry, and helps to ensure the accuracy of the research database. If multimedia work forms only a part of your organization's activities, please answer this survey based on the multimedia component of your organization. For questions asking for percentage values, approximate estimates are fine.
I am conducting this survey as part of my dissertation research in Economic Geography at the University of Toronto. If you have any questions or comments regarding the survey or the project overall, please contact me at: [email protected] or Prof. Carl Amrhein, Chair, Department of Geography, University of Toronto, 100 St. George Street, Toronto, Ontario, M5S 3G3. All information provided in your responses will remain strictly confidential.
Thank you for your participation.
ShaunaBrail Department of Geography University of Toronto 100 St. George Street Toronto, Ontario M5S 3G3
I. Classification of Activities 1. Which of the following best describes your work organization?
[ ] Private firm [ ] Non-profit organization [ ] Museum [ ] Public organization [ ] Educational institution [ ] Other
2. Is multimedia the sole focus of your organization or a component of the work you do? [ ] Multimedia only [ ] Multimedia component (if yes, please respond to the remaining questions based on the
multimedia component of your firmlorganization)
3. If multimedia is a component of your work, please indicate what other work/activities you do:
4. What proportion of your work, by sales, are: 100% >SO% <50%
Custom products [ 1 [ 1 [ 1 Mass market products [ ] [ I [ 1
5. What proportion of your products, by sales, are: 100% >SO% <SO%
Interactive [ 1 [ I [ 1 Non-interactive [ 1 [ 1 [ 1
6. What proportion of your work involves: 100% >SO% <SO%
Multimedia developing [ ] [ 1 [ 1 Multimedia publishing [ ] [ 1 [ 1 Multimedia distributing [ ] [ 1 [ 1 Other [ 1 [ 1 [ 1
7. What proportion of your work, by sales, is developed for: 100% >SO% <SO%
CD-ROM [ 1 [ 1 [ I Internethtranet [ 1 1 1 [ 1 Kiosks [ 1 [ 1 [ 1 Hard disk [ I 1 1 [ 1 Floppy disk [ 1 [ 1 [ 1 CartridgeIGame console [ ] [ 1 [ 1
8. What proportion of your work involves the following media: 100% >50% <50% 0%
Text [ 1 [ 1 [ I [ 1 VideolGraphicslPhotos [ ] [ 1 [ I [ 1 Sound [ 1 [ 1 1 1 [ 1
9. What proportion of your work, by sales, is geared to the following sectors? 100% ~ 5 0 % <50% 0%
Corporate [ 1 [ 1 1 I [ 1 Entertainment [ 1 [ 1 1 1 [ 1 Edutainment [ 1 1 1 [ 1 [ 1 Education [ 1 [ 1 [ I [ 1 Health [ 1 [ 1 [ I [ 1 Information [ I [ 1 I 1 [ I Other [ I [ I [ I [ 1
10. Please indicate which of the following products and markets you serve: (please place an X in relevant boxes) Virtual reality [ ] Children's education [ ] Intranet site design [ ]
Games [ ] Reference materials [ ] Adult education [ ] Advertising [ 1 On-line publishing [ ] Animation [ 1 Software [ ] Special effects [ ] Financial applications [ ] Movies & TV [ ] Interactive TV [ ] Vocational education [ ] Film editing [ 1 Internet site design [ 1 Business & management materials [ ] Clip media [ 1 Graphics [ ] Marketing & merchandising materials[ ] Other [ ] Other [ 1
11. Firm Structure and Organization 11. When was your firm established?
(month, year)
12. When was your multimedia business established (if different from above) (month, year)
13. How many people a) are presently working with your firm and b) were working with your firm in February 1996?
Presently February 1996 Full time - - Part time - - Long-term contract Short-term freelance
14. How many of your employees fall under the following skill categories? Creative Technical ManagementISales Other
Full time - - - - Part time - - - - Long-term contract - - - - Short-term freelance - - - -
15. Which of the following types of work do you conduct in-house andor subcontract out? (I = in-house, 0= subcontract out, B= both in-house and subcontract out) [ ] Artwork and illustration [ ] Animation [ ] Programming and software services [ ] Game design [ ] Writing and editing [ ] Special effects [ ] Content research [ ] Public relations [ ] Cinematographylvideo [ ] Packaging [ ] Musical composition and performance [ ] Voice-over [ ] Sales and marketing [ ] Live action [ ] Customer se~ice/support [ ] Other
16. How much of your multimedia work (as a rough % of total revenues) do you subcontract out?
17. How much of your multimedia work do you take in as a subcontractor to other firms? (again, please express as a % of total revenue)
-%
18. What percent of a) your suppliers, including subcontractors; and b) your customers, by approximate value of sales, are located in:
a) suppliers b) customers Same neighbourhood Toronto area -- Ontario -- Canada -- United States -- Outside North America
19. Was your firm profitable in 1996?
[ ] Y e s [ I N 0
20. What were your firm's a) approximate revenues from sales of multimedia products in 1996 and b) approximate profits from sales of multimedia products in 1996? (check highest category that applies) (Reminder - responses are strictly confidential)
>$50,000 r$100,000 s$500,000 >$1,000,000 >$5,000,000
a) Revenues [ 1 [ 1 [ 1 [ 1 [ 1 b) Profits [ ] [ 1 [ 1 [ 1 1 1
IILLocation 21. Where was your firm initially established?
[ ] Toronto area [ ] Elsewhere (please identify)
22. Does your firm have offices in other cities?
[ I Yes [ I N 0 If yes, please list other cities in which your firm has offices:
23. Has your firm had previous locations within the Toronto area?
]Yes [ I N 0 If yes, what was your previous address? (please give street address and municipality)
24. If your firm has moved from another location, what was the reason for your move to your current location? (please rank if more than one reason; 1 = most important)
[ ] Space too small [ ] More central location [ ] Lower rent
[ ] Moved from home office [ ] Less central location [ ] Other
Please identify yourself and your firm: (this information will be used to ensure database accuracy and for preparation of mapwork and will not be made public.) Name: Position: Firm: Address: Phone: Fax: Email: Thank you for taking the time to complete this survey. Please check off the box below if you would like to receive a summary of the results.
[ ] Please send me a summary of the results
APPENDIX D: List of Interviewees
Toronto Multimedia Firms Abrams, Frank. Flying Disc Entertainment, President. Anderson, Karen. Interlynx Multimedia, President. Brandt, Ron. Canada Media, Vice-president Marketing. Davies, Bryan. Kortright Conservation Centre, Multimedia Coordinator. DeConinck, Daniel. High Res Technologies, President. Dowsett, John. Adrenaline Communications, Principal. Duffy, Paul. Corporate Communications Interactive, Managing Partner. Evitts, Jesse. Forefront Graphics, Senior Technical Engineer. Feist, Harold. 2D Art Systems, President. Ferrari, Vanessa. Megapix Communications Inc., Media Specialist. Gleason, Ame. St. Clair Interactive Media, Senior Multimedia Developer. Gower, Gord. Mackerel Interactive Media, President. Herrington, Janice. Corporate Communications Interactive, Director of Development. Hicks, Brian. MetroMan, Project Manager. Jackson, Kevin. NVision Multimedia, Partner. Janczak, Voytek. Janczak/Mandel Associates Inc., Principal. Karsten, Selia. Karsten Productions, Principal. Langlois, Aurel. Electramedia, Director. Latimer, Jim. Cyberplex Interactive Media, Technical Director. Mandel, Carl. Janczak/Mandel Associates Inc., Principal. Maraldo, Brett. Plexus Interactive, Principal. Nikitopoulos, Peter. ICE Inc., Marketing Director. O'Donnell, Brian. Irwin Publishing, President. O'Hara, Frank. O'Hara Systems, President. Paterson, Nancy. Paterson Productions, President. Punnett, Sam. Free Association Development, President. Ross, Stuart. Bindemagel Ross New Media, President & Chief Executive Officer. Rossiter, James. Knowledge Connection Corporation, Executive Director. Shostak, Michael. Digital Renaissance, Vice-president Marketing. Sweetman, Bill. Electric Eye Multimedia, President 1 Ideaguy. Tumangday, Erwin. Random Media Core, Project Manager. Van Buskirk, Christopher. TNT Interactive, Vice-president.
Government Representatives Danzig, Brigitte. Ministry of Economic Development, Trade and Tourism, Information Industries Office. D'Sousa, Ritoo. Industry Canada, New Media and Entertainment. Godfrey, John. Federal Government of Canada, Member of Parliament. Montgomery, Robert. Ministry of Citizenship, Culture and Recreation. Director, Cultural Policy Branch. Parsons, John. Ministry of Citizenship, Culture and Recreation, Acting Manager - Cultural Programs. Plant, David. Toronto Film and Television Office, Film Commissioner. Ratchford, Donna. Ministry of Citizenship, Culture and Recreation, Policy Analyst.
Organizations and Educational Institutions Derry, Don. Interactive Multimedia Arts and Technologies Association, Executive Director. Froman, Adam. Interactive Multimedia Arts and Technologies Association, President. Kavanagh, Paul. Connect.IT. King, John. Bell Centre for Creative Communications, Director. Putterman, Connie. Information Technology Research Centre, Manager, Marketing Industry Interaction. Stewart, Walter. SMART Toronto, President.
Related Industries (Advertising, Computing, Publishing, Recording) Faibish, Kris. The Microsoft Network Canada, Producer. Hutchison, Heather. Apple Canada. Neil, Gary. Neil Craig Associates, Principal. Rosen, Earl. Marquis Records, President. Simpson, Alison. MacLaren McCann, Group Account Director. Teplicky, Barry. BBDO Advertising. Warrilow, James. Maclean Hunter Publishing, President.
Finance Campbell, Brian. Yorkton Securities, Director. Cunneen, Brendan. Business Development Bank of Canada, Managing Director - Emerging Markets. Eckert, John. McLean Watson Capital, Managing Partner. Mitobe, Suzanne. The Royal Bank of Canada, Marketing Support Officer. Stewart, Paul. The Royal Bank of Canada, Knowledge Based Industries, Account Manager. Valliere, David. The Royal Bank of Canada, Senior Manager - Advanced Technologies. Yakemchuk, Gail. Shaw Cable, Assistant Executive Administrator.
New York Connors, Connie. Connors Communications, President and CEO. Dickerson, Mei. ICE Inc., Vice President, Business Development. Edwards, Andrew. Renaissance Multimedia, CEO. King, Steve. Virtual Growth Incorporated, President. Kwon, Thomas. Dynamind, CEO. Raposo, Tony. Canadian Consulate General, Commercial Officer. Rose, Miles. Regional Delights, Principal; MediaPartners, Principal. Sousa, Chris. Sixth Gear Intemet Solutions. Wong, James. The Atlas Organization, Principal.
San Francisco Bauman, Catherine. City and County of San Francisco, Planner. Bui, Theresa. Red Dot Interactive, Manager, Marketing Communications. Corona, Anita. Ikonic, Director, Communications Evershed, John. Mondo Media, CEO. Ghosh, Amit. City and County of San Francisco, Chief, Comprehensive Planning Poole, Henri. Vivid Studios, President and CEO. Robins, Debra. San Francisco Production Group, President and CEO. Worthman, Susan. Multimedia Development Group, Executive Director.
APPENDIX E: Interview Guide for Toronto Multimedia Firms A. Description of Firm and Activities 1 . What are the main activities that this firmlorganization is involved in? Do you develop or produce a 'trademark' product? What is it?
2. How was this firm's multimedia business established? What are the origins of the business, including the 'work history' of the founder(s)?
3. Has the focus of your findorganization changed since establishment? (i.e. cd rom to internet, corporate to education) If so, how?
B. Access to Suppliers and Clients 1. What kinds of firms are your major suppliers (by firm type or activity) and where do they tend to be located?
2. How frequently do you meet face-to-face with suppliers? Where do you meet? What other modes of interaction do you use? When is face-to-face interaction important to achieve? What is the geographic range of your suppliers?
% Distribution 'Downtown' - Rest of Ontario - USA (where?)
R e s t of GTA - Rest of Canada
3. Who are your clientslcustomers (by firm type or activity) and where are they located?
% Distribution - 'Downtown' - Rest of Ontario - USA (where?)
Rest of GTA R e s t of Canada
4. How frequently do you meet face to face with clients? Where do you meet?
C. Location 1 . What factors led you to locate in this building?
2. Is this a good neighbourhood to be located in? Why or why not? What factors led you to choose this area of the citylregion?
3. Is the GTA a good region in which to be working in multimedia? Why or why not?
4. If firm has moved, what considerations motivated 1) the decision to move; and 2) choice of new location?
5. What is the relative importance to you or your firm of access to: clients, infrastructure, suppliers, technology, transportation networks, etc.? (Rank with 1 being most important)
[ ] Clients [ ] Infrastructure [ ] Suppliers [ ] Technology [ ] Transportation Networks [ ] Other
D. Imports and Exports 1 . Does exporting play a role in your firm's work? If so, what do you export? (services, products, both)
2. Where do you export to?
3. Has the importance to your business of export markets changed since firm startup? In which direction? Why?
4. What types of services or products or other 'inputs' do you import? Where do you import them from and why? Have there been any recent changes in your firm's importing patterns?
E. Competition and Cooperation 1 . What types of projects do you work on collaboratively with other multimedia or 'related' firms? How do you structure the division of work responsibilities between firms?
2. In such collaborative ventures, does your firm usually act as 'project manager' or are you requested by other firms to work on product developmentlservice provision?
3. What types of work, and to what kinds of firms do you contract out work to?
4. On a more general level, how important is cooperation and collaboration within the multimedia industry in this region? What mechanisms or organizations promote1 encourage such cooperation and how effective are they? (scale of 1-5 -- 1 = very effective, 5 =not effective)
F. Organization of firm 1 . What does the organizational chart of this firm look like (in terms of occupations and positions)?
2. What kind of educational training do your technical and creative employees have? Which colleges, universities or other institutions specializing in this training have you hired graduates from?
3. Have any previous employees left your firm to start their own firms or work in other local firms? Does it happen frequently? Does this pose problems?
4. How adequate is the supply of skilled labour for this industry in the GTA? What are the major shortcomings of the local labour force?
G. Financing 1. What costs did you have to incur in order to start up?
2. How are decisions made about the adoption of new technology, and purchase of equipment?
3. Has your company required financing for new product development or development1 acquisition of new technologies/equipment? How and from where did you obtain financing? Problems?
4. What are the biggest challenges to your firm's survival and growth?
H. Public Policy 1. What role is there for public policy and public institutions in supporting the multimedia industry? (municipally, provincially, federally) What could be done better?
2. What do you percpive the role of institutions (i.e. IMAT, SmartToronto) to be in supporting the multimedia industry? What could be done better?
3. Are there any infrastructure improvements that should be undertaken to foster a more positive business environment for multimedia firms in the Toronto area? What? How important are these to the industry's development, growth and survival in this region?
4. What are the most significant financial and non-financial measures that could be implementedlinstituted to help support the industry?
APPENDIX F: Interview Guide - New York and San Francisco Multimedia Firms
A. Description of Fi rm and Activities I. What are the main activities that this fidorganization is involved in? Do you develop or produce a 'trademark' product? What is it?
2. How was this firm's multimedia business established? What are the origins of the business, including the 'work history' of the founder(s)?
3. Has the focus of your fidorganization changed since establishment? (i.e. cd rom to internet, corporate to education) If so, how?
B. Access to Suppliers and Clients 1. What kinds of firms are your major suppliers (by firm type or activity) and where do they tend to be located?
2. How frequently do you meet face-to-face with suppliers? Where do you meet? What other modes of interaction do you use? When is face-to-face interaction with suppliers important to achieve? What is the geographic range of your suppliers?
% Distribution (by expense volume) - 'Downtown' R e s t of State - Other (where?) - Rest of region R e s t of USA
3. Who are your clientslcustomers (by firm type or activity) and where are they located?
% Distribution (by sales volume) - 'Downtown' - Rest of State - Other (where?) R e s t of Region - Rest of USA
4. How frequently do you meet face to face with clients? Where do you meet? When and why is this important?
C. Location 1. What factors led you to locate here?
2. What are the specific advantages of being located in this r?eighbourhood? What factors led you to choose this area of the citylregion? Any disadvantages?
3. What are the principal advantages (disadvantages) of the New York / San Francisco region as a region in which to be working in multimedia?
4. If firm has moved, what considerations motivated 1) the decision to move; and 2) choice of new location?
D. Imports and Exports 1. What proportion of the firm's sales are exports? What do you export? (services, products, both)
2. Where do you export to?
3. Has the importance of export markets changed since firm stanup? In which direction? Why?
4. What types of services or products or other 'inputs' do you import? Where do you import them from and why? Have there been any recent changes in your firm's importing patterns?
E. Competition and Cooperation 1. What types of projects do you work on collaboratively with other multimedia or 'related' firms? How do you structure the division of work responsibilities between firms?
2. In such collaborative ventures, does your firm usually act as 'project manager' or are you requested by other firms to work on product development/service provision?
3. What types of work, and to what kinds of firms do you contract out work to?
4. On a more general level, how important is cooperation and collaboration within the multimedia industry in this region? What mechanisms or organizations promotel encourage such cooperation and how effective are they? (scale of 1-5 -- 1 = very effective, 5 =not effective)
F. Labour Force 1 . What kind of education or training do your technical and creative employees have? Which colleges, universities or other institutions specializing in this training have you hired graduates from? (primarily local or non-local)
2. How adequate is the supply of skilled labour for this industry in the region? What are the major shortcomings of the local labour force?
3. Are you involved with R&D projects at universities andlor research institutes? Does proximity to universities and research institutes encourage you to become more involved in RBD efforts? What are the most important research issues with respect to new media?
G. Financing 1. How are decisions made about the adoption of new technology, and purchase of equipment? How would you characterize your firm's R&D efforts?
2. Has your company required outside financing for new product development or development/ acquisition of new technologieslequipment? How and from where did you obtain financing? Problems?
3. What are the biggest challenges to your firm's survival and growth?
H. Public Policy 1. What role is there for public policy and public institutions in supporting the multimedia industry? (municipally, state, federally) What could be done better?
2. What do you perceive the role of institutions (i.e. NYNMA, MDG) to be in supporting the multimedia industry? What could be done better?
3. What are the most significant financial and non-financial measures that could be implementedlinstituted to help support the industry?
4. In sum, what in your opinion are the most significant reasons for this region's success as a multimedia production centre?
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