Rebuilding Place in the Urban Space

"A community’s physical form, rather than its land uses, is its most intrinsic and enduring characteristic." [Katz, EPA] This blog focuses on place and placemaking and all that makes it work--historic preservation, urban design, transportation, asset-based community development, arts & cultural development, commercial district revitalization, tourism & destination development, and quality of life advocacy--along with doses of civic engagement and good governance watchdogging.

Wednesday, January 10, 2018

Discovery Channel to leave Silver Spring, Maryland

Over the past year, Aaron Renn, writing in his Urbanophile blog, had two posts that I found particularly provocative (in a good way) but I haven't gotten around to reacting. 

One was more recent, "St. Louis and the Consequences of Consolidation," discussing corporate "consolidation" and the impact of corporate mergers, distant control of the corporation, and the eventual impact on support services.

His example was Anheuser Busch, the nation's number one beer producer, based in St. Louis, but now owned by an international brewing behemoth based in Europe and South America. 

Historically, companies like A-B or General Motors were large enough to have key services such as advertising development and media buying provided locally, albeit by divisions of larger firms located in the nation's advertising capital--New York City, whereas most other companies would go to New York (or Chicago) more directly for this work.

(St. Louis has lost many locally significant businesses through corporate consolidation, such as Boatman's Bank, now part of Bank of America, May Company department stores, now part of Macy's, and increasingly, Anheuser-Busch, with a major negative impact resulting on the business district in Downtown St. Louis.)

The acquisition of Anheuser-Busch is an example of how business is now organized on international terms without respect to national boundaries, and even companies that are huge within their markets can not avoid or evade the merger and consolidation process as business is reorganized on a global basis.

A-B, acquired in 2008, took until 2017 to shift its advertising accounts to New York City, costing a number of highly paid St. Louis-based jobs as a result. 

Aaron discusses this in terms of consolidation and was reacting to a 2016 Washington Monthly article, "The Real Reason Middle America Should Be Angry," which makes the argument that lack of adequate anti-trust regulation against corporate mergers led to this kind of result.

Personally, I think the WM argument is weak because as long as companies are stock-based, the pressure from investors, especially large institutional investors and hedge funds agitating for maximized returns ("The Effects of Hedge Fund Interventions on Strategic Firm Behavior," Harvard Law School Forum on Corporate Governance and Financial Regulation) is to make more money and that comes from bigness and consolidation.

Although it must be noted that because extranormal business growth is unattainable in mature markets, profit margins are mostly increased by "efficiency gains" that come through layoffs and consolidation of production. This is true especially for businesses in countries like the U.S. where the days of hyper-growth are decades in the past. Moreover, as countries like China accelerate the growth of their economies especially in consumer-focused industries, those firms are now the hyper-growth actors and increasingly operating on an international basis.

In college, I came across a couple books, Human Scale by Kirkpatrick Sale, and The Bigness Complex: Industry, Labor, and Government in the American Economy by Walter Adams which had a lot of influence on my thinking about these issues, but the reality is that the organization of the capitalist system and a focus on "efficiency" leads this process and anti-trust regulation is more likely to result in the crippling of smaller companies.

Being from the Detroit area myself, I had witnessed a similar type of activity dating to the 1970s, in how the control of the city's advertising and media businesses (other than locally focused media) and banks especially, was shifting out of the region, in particular to Chicago, because a primarily one industry town wasn't big enough to generate its own momentum in the support of business-related "service" economy.

So this process isn't new to me.  It's the basis of agglomeration economies and the benefits of clustering.  What has happened is that as businesses grow and operate on a national or global/international basis, where they purchase services changes, from locally-owned or based businesses, to national centers.

This is the same effect as with the difference between locally-owned retail and national chains.  Chains don't purchase products or services locally, so the "multiplier effect" or the economic and business-to-business recirculation benefits from consumer spending are significantly reduced compared to purchases made at locally owned businesses ("The Multiplier Effect of Local Independent Businesses," AMIBA).

This comes up locally with yesterday's announcement ("Discovery Communications to exit Silver Spring," Washington Business Journal) that Discovery Channel, a large cable network, alongside their merger with Scripps Media, owner of channels such as HGTV, Travel Channel, and Food Network, is shifting its corporate headquarters to the nation's media capital--New York City--and most of its back office and production functions to Knoxville, Tennessee, where the Scripps operation is based.

Hurts Montgomery County, especially Silver Spring's office market.  This is a blow to Montgomery County, Maryland and the conurbation of Silver Spring, which loses one of three major business headquarters located there (the others being United Therapeutics and a federal agency, NOAA), 1,500 jobs directly, and likely more than double that in terms of indirect jobs.

It makes the capture of office jobs in Silver Spring even more difficult as suburban office space demand is shrinking ("Report: No Recovery in Sight for Parts of Montgomery County Office Market," Bethesda Magazine).

For whatever reason, Bethesda has been more successful ("Marriott to move headquarters to downtown Bethesda with $62 million in incentives," Washington Post) than Silver Spring in continuing to capture new headquarters, as companies shift to transit-adjacent locations away from the office parks.

Diminishes the DC area's relevance as a media production center, excepting television news.  Interestingly, both Detroit and Washington have functioned as secondary media production centers for a long time.  For Detroit, this came out of the business videos produced for the auto industry.  For Washington, it derived from the various television news operations for national networks and station groups.

And like with how MCI, the long distance telecommunications firm, located in the DC area because of access to regulatory agencies, a handful of television operations (PBS) and cable networks (BET, Discovery Channel, C-SPAN, Learning Channel later acquired by Discovery, etc.) developed here out of a similar proximity, including to the National Cable Television Association and the National Association of Broadcasters, industry trade associations and lobbying organizations.

But as these companies become relevant on a larger scale, nationally and/or internationally, local agglomeration economies are less valuable, and the businesses relocate.  This happened with BET already ("BET Shutters Washington, D.C., Office as Operations Move to New York," Hollywood Reporter) and now Discovery.  Plus, control of the National Geographic Channel shifts to Disney from Fox, etc.

How realistic is it for a ban (anti-trust regulation) of corporate mergers to occur, to staunch this kind of relocation? I'd say, not very.

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At 6:36 PM, Blogger Edward Drozd said...


As I noted in a comment to the article about this on GGWash, my guess is that the answer to "for whatever reason, Bethesda has been more successful" is where do CEOs live. Well, I should expand that to CEOs plus senior management. Well, maybe two other reasons are name recognition outside of the area (presumably connected to the CEO thing). And, I suspect, something I'll call "socioeconomicism" to roll a bunch of stuff into a catch-all category because I don't know what weight to put on the ingredients in that catch-all...

Also, I'm happy to see the increased posting frequency; I hope the family medical issues have resolved well enough. And please don't ask about the Fenton Street stuff; work and family have gotten in the way all too much.

At 7:11 PM, Blogger Richard Layman said...

1. Well, the best answer to your very good point is one word: Potomac.

Yep... plus legacy stuff. But speaking of Fenton, one of the points in the 18 point agenda (and I need to add one more, CBD playgrounds) was a focused business recruitment effort, although I think it's tough. One way to build long term is do to WeWork related stuff, plus other stuff I recommended along those lines with Montgomery College.

2. Fenton!!!!! (I didn't meet the deadline to submit to get on the MoCo conference thing; I have been meaning to contact Purple Line Now and/or ACT to see if they'd be interested in a presentation.)

3. The family stuff has settled down, at least for the short term... thank you for asking.

At 7:31 PM, Blogger Richard Layman said...

related to your point, when Casey Anderson spoke before an ACT meeting a couple months ago, he made a very good point, that desires to add science functions, upscale housing, etc. in association with the new development around the FDA campus could lag, because of perception of East County schools. Another reason businesses likely locate in west county is because of proximity to great schools, especially high schools.

At 8:42 AM, Blogger Richard Layman said...

Aaron makes me feel like a conservative. He has a column in this month's Governing Magazine making the same point, that federal policy (he doesn't use the term neoliberalism but that's what generated the policy) de-emphasized anti-merger regulation, that this aided centralization of business to the major cities, generally on the coast.

I would counter that in a global economy, keeping US businesses smaller doesn't make them more successful.

It's the idea of the "national champion" business, e.g., in France, and generally that hasn't worked so well.

At 9:21 AM, Blogger Richard Layman said...

a bunch of articles in the Wash. Biz. Journal. I don't subscribe and many are locked to registered users only.

Still, their general take is that this hurts MoCo.

... but this piece makes the point that Discovery's future isn't here, that they had to leave:

And that's the kind of point re Aaron/the Washington Monthly article. Crippling businesses by limiting their ability to consolidate and move doesn't help business in the long run.

That being said there need to be other protections, not so much for communities, but for workers (national health, job supports, education and training) to deal with the precarious nature of work.

wrt communities, we have to accept that not every place can be "revitalized," that in a globalized world and national economy, exchange concentrates.

At 10:43 AM, Anonymous charlie said...

" Crippling businesses by limiting their ability to consolidate and move doesn't help business in the long run."

I'd side with Renn on this.

Antitrust law used to be very simple -- the purpose was to keep things small.

Much like we talked about the structural legacy of urban policy in the US is designed for smaller cities, that is the part of the legacy of populism and antitrust.

(it is why I don't view the R as "Anti-urban" right now as "Anti-big city" which his slightly different. Maybe not)

The big innovation of Bork in the 1970s was to stay staying small for its own sake is not worth it, look at consumer benefits (loosely defined) which enabled the great rollups of the 70s to 90s.

Macy, the movie chains, Walmart, etc.

I have no doubt that era is ending and we'll have a new approach. In fact the trump DOJ seem to be sharing the same view on anti trust.

At 12:02 PM, Blogger Richard Layman said...

but this is something that's been happening since c. 1900. Before transportation became more national (e.g. railroads), most business was organized on a big city/regional basis. For example, you had battery companies, stove works, bathroom machinery manufacturers, breweries, mills, that were local/regionally focused.

When transpo changed and more importantly, the cost of transpo changed, these companies started merging, e.g. "American_Standard" (we have their c. 1929 products in our house, which is why I looked into it), Ever-ready battery (an amalgamation of multiple firms, again, battery cases c. 1920s were left in our basement), etc.

With the making of the mass market, business reorganized on the scale of the mass market.

Chains rose in the 1920s too. I came across an article in Colliers from the 1920s (don't have an exact cite) that represented the interests of the chain owners, making the point that it was more efficient, could make goods cheaper, etc.

While I think we should remove all the elements that chains and larger businesses use to their advantage over independents, I don't see how we can stop mergers, since business now functions way more cross-nationally.

e.g., one way chains reduce their profits is to charge each store a brand licensing fee (not unlike a franchise fee) of say 5-7% of sales, which reduces their profits, even though it just moves the money from one pocket of the finance dept. of the firm to another.

Or apparel retailers force manufacturers to absorb markdowns. various retailers charge slotting fees, etc.

All of these kinds of acts provide big companies with advantages over small ones or independents.

But A-B, as the market changed to favor artisan products with flavor, was always going to lose market share, just as other market leaders functioning in a mass market have lost share as their particular markets have become much more segmented.

McDonalds, GM, Ford, the large food manufacturers

or as products became commoditized. E.g., looking at how gasoline was marketed, branding was key and special elements were provided as part of the package. Now those companies do almost no brand promotion other than signage and store design and focus on selling snack goods. gasoline station owners make virtually no money from gasoline (even if the refiners and extractors do), just from ancillary sales of goods.

Would it have made a difference if the merger of Getty-Texaco, Exxon-Mobil, Marathon-Hess, etc. bulking up of stations into big groups would have been disallowed?

Yes in terms of impact on administration jobs. e.g., merger of truck stops (Pilot/Flying J; Flying J had been in bankruptcy), merger of Bass Pro stores and Cabelas, etc.

My past writings about Hostess and the consolidation of the company to remain a going concern.

Or digitalization. Stores like walmart, gas stations, etc., used to all have individual bookkeepers. Not any more. I read something about Pilot, with computerization, they dropped the number of accounting employees by at least 40%.

But could the companies have best functioned still as independents? Hard to say.

In short, there's a lot of different things going on simultaneously. Merging is a big element, sure. And yes it is partly a function of financialization. But also just the constantly changing nature of how markets and business sectors are organized.

At 10:08 AM, Anonymous charlie said...

You're throwing some good haymakers there,but I'd say the ferocity of your position is compromised by the ground you are standing on.

Yes we are in a highly partisan time, where political allegiances are like tribes. Mapping that onto the rural-urban divide (which itself is a intellectual remnant from the 19th century) isn't helping.

And it goes back to "What is a city".

I'd offer a new definition -- a city is where the externalities become so complex that you can't measure them with market forces.

(ie. what is the externality cost of a pop up (or pop-back) on your street? Property crime? Litter? homeless people wandering up and down?)

At some point the externalities become easier to measure. Take some farmland for a pipeline -- very easy to measure the value there.

So yes, anti-regulation people want the place where you can measure externalizes -- and urban places understand that you can't always do that.

good article on D in Alaska:

I'm not sure this is so different than populists in the south in the 1910s and the Texas Railroad Commission, for instance.

I see your point that business changes, and that having the government get in there and stop change is not always desirable.

But through anti-trust enforcement -- and the lack of the push to keep business small -- you're already setting the ground rules.

And our urban policy is still stuck in the older time - therein a reason we have only 3 world class cities (LA, NYC and Chicago) and a bunch of other contenders (SF, Seattle, Boston, DC, Dallas, Houston, Miami). If we leet things flow NYC or LA would eat up every job in the county. Network effects and all that.

So we keep pushing to have 25-30 "NFL" level cities rather than 5-6 world class ones.

My point -- populist demand for antitrust come from a very old place -- as do demand to spread out jobs. In fact they come from the same place.

We wouldn't have any gasoline chains if someone had not broken up Standard Oil -- which didn't even sell much gasoline at the time.

At 11:36 AM, Blogger Richard Layman said...

in _Planning in the Capitalist City_ Foglesong lays out what he calls the democracy contradiction, that property owners need public input to prevent the problems that may result from the "property contradiction," other property owners who unfettered may do stuff that reduces the values of properties owned by others.

Here we have a contradiction between jobs/place/labor and the inexorable focus on consolidation and capital and mass markets vs. local markets.

Of course, the whole idea of place-based capital is a fundamental element of the Growth Machine thesis. But as ownership gets cleaved from place, even then it doesn't matter so much. (E.g. an article in the baltimore press about Constellation's continued philanthropic activities post the acquisition of the company by Chicago-based Exelon.)

I was thinking about this when I was on an urbanist list around the time Obama got elected, and all the talk about a new localization of industry (e.g., think about Local Motors). Granted I am from Detroit and think about "big business" but with economies of scale and the reality that people don't want to pay artisanal prices for every good like a toilet or washing machine or car I just don't see how it makes sense.

e.g., arts and crafts failed for this reason.

I know an ex-FIT professor who has this idea to limit waste in the apparel industry, that rather than junking the clothes that don't sell, rework them. But say it takes half an hour to rework one garment. The labor and support costs are probably at least $30/garment. If you sell it for double, $60 or more, will it be priced too highly, do people even want to buy it, the market segment of interested purchasers is pretty small, etc.

As long as you need lots of individualized labor it's a tough business.

But of course, what we might call the democracy contradiction is that we prefer high employment and accept that it costs more.

... but the cost of construction of subways in NYC. up to 4x more laborers than in Europe, significantly greater costs spent on outside consulting and engineering.

Is it worth that cost of additional labor for those people vs. the much higher cost to build and therefore the creation of much less new transit lines compared to Paris or London etc.

That the benefits of employment to a small number of laborers and firms come at a huge cost.

At 11:38 AM, Blogger Richard Layman said...

wrt the cities thing, the US is big, most other countries are small (excepting China, India, Russia). That complicates things a lot.

when I did the piece on Thessaloniki for the EU project, that was a big issue there. There isn't enough business within the country and vis a vis cheaper labor in the other Balkan/Slavic countries to support two major industrial centers (Athens, T). Especially in a situation where crony capitalism matters so much.

At 11:39 AM, Blogger Richard Layman said...

(sorry to sound pedantic about stuff you clearly already know.)

At 11:43 AM, Blogger Richard Layman said...

fwiw, Aaron reworked his piece as a column in this month's Governing Magazine.

At 9:25 AM, Blogger Richard Layman said...

Thinking about this more, it comes down to size of the country, transportation costs, AND investor vs. individually owned businesses.

I don't know much about the geography of location of the various Mittelstand businesses in Germany, but the national laws and financing systems must favor the continuation of this type of ownership, where that isn't the case in the US.

What is it about the structure of US industry that encourages if not mandates bigness and consolidation, whereas in Germany "small" but significant companies can still remain independent and as a whole, deconcentrated.

At 10:31 AM, Anonymous charlie said...

RE: German concentration; the historical answer was bank financing vs equity financing.

That has changed quite a bit in the past 20 years.

Not sure on German anti trust laws. Might be out of my league there.

But I'd say again goes back to "Federalism"; we are very comfortable in the US with a national scale for companies (A Walmart) but not in public service (every place needs it own school board and police force).

So I'd say Renn is really focused on the federalism issue but doesn't know it -- he (like all of us) can see the sorting process in urban economies is not working quite as we'd like. Seattle may thrive, KC may sink hard.

Did you read the Alaksa article? Very good.

Off topic, Politico has an excellent series on health care costs and basically your argument for a marshall plan:

All under "Agenda 202: The Future of Health" about 5 articles altogether .

Also on your own health read the APO-E gene variation stuff, NYTIMES did a good piece. Worth testing for if you have insurance.

I'm dubious of the health care cost issue. As Massachusetts found mandatory insurance actually didn't reduce emergency visits. You are an example of that too - it takes huge personal choices to get your heart up to where it is. That isn't a social issue, that is your work.

But yes, thanks for a number of factors we use hospitals (and police, and FD) and dumping grounds for the poor.

At 1:11 PM, Blogger Richard Layman said...

Dmn. A lot of stuff here...

Alaska, hmm, seem to have mislaid that cite, can you re-point me to it? Thx.

2. wrt health care "costs," interesting too what is happening in the UK and like with MBTA and NYC Subway (and WMATA in a way) about under-resourcing to the point where exogenous circumstances kick the under resourced org past the point where it can function.

(With the UK it is both the NHS and also the local governments being pushed to the brink of failure/insolvency, the latter having to take on the cost of "social care" for the aged and disabled, in the way that govt. in the UK is organized.)

But thinking about my father who died at 54 and Suzanne's father who is 80ish with dementia and my experience working at CSPI, I have to wonder that the kinds of health economics issues we have cost wise were hidden by the impact of smoking and super bad diets and forthcoming improvements in emergency care and health care, and a lot of people who didn't get to "present" symptoms of dementia/Alzheimers etc. because they were felled earlier by other diseases.

I think that health care costs likely won't be "reduced" with national health etc. because of the increased costs to deal with "old age" + Baumol cost disease + technologization.

Even if we can save a lot of people from chronic conditions through diet and exercise and sounder behavioral choices, clearly that requires an almost incalculable change in societal behavior, given the reality that obesity is increasing at a near scalar pace.

That itself is a huge cost burden. And while we have the ability to move in with Suzanne's parents and assist, who will take care of us when the time comes, as we don't have children?

3. Will read the politico series. Thanks.

Like how you mentioned that a goodly number of points in my Marshall outline were about "work", a bunch of the coverage on the Medicaid work issue makes the point (not using this language) that like how the Herzberg Motivation Hygiene theory discusses structural requirements to function well, having health care (with limited deductibles compared to insurance) gives many of the low income families participating enough stability so that it becomes easier for them to work, get educated and then work, etc.

So that is a value of national health (as opposed to mandatory health insurance with a comparatively high deductible and limited support for what we might call maintaining "wellness" as a kind of mandatory element separate from catastrophic care) that is worth considering.

4. apoe (no insurance at the moment, but generally, my cholesterol levels are decent. Will keep this in mind thanks.)

At 6:01 PM, Blogger Richard Layman said...

At 6:42 PM, Blogger Richard Layman said...

local bread "manufacturing" eventually superseded by national brands (like brewing, like ice cream making, like soda).

... I didn't even know that WETA had a local history blog.

At 9:57 AM, Blogger Richard Layman said...


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