It didn’t come as a huge surprise when Jeff
Amazon’s breakup with New York was still fresh when other cities started sending their own valentines to the online giant.
Officials in Newark, New Jersey, one of the 18 finalists that Amazon rejected in November when it announced plans to put its new headquarters in New York and northern Virginia, sent a giant heart that read, “NJ & Newark Still Love U, Amazon!”
Representatives of other jilted suitors, such as Chicago and suburban Maryland, tried to get Amazon’s attention and say they’re still interested in a relationship, too.
The love notes came even though Amazon said it doesn’t plan to pick a new city to replace New York, where the HQ2 project was supposed to produce 25,000 jobs. Instead, the company said it will spread some of those jobs around at other Amazon sites in the U.S. and Canada and expand its existing New York offices.
But why woo a company that says it’s not interested?
For one, the allure of potential jobs is just too much to pass up for many politicians, said Nathan Jensen, a University of Texas government professor who has criticized how economic development incentives are used.
And even if Amazon spurns them, this is a low-risk way for politicians to show they are looking out for their constituents.
“The ‘losing’ cities can continue to publicly talk about everything they are doing for HQ2 even if they know they don’t have a shot. If they know HQ2 isn’t coming, there is no real cost to doing this,” Jensen said.
More than 230 municipalities in North America competed for HQ2, taking part in a months-long bidding war that Amazon eagerly fomented. Cities offered billions in inducements. In New Jersey, state and local governments put $7 billion in incentives on the table as part of the Newark bid.
New York ultimately won the competition by promising nearly $3 billion in tax breaks and grants in addition to access to the nation’s media and financial capital and its educated workforce. But on Valentine’s Day, Amazon abruptly canceled the project after running into fierce opposition to those incentives from lawmakers and political activists on the left.
That shows that the company cared little about getting community input, said Richard Florida, an economic development expert.
“After searching across 200 plus communities and identifying NY (and greater DC) as the places it needed to be, it pulls out as soon as local residents and politicians question the billions in incentives it does not need and asks it do more for the community,” Florida said in an email.
Florida and Jensen predicted some cities will now begin to push back when companies seek tax subsidies. But Greg LeRoy, executive director of the nonpartisan think tank Good Jobs First, said there is little likelihood that will happen any time soon.
“Look, this is deeply learned behavior,” LeRoy said. “There’s an 80-plus-year history to this tax-break-industrial complex.”
In the meantime, the mayor of Warren, Michigan, posted online about his town being available. Upstate New York cities, like Rochester, made it clear they, too, are open for business.
“Nassau County welcomes your investment and would like to discuss siting your project here,” state Sen. Todd Kaminsky, a Long Island Democrat, told the company.
Amazon’s Stormy Week Ends With A New York Diss
It’s been a complicated few weeks for Amazon, what with its abrupt pullout from a massive New York City development, extortion claims related to intimate photos taken by its founder Jeff Bezos and increasing antitrust scrutiny in Europe.
For now, these events seem unlikely to pose much threat to Amazon’s brand or business. But they’re indicative of the mounting challenges the e-commerce giant faces as it grows ever larger and more dominant.
Amazon’s turn in the spotlight is a natural consequence of its prominence in retail, entertainment and internet infrastructure, Wedbush Securities analyst Dan Ives said. “As you get bigger and more successful, you have more of a target on your back,” he said.
Few analysts believe Thursday’s reversal in New York or the previous week’s dust-up with the publisher of the National Enquirer will have much impact on consumer enthusiasm for Amazon’s broad product selection and services or its fast shipping. Bezos has accused the Enquirer of ”extortion and blackmail” for threatening to disclose revealing personal photos unless he ended his private investigation into how the tabloid obtained his private exchanges with his mistress.
Investors don’t appear particularly concerned that these issues will distract the hard-driving Bezos, who is also in the midst of a divorce — generally considered one of life’s most stressful events. Even if Bezos were to find his attention otherwise occupied, Evercore ISI analyst Anthony DiClemente notes that the Amazon chief has a trusted senior leadership team in place. “That gives investors comfort,” he said.
Amazon shares have more than made up a brief drop after Bezos made his public case against the Enquirer last week.
Public anger at tech companies has been growing for some time, but much of it has been focused on Facebook and other tech companies that collect vast amounts of personal user information for targeting online ads and other purposes.
Facebook’s privacy issues have been particularly acute since they involve the company’s core business, said Paul Argenti, a Dartmouth College professor of corporate communication. Amazon isn’t immune to the tech backlash. But Argenti said the company’s popularity with consumers won’t likely be affected by recent headlines.
“I’m not going to stop ordering my movies and packages from them, and I think that’s the way most people will look at it,” he said.
Longer-term issues, however, could present a more serious threat. Amazon’s New York investment would have put 25,000 jobs in the Long Island City neighborhood of Queens, at a cost of nearly $3 billion in tax breaks. Local activists called that a corporate giveaway, one made even less palatable by Amazon’s anti-union stance.
That grass-roots rebellion suggests that people are growing more skeptical of big tech companies, especially when government is cutting them special deals, said Blair Levin, a policy adviser to New Street Research and a former chief of staff to a Federal Communications Commission chairman.
“Time and time again, the public has seen promises made and reality is different,” he said. “So they’re going to be skeptical of Amazon. And it’s across the board, not just Amazon.”
Several European nations are also investigating Amazon’s alleged anti-competitive activity. On Thursday, Austria’s antitrust agency said it is reviewing complaints that the company is favoring its own products and discriminating against other sellers on its e-commerce site. German antitrust authorities and the European Commission are investigating Amazon for similar claims.
In the U.S., politicians are also speaking out against Amazon’s practices, said Barry Lynn, executive director of Open Markets, an institution that studies corporate monopolies in the U.S.
Lynn argues that Amazon is a monopoly that should be more heavily regulated by the government. He pointed to comments Sen. Elizabeth Warren, a Massachusetts Democrat who is running for president, made last year about Amazon’s “anti-competitive” practices.
“The word is out, the discussion is ongoing,” Lynn said. “It’s not going to go away, it’s only going to get louder.”
Amazon responded Friday with a statement emphasizing the breadth of its business and its small market share of global retail sales.
For shoppers, everything is business as usual, and the bad news will quickly blow over, Dartmouth’s Argenti said.
“We won’t be talking about this a year from now, maybe not even a month from now,” he said.
Will Amazon’s Pullout Affect New York City’s Tech Future?
Amazon jilted New York City on Valentine’s Day, scrapping plans to build a massive headquarters campus in Queens amid fierce opposition from politicians angry about nearly $3 billion in tax breaks and the company’s anti-union stance.
With millions of jobs and a bustling economy, New York can withstand the blow, but experts say the decision by the e-commerce giant to walk away and take with it 25,000 promised jobs could scare off other companies considering moving to or expanding in the city, which wants to be seen as the Silicon Valley of the East Coast.
“One of the real risks here is the message we send to companies that want to come to New York and expand to New York,” said Julie Samuels, the executive director of industry group Tech: NYC. “We’re really playing with fire right now.”
In November, Amazon selected New York City and Crystal City, Virginia, as the winners of a secretive, yearlong process in which more than 230 North American cities bid to become the home of the Seattle-based company’s second headquarters.
New York Mayor Bill de Blasio and Gov. Andrew Cuomo heralded the city’s selection at the time as the biggest boon yet to its burgeoning tech economy and underscored that the deal would generate billions of dollars for improving transit, schools and housing.
“There’s a real risk that Amazon’s decision does make it more difficult for big companies who want to take those really big bets on New York to take them,” said Julie Samuels, the executive director of Tech:NYC, which represents more than 650 tech companies in the area.
In its pitch to Amazon to come to New York, Mayor Bill de Blasio cited the city’s diversity of talent and connections with established industries beyond tech including finance, fashion, media, art and real estate. Those attributes have been luring Amazon’s fellow titans for years, and have helped create a sector that now counts more than 326,000 jobs, according to Tech:NYC.
“When you attract and grow a strong engineering and entrepreneurial base, those folks would have worked at Amazon and eventually they would have left Amazon and started new companies,” Samuels said. “People move around from job to job so I actually think this is really unfortunate for tech companies that are already here.”
Google, which opened its first office outside of California in New York in 2000, last year pledged to invest more than $1 billion for a new Manhattan campus. The expansion will allow the Alphabet Inc. unit to double its workforce in the city to 14,000 over the next decade.
Twitter Inc., Facebook Inc. and Uber Technologies Inc. also all have big offices in New York, and Apple Inc. has plans to expand in the city too. Amazon, which already has 5,000 employees in town, said Thursday it will continue to build its presence in the city over time.
Opposition came swiftly though, as details started to emerge.
Critics complained about public subsidies that were offered to Amazon and chafed at some of the conditions of the deal, such as the company’s demand for access to a helipad. Some pleaded for the deal to be renegotiated or scrapped altogether.
“We knew this was going south from the moment it was announced,” said Thomas Stringer, a site selection adviser for big companies. “If this was done right, all the elected officials would have been out there touting how great it was. When you didn’t see that happen, you knew something was wrong.”
Stringer, a managing director of the consulting firm BDO USA LLP, said city and state officials need to rethink the secrecy with which they approached the negotiations. Community leaders and potential critics were kept in the dark, only to be blindsided when details became public.
“It’s time to hit the reset button and say, ‘What did we do wrong?’” Stringer said. “This is fumbling at the 1-yard line.”
Amazon said in a statement Thursday that its commitment to New York City required “positive, collaborative relationships” with state and local officials and that a number of them had “made it clear that they oppose our presence and will not work with us to build the type of relationships that are required to go forward.”
Not that Amazon is blameless, experts say.
Joe Parilla, a fellow at the Brookings Institution’s Metropolitan Policy Program, said the company’s high-profile bidding process may have stoked the backlash. Companies usually search for new locations quietly, in part to avoid the kind of opposition Amazon received.
“They had this huge competition, and the media covered it really aggressively, and a bunch of cities responded,” Parilla said. “What did you expect? It gave the opposition a much bigger platform.”
Richard Florida, an urban studies professor and critic of Amazon’s initial search process, said the company should have expected to feel the heat when it selected New York, a city known for its neighborhood activism.
“At the end of the day, this is going to hurt Amazon,” said Florida, head of the University of Toronto’s Martin Prosperity Institute. “This is going to embolden people who don’t like corporate welfare across the country.”
Other tech companies have been keeping New York City’s tech economy churning without making much of a fuss.
Google is spending $2.4 billion to build up its Manhattan campus. Cloud-computing company Salesforce has plastered its name on Verizon’s former headquarters in midtown, and music streaming service Spotify is gobbling up space at the World Trade Center complex.
Despite higher costs, New York City remains attractive to tech companies because of its vast, diverse talent pool, world-class educational and cultural institutions and access to other industries, such as Wall Street capital and Madison Avenue ad dollars.
No other metropolitan area in the U.S. has as many computer-related jobs as New York City, which has 225,600, according to the Bureau of Labor Statistics. But San Francisco, San Jose, Seattle, Washington, Boston, Atlanta and Dallas each have a greater concentration of their workers in tech.
In the New York area, the average computer-related job pays roughly $104,000 a year, about $15,000 above the national average. Still, that’s about $20,000 less than in San Francisco.
Even after cancelling its headquarters project, Amazon still has 5,000 employees in New York City, not counting Whole Foods.
“New York has actually done a really great job of growing and supporting its tech ecosystem, and I’m confident that will continue,” Samuels said. “Today we took a step back, but I would not put the nail in the coffin of tech in New York City.”