Google's Schmidt: We've Decided Not To Bail Out Newspapers


The FT’s Chrystia Freeland did a long Q&A with Google’s Eric Schmidt, mostly about the future of newspapers. 

Eric is dead-on about subscriptions (they’ll work for specialised content but not general news).  He’s also right about the value of Google to newspaper sites (traffic). 

We think Eric’s a bit too optimistic about the ability of technology to save newspapers, at least the current newspaper cost structure.  But overall, Google’s position is perfectly fair on this.

Here’s the full interview>   Some highlights below:

On subscriptions (smart):

ES: I think it’s unlikely to work although people will certainly try it and they’re welcome to do so. And the reason is that for most content people are preferring an advertising model. There will be some very specialised content, you know, high-quality newspaper articles, magazines, that sort of thing, which I suspect subscriptions will work for. But for the average news that everybody gets today they would prefer an advertising-supportive model.

FT: And when you say, high quality, would something like The New York Times fit into that area? Or are you talking about more specialised content?

ES: Without commenting about a specific paper, the specialised reader is going to pay, and they’re willing to do it with subscriptions or micro payments. For average news even the best quality, but common news – what is the President doing, what happened in the Senate – it’s highly unlikely, I think, that the people will pay extra for that because there will be so many free versions.

FT: Even as all the metro dailies go broke? Isn’t there a possibility that high-quality, general news becomes sufficiently scarce that people can charge for it online?

ES: Most people think that there will always be enough competition at the centre of our government, at the most important cities and so forth. The real loss that we’re having right now is the loss in the secondary markets, where there was not that much money to begin with, there were not that many newspapers to begin with and reporters. And I’m concerned that the reporting that keeps the Mayor honest, that kind of local is largely going to be gone. They don’t know how to fix that.

Google to bail out newspapers by buying them?

ES: We’ve actually looked at this and we’re trying to avoid crossing the line between the infrastructure and technology that Google provides and the content that our partners provide. There is a line and we’re trying to stay on our side it.

How should newspapers evolve online?

ES: [I]t seems to me that the newspaper that I read online should remember what I read. It should allow me to go deeper into the stories.

Can Google save the industry?

ES: [I]f we come up with a great product in this area we’ll make it generally available.

FT: And what do you think your chances are? How likely are they to come up with this product?

ES: Eventually high.

Should Google News spread the wealth?

FT: In their quest for revenues newspapers have started talking about trying to persuade you, Google, and specifically Google News, to share a little bit more of the revenue, specifically from their stories that appear on Google News. Wouldn’t that be a good idea?

ES: We’ve decided that the value we provide to the partners is the traffic. So we want to provide incredible numbers of users going to their sites, their content, which is why we urge them to make it deeper, stronger and use better tools and so forth. From our perspective, that’s where the real source would be. In our model, and what we’re doing today, the vast majority of the revenue that comes directly from reading newspapers, in fact, goes to them through all these mechanisms. The real issue here is that when people are reading the news online, we’re not monetising it in aggregate, so if we were to transfer money we would be taking money from something unrelated to newspapers and just paying them, which doesn’t seem like a good sustainable model for anybody.

FT: And don’t you think that there is a risk for you, as well, if you fail to find, perhaps, more of a revenue-sharing model, say, with something like Google News? Your sources of news for that service that you provide will just dry up? You risk killing the goose that’s laying the golden egg?

ES: This is the co-dependence that we were talking about earlier. From our perspective, we depend on the production of very, very high-quality content. If the people who are producing that are getting laid off, it’s really a tragedy for both. So we need the high-quality content. There’s a debate in the industry of exactly how to get it but, ultimately, the problem is not us taking money from some other pocket and subsidising it, ultimately the solution is to build products that really are so good that we make enough money from advertising and subscriptions, to a degree, that they make sense and that there’s enough money to pay for the construction of this high-quality content.

Read the whole thing >

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