Google CEO: 'People love the news....the problem is .. .the business model'

Dateline: Tue 20 Jan 2009

A courteous reader sent along an insightful interview from Fortune magazine with Google's CEO Eric Schmidt. The subject is newspapers. Schmidt likes and respects what newspapers do -- when the essential mission is gathering and printing news -- but, like everyone else, he can't quite figure out how to fix the broken business model.

Here are some excerpts followed by a link, with thanks to Jason.

"Fortune: Maybe their time has just come and gone?

Schmidt: No. They don't have a problem of demand for their product, the news. People love the news. They love reading, discussing it, adding to it, annotating it. The Internet has made the news more accessible. There's a problem with advertising, classifieds and the cost itself of a newspaper: physical printing, delivery and so on. And so the business model gets squeezed.

So what else can Google do?

We have a mechanism that enhances online subscriptions, but part of the reason it doesn't take off is that the culture of the Internet is that information wants to be free. We've tried to get newspapers to have more tightly integrated products with ours. We'd like to help them better monetize their customer base. We have tools that make that easier. I wish I had a brilliant idea, but I don't. These little things help, but they don't fundamentally solve the problem.

How about just buying them?

The good news is we could purchase them. We have the cash. But I don't think our purchasing a newspaper would solve the business problems. It would help solidify the ownership structure, but it doesn't solve the underlying problem in the business. Until we can answer that question we're in this uncomfortable conversation.

I think the solution is tighter integration. In other words, we can do this without making an acquisition. The term I've been using is 'merge without merging.' The Web allows you to do that, where you can get the Web systems of both organizations fairly well integrated, and you don't have to do it on exclusive basis.

If not buy, how about just pump some cash into them, the way Microsoft famously once did with Apple?

There are no current plans to do that. The necessary criteria to get us to make that decision are not currently in place."

Other interesting points: Schmidt talks about newspapers being published by non-profit entities and/or consolidation , a model in which newspapers become part of larger companies that are making money in other endeavors.

Schmidt says it would be a "real tragedy" if newspapers were to go away, but he says Google won't be writing any "big checks" to save the day.

"We write large checks when we have a great strategy," he concludes. "And we don't yet have that strategy."

Here is the link:

http://money.cnn.com/2009/01/07/technology/lashinsky_google.fortune/index.htm

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