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Eric Schmidt wishes Google could save newspapers (cnn.com)
28 points by gibsonf1 on Jan 7, 2009 | hide | past | web | favorite | 11 comments

There are a few problems with the industry. A tough one is that people read fewer papers. However, the major one that I don't see any way around is that the business model is unrelated to the core competency/value/activity of the company. That's a problem almost inherent in advertising though not quite.

The classifieds just piggybacked onto newspapers because they had a distribution mechanism & the could make the network effects happen. It never had anything to do with news. There was a symbiosis, but it was an incidental one. You can't just counter that with 'Democracy needs News.'

Consider a possible parallel. Imagine T shirts where a major ad industry. Various brands are able to sell cool T shirts that are very fashionable & desired. They sell em cheap & make it up on ads bought by the highest bidder. This becomes a cultural norm. Everyone wears these $2 shirts that would otherwise cost $50 & everyone gets a handful every month.

Now say no one wants to buy the ads any more or say the fashion becomes put a sticker over the ad or say atheist buses & neon building become so common that advertising is devalued. Whatever. Can't sell the ads any more. OK. Well, people will buy less shirts. It was nice while it lasted. We had $2 shirts. But that's it. No way around it. I will buy fewer shorts at $40 then at $2.

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

"What about Google.org, Google's for-profit philanthropic arm, which is investing in alternative-energy startups?"

Is it just me who finds those suggestions bizarre to ludicrous? They're practically begging.

Re-Google.org: In the proceeding answer Schmidt talks about newspapers as "doing the public good" - something we usually think of when we think of non-profits. He even mentions a non-for-profit news organization (not NPR). I think it makes a lot of sense. I agree with Schmidt that these organizations can't just fold; they are a vital part of our democracy.

Newspapers that survive may get a second wind once the infrastructure, technology and critical mass is there to sell subscriptions for e-book readers.

wrong. this isn't a problem of distribution, or readership. the problem is that there's more advertising options with the internet. e-book readers won't bring that back.

They don't have a problem of demand for their product, the news. People love the news.

People love getting personal messages delivered to them, but that couldn't save the telegram. I mean, come on, TV news has been around for sixty years and we're still acting like the news still belongs to newspapers?

Well people don't talk about the TV news all that much, because TV news has a similar content model as blogs. Read the newspapers, translate the highlights to your audience.

I don't understand why this matters. Can't the newspaper companies just publish their stories online? Does it really matter whether I read the content in the paper or online? Honestly this seems like a good thing; we're saving resources and moving to a new media. Am I missing something?

Yes, you're missing something. :)

Even if they publish all of their stories online, you have to realize that newspapers typically have huge CapEx and/or fixed costs. If they want to keep a single print copy out there, there is a huge fixed cost to print the first paper copy. I know that there are ways to reduce the fixed cost, but that increases the marginal cost. Newspapers have optimized their businesses on the assumptions that they'll print lots of copies. The "crisis" in the industry is that they all realize that assumption won't be valid sometime between now and "real soon now".

The internet is quite simply a MORE EFFICIENT way to sells news. It costs less to produce, distribute, and sell. So much less, in fact, that for existing businesses (newspaper co's) it's very difficult to make the transition without the entire thing collapsing.

The smaller newspapers are having more success at this than the big ones because their investments are lower than the big guys. They also are in a different news business; they do LOCAL news. Thus, they have unique content with less competition. All of the big newspapers are essentially the same national news, and that is very competitive due to the internet.

It's also not just a matter of "moving content online". Newspapers get ~75% of revenue from ads (display ads + classifieds, about half & half), ~18% from subscriptions, and a few other sources. The classifieds business kinda got stolen out from under their noses (see craigslist) and that killed about 25% of their revenue. Online ads are more trackable, and work better, so that reduced the VALUE of the same print ads. And subscriptions are down. Take nearly any business and tell them their revenues will drop by at least half and stay that way and see how well they do...

I suspect the economics of on-line advertising don't support the large editorial staffs that major newspapers have. Are dept. stores going to pay the equivalent of full page print ads for banner ads? If it were true, the NY Times would be rolling in money. People look at the newspaper display ads, but ignore online ads. Classifieds used to be a money maker, but are now essentially dead.

"Merge without merging"

Isn't that the same thing they claimed they were doing (with Apple) when they introduced Google Maps and YouTube on the original iPhone? Mr. Schmidt appears to really like that concept...

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