»It's your content and we

respect that and so forth.«

Eric Schmidt, Google

About Schmidt.

Good evening,

I am very happy to be here at the 37th Fipp World Magazine Congress and welcome you to a small, informal get together this evening.

In the course of the day we have all attended many interesting presentations and taken part in exciting discussions. Some of the topics have certainly been highly relevant for one’s own current business, while others have probably been less so.

But there is one topic that captivates us all: its powerful impact has been the subject of much debate, and all the more since the speech Google´s CEO Eric Schmidt delivered at the Annual Convention of the “Newspaper Association of America” several weeks ago, namely - the coexistence, cooperation or confrontation of the publishing branch and Google.

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»If you have put offenough readersyou will soon be losing them all!«Google CEO Eric Schmidt at the Annual Convention of the »Newspaper Association of America«

First of all, the fact that the speech Google’s CEO delivered was received by the audience without any signs of disapproval whatsoever comes as a considerable surprise. I find this very notable indeed.

Have we really reached a state of affairs in which seasoned publishing professionals are content to have a branch outsider - albeit the most powerful representative of Internet business - tell them that they should gear their activities more strongly to the needs of their readership?

And is it sufficient to merely listening on, when this is followed by the threat that “if you have put off enough readers you will soon be losing them all!?”

In my opinion, our branch does not have to simply accept such comments at face value. The situation does, however, reflect some rather deplorable conditions throughout the publishing industry.

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Google

Magazines

Sales 2008

21,79 Billion US$

Est. Sales 2011

117 Billion US$

Source: DiePresse.com, Wien, 23.1.09

PWC survey: Global Entertainment and Media Outlook 2007-2011

In the meantime, Google has advanced to the position of a worldwide power. In the year 2008 sales took a leap by 31.3% to a total of US $ 21.79 billion (Source: DiePresse.com, Wien, 23.1.09“). This is highly impressive!

Even the projections for the year 2011, however, place total worldwide magazine sales at an estimated US $ 117 billion (PWC survey: Global Entertainment and Media Outlook 2007-2011).

With this volume, the market power of magazine publishing houses is five times larger, in spite of all declining trends and any effects of the current economic crisis it may incur.

And regardless of all the existing problems there are no invincible Internet forces laying an insurmountable siege to this market power, as the man at Google’s helm would like us to believe.

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»As far as I can see, this is the only solutionto these problems.«Google CEO Eric Schmidt at the Annual Convention of the »Newspaper Association of America«

Mr. Schmidt augurs our demise if we are not willing to cooperate with Google. He sees the solution for this situation in joint business models with Google. Accordingly, the publishing houses would supply news items and participate in the online ad sales, as entire articles are made available according to this concept.

Quote: “As far as I can see, this is the only solution to these problems.”

The statement is comprehensible from his standpoint. Unfortunately, the micro-payment procedures are not sufficiently developed to ensure that the articles made available can also be settled accordingly.

Therefore, it is likewise understandable that America’s publishers have been highly vocal in accusing Google of succeeding at their expense.

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Drawing the line between Internet business and journalism

There is one thing, however, that everyone here today will certainly agree on: Google is far from holding the position of a globally operating publishing company, and Google will not become a publishing house in future either.

From the publishers’ standpoint Google is creaming off advertising sales, and is increasingly successful in doing so, also, and especially, through cooperation agreements concluded with publishing houses.

This is based on a situation in which editorial and published products such as current news are utilized for free, or below their actual value. The current practices in the USA reflect the surprises that may arise from this situation. In the meantime, advertising business – as a matter of course – is first settled on the Google News pages, and only then linked to the publishing houses.

As Eric Schmidt’s speech clearly reflects: Google would like to see publishers who readily integrate into the Google business model. He has clearly understood the value of publishing products for his business, just as he has also understood the value of the product “books”.

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In my opinion, however, the measures that magazine publishers have taken to date have not clearly marked the dividing lines as to where a search machine ends, and the publishing business begins.

Google would like to induce the publishing companies to hand over further shares of their business – and preferably without putting up too much of a fight in the process. This strategy has already been successful in the advertising business. At the same time, I would also like to state the following very clearly: setting up “Google and Co.” as the new “favorite enemy” is not in anyone’s interest.

Instead, it would be far more expedient if we were to concentrate on our own, inherent strengths once again. This would entail drawing the line between Internet business and journalism in a clear and unambiguous manner. It is time for publishers to draw these lines, and set themselves off with new business models.

I would like to sum up a few relevant ideas in the form of five short and concise key points:

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End the deluge of titles1

Put an end to the veritable deluge of titles. There is no sense in continuing to flood the markets with titles. The markets are saturated with print products whose journalistic quality is at times poorer than the advertisements they run.

Tidy up, streamline, and concentrate your strengths and resources on titles that you can build on and expand – products to which you bring strong content competence and authenticity. Set counterpoints to the widespread platitudes on the Web.

Review your portfolio with regard to products that are capable of binding target groups, also in the information and Internet age, and therefore open up potentials for new, strategic business models.

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2Use Google and Co.

Use Google and Co. in order to enrich your high-grade information with additional information and boost the attention your web sites attract. Use web contents such as those offered by agencies like AP, Reuters or dpa. But on your web site and clearly indicated as additional information. Use Google Ads to attract users to your platforms. And engage in link building. Links are the currency of the Internet. This is the best definition since years and was formulated by Jeff Jarvis, an American professor of journalism in New York.

This not only refers to machine generated links, but primarily to user created links, social links that are recommended and passed on and that are enriched by human activity, interests and passion.

Publishers were always proud when their products were quoted. It is high time that we should do more for this again. Quotes have unmistakable origins: high-grade journalism, high-grade products created by publishers and the individual quoted with his or her passionate stance.

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3Modernize company structures

Modernize the structure of your company. The Internet has long since changed the work processes at editorial offices and publishers. The organizational structures and sequence organization in place at publishing houses, however, are still built up along the lines of outdated procedures.

Motivate your editors and journalists to compile media-neutral contents without neglecting your brand or the specifics of the output media. Integrate the concepts of partner publishing houses, business partners and active readers - as well as Google - into your own information concept.

Motivate your ad sales professionals to place new business models based on context related business models. Staff motivation. Ensure that your people are proud of their own work again. Set an example in the new world!

Bring a new organization to your company. This may involve younger managers, trimming editorial and ad sales staff, introducing new business models and building up networking activities.

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4Save your heart’s blood:

content

Stop the Internet from draining the heart’s blood of your publishing company. Google ads strengthen Google.

Today, publishing success calls for new authenticity in action and the further development of publishing values and visions in order to transfer the principles of the “long tail sales business“ to the publishing business model. Conveying or selling products may enrich the ad and product campaigns.

It will not be possible for today’s publishing companies to make the transition into the information age unchanged. The necessary transformation will be dramatic and will impact on all areas. The campaign mix on the foundation of good print products is currently still in its infancy.

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5Who is driving who?

Currently, Mr. Schmidt, with Google and Co., is definitely driving the publishing companies in his desired direction. Is it possible that there are too many managers at the publishing houses who would actually prefer to work for Google for the fast money?

Publishers need the political will for strategic cooperation worldwide. The unmistakable position of publishing companies as a societal force has not become superfluous by the Internet, nor can this position be replaced by Google and Co.

The information age is dissolving the evolved power structures, and the knowledge that has enabled publishing houses to hold rule to date is running through their fingers.

These developments represent the actual challenges. When pure information has become democratized – or generalized, as some would say – then journalism will be faced with the challenge of redefining itself on this foundation.

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This is a demanding, and sophisticated task that will lay the future foundation for publishing activities and new business models. Authentic, genuine publishing professionals will be undaunted and capable of solving these tasks - and I am not alone in my conviction here.

Let us make the most of these discussions this evening and, in the further course of the conference tomorrow, join forces in searching for pioneering, forward-looking concepts and solutions. And find answers to the demands Mr. Schmidt is making – at our terms and conditions.

I wish you a relaxing conclusion to this interesting conference day and look forward our enriching conversations in the course of this year’s congress.

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Dieter Reichert, CEO