Summary:

There are three things the TV executive audience have come to expect from the annual MacTaggart lecture: the pantomime of an inter-industry…

Eric Schmidt
photo: AP Images

There are three things the TV executive audience have come to expect from the annual MacTaggart lecture: the pantomime of an inter-industry dispute, an intellectual appreciation of the past year’s achievements and a warm glow of self-congratulation derived from being an industry that still matters, despite everything.

Eric Schmidt was never going to tick any of those boxes. Even before Google’s executive chairman had taken to the stage, there were mutteringsfrom festival veterans that his would be the most anodyne MacTaggart ever, that he was miscast as keynote speaker, that this was tech tokenism taken a step too far.

What Schmidt did deliver was a carefully crafted lecture designed to boost Google’s intellectual credibility, and give much-needed depth to the debate around the role of technology firms in the media industry’s future. Evident throughout was the artful hand of Peter Barron (the former Newsnight editor, now Google’s UK director of external relations)clearly balancing his first-hand insights of Google with his years of experience in the broadcast industry. But it took Schmidt’s charm and erudition to carry this one off; however important Google might be to the future of broadcasting, newish chief executive Larry Page would have lacked the “human interface” required.

The biggest applause of the night was unexpectedly for Kangaroo, after Schmidt had explained the absurdity of blocking development of the online TV project because regulators thought it might be too successful. “You need to get smarter about how to … get the most from your public sector innovations,” he said. “Even if YouView meets its revised timetable of launching in 2012, you’ll still have thrown away several years when the UK could have been in the lead – a lifetime technologically.”

There was the obligatory flattery and dash of nostalgia, too. “If any industry is poised to rise to the challenge, it is yours,” he crooned. “Your creative talent is unrivalled. Your independent producers are famed for their entrepreneurial zeal. Your managers have fought hard battles for efficiency, and won. Britain’s industry has an unparalleled global reputation, including journalism, comedy and drama … I grew up watching your stuff.”

Not everyone was charmed by Schmidt, however. Any eavesdropping Googlers in the George hotel’s bar that night might have left feeling that he had gatecrashed TV’s most exclusive party. Some felt patronised by his cautious explanations and histories of the computer industry, while the self-deprecating jokes perhaps tried too hard to humanise the corporate behemoth that is Google, trying to make it seem less intimidating. If that wasn’t enough to make Google seem ‘one of us’, Schmidt left the private jet at home (it was in the garage, he said) and arrived in Edinburgh by train. For a billionaire, the East Coast service must have been something of a rude awakening.

Schmidt was more himself the next morning in taking questions from the floor. Gone were the apologies, replaced by his more convincing corporate dynamism. Asked whether the single most constructive thing that Google could do for the UK would be to pay full corporation tax – Britain is Google’s second largest market, yet its European base is in Dublin where it pays 12.5% tax instead of the 28% it would pay in the UK – he replied “We pay the legal minimum amount of tax that we have to pay,” but argued that £6bn a year runs through Google into the British economy. “We could pay more, but it would be very hard to say to our shareholders ‘we feel very sorry for these British people, so we’re going to pay millions of dollars in extra taxes that we’re not required to do’. There are probably laws against that.”

Some of his points are hard to disagree with. European and US online industries must maintain their edge in the face of growing competition from the East, he said. And as well as improving support for later-stage companies, the UK needs to become better at educating children in computer science. Whether the TV industry likes it or not, these issues will come to determine the long-term success of many of our businesses, and his observation that the UK is culturally divided into tribes of “luvvies and boffins” was particularly discerning. Schmidt diplomatically gave credit to Apple’s polymathic co-founder Steve Jobs, calling him the definition of creative genius and a man with “an artist’s eye as well as a definition of what great engineering is”. The festival’s own high-profile polymath, Brian Cox, was delighted with the emphasis on better science education.

“It was superb that he talked about the importance of science and engineering graduates, and not going back to old-fashioned boundaries of arts, science and humanities,” said Cox, who disagreed with those who saw Google’s festival presence as reflecting contrition. “There was no notion of an apology in there. For me he was saying there’s a much wider market being opened up and more good we can do together. I don’t think Google needs to get down on its knees and say ‘please help us be a successful company’.”

Where Schmidt did seem to come unstuck was when he started to grapple with the detail of the challenges he said UK media need to address. Does he understand how TV advertising is sold? Not enough to explain it to the satisfaction of an industry expert, he replied. His suggestion that broadcasters run cheap pilots on YouTube and tweak them according to viewer feedback was dismissed by one TV executive as unrealistic. And when he asserted that the UK needs lighter regulation, it was explained to him by another that protections like contract rights renewal were designed to give smaller players a chance against heavyweights like ITV.

“Look, I’m an American entrepreneurial capitalist and technologist,” he said to muffled laughter. “I want more competition and I worry about restrictions on that. There’s a tendency to over-regulate, so if you want to grow really fast you start by saying ‘is that really necessary?’ There must be other ways to stimulate competition … Regulation has always favoured the regulated and at some level always shuts off new opportunities.”

Broadcaster Mariella Frostrup felt that “what he’s done is open a conversation, but he hasn’t given all the answers. You want to sit down in a corner with him and say ‘OK, so you want to deregulate the internet … and you believe in privacy … how?'”

Notable by their absence were mentions of some of Google’s biggest controversies: last week’s $500m (£306m) fine for publishing ads for rogue pharmaceutical retailers; accidentally acquiring passwords and personal emails while gathering data for its Street View service; or speculation earlier this month that it passed data on European users to US intelligence services under the Patriot Act.

Google would say that those issues aren’t relevant to the broadcast industry, and that Schmidt did mention Google’s investment in copyright protection software and the importance of privacy – though that was qualified by saying it must be balanced against the advantages of personalisation.

The undercurrent of any MacTaggart lecture is always self-interest, and Schmidt’s was no exception. Strategically, Google was moving to repair damage caused by what he admitted was “an insensitivity to the impact of its innovations”, but it was also wooing an audience who, as content partners, could determine the success of its Google TV product, now due to launch in the UK early next year. It’s also easy to forget that behind all that powerful technology, Google is essentially an advertising firm, and will have recognised that exploiting the exploding popularity of video content – with the potential of interactive ads – will need quality content on board.

Schmidt was quick to try to dispel the assumption that it has stolen market share from broadcasters: “Why can’t we make the pot bigger? The question we see over and over again is how the internet has displaced some existing and fixed revenue stream, but that’s not how the world works. You build new businesses. The majority of advertising money Google is getting is new money created from new customers of one kind or another … growth is the solution to nearly all societal problems. Television viewership is declining gracefully and that’s bad for all for us. Let’s reverse that, let’s grow it.”

Fru Hazlitt, ITV’s managing director of online and commercial, said Schmidt was right to pick up on broadcasters’ fear of Google (NSDQ: GOOG). “Google’s DNA is technology and ITV’s DNA is creativity – and we have frightened each over the years. But if we’re going to invest in other platforms we need to make sure we get a return on that investment. For Google, without fantastic content the aggregators have nothing to aggregate.”

Any savvy broadcaster should be taking its very best guess at Google’s advertising road map and what that means for their content. Is it a sign of maturity in Google’s business that it needed to reach out to the broadcasters, or was there a purely commercial motive?

“Both industries have come from such different backgrounds and viewpoints that it has taken a very long time to agree on what the common goals are,” said Schmidt. “In the five years since we acquired YouTube we’ve been sued, but also developed powerful solutions to address some of those problems, and now we recognise a mutual dependency. We’ve matured in attitude and technologically, and you understand there’s a much larger audience available to you as a result of these new digital tools.”

It took four years to bring Schmidt to the Edinburgh television festival, prompting a 25% increase in delegates from more technical backgrounds. And it was right, given the seismic changes transforming broadcasting – an industry founded on the opportunities of combining technology with quality content – that what is arguably the world’s most powerful technology and advertising company should have its moment in the MacTaggart spotlight.

It remains to be seen how far the ripples from Schmidt’s lecture will carry, and whether delegates are still discussing computer science education or copyright protection software next year, however important these issues are for the long-term health of the UK’s broader creative industries. As for the next choice of MacTaggart speaker, no doubt normal service will be resumed in 2012.

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This article originally appeared in MediaGuardian.

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