Eric Schmidt delivers the James MacTaggart lecture

Let's see, is my mic on? Let's see, can you all hear me? Yes. Hi, thank you very, very much, Elaine. And let's see, I'm particularly excited all the people in the circle, so thank you all for coming, all of you. I wanted to start by saying that it's great to be in Scotland. Many people don't know how strong the initiatives are in computer science with Scottish universities here in greater Edinburgh. There are a number of companies which, for example, I've personally invested in, and I think there's every reason to believe that there's going to be quite a software renaissance, if you will, here in a place that you might not have thought.

I also wanted to say that it's quite an honor to be here, as I said, especially because in my growing up I've always assumed that there were sort of people from the media and television world and other people from the scientific world. There has been one person who managed to actually live in both worlds, and I wanted to take a minute to say that I think that we've just seen Steve Jobs step down as CEO of Apple to become chairman. And if you look at, he was the only person I've ever known who's ever been able to actually merge the two worlds completely with an artist's eye as well as a definition of what great engineering is. I'm sure that he and the company will do very well in the future. From my perspective, that's the perfect example of the kind of union that we should see in the future, you know, their companies and in other collaborations.

From my perspective, again, this is the first time the MacTaggart lecture has been given by someone not employed in television broadcasting or production. I'm not sure whether that means that the bar has been raised or lowered, but I'll do my best. Sorry, I'll do some fun with that now. It's an honor to be here, as I said, as an outsider. When he spoke here two years ago, James Murdoch described himself as the crazy relative everyone is embarrassed by. I guess I wonder what he'd say now. But if James is the family outcast, I'm not sure what that makes me, right? Am I the geek in the corner? Am I the alien species? Am I the day Android? You know, am I this... no, you get the idea. Don't worry, I promise I'm not a crook.

Charles Allen called the MacTaggart the longest job application in the industry. By the way, isn't it great to have Google to look this stuff up? Sorry, come back, sorry, little plug there. But it's very kind of you to think of me, but I'm very committed to Google. All that's changed now is that Larry has the keys to the Google TARDIS. And I know, okay, I'll promise I'll stop the Doctor Who quips, although in this case it is perhaps apt. We have a private joke at Google that Larry is actually from the future, which is always exciting. So I'm also indebted to my friend Mark Thompson, who gave last year's lecture, for his tips on what makes a classic MacTaggart lecture. According to him, the recipe boils down to anger, archvillains, impossible proposals, and insults. Now I'm not sure about the anger, but I'll do my very best to come up with the rest. And Mark has even identified candidates for demonizing, usually a choice between the BBC and Murdoch. And I must say how refreshing it is that Google is not on this list, right? So thank goodness.

Look, I don't kid myself. I know some of you have suspicions about Google. Some of you blame us for the havoc wreaked on your businesses by the internet. Some people accuse us of being unresponsive, uncaring, or even worse. So today I'm going to try to set the record straight on those points and demonstrate why we can and should be optimistic together about television's futures, which I think we can if we work together. And a little bit about my industry. Peter Fincham said that this lecture is the closest most television people get to going to church. So what he said. Now in my case, I'm a tech evangelist from way back, so I'll take any excuse to preach about the internet.

In less than 30 years, the internet has grown from almost nothing to more than two billion users, and I always say, and we have a ways to go. It's available on Mount Everest, on the South Pole. Half of the adults in the European Union use it every day, and our goal, of course, is to get the other half as well. It has become such a profound part of life that four of five adults worldwide now regard internet access as a fundamental human right. Today it's hard to imagine life without the internet. We take it for granted, but it's worth reminding ourselves just what an incredible force for good the internet has been. Without the internet, a child growing up in a remote village is unlikely to reach their potential with little access to books or learning. Without the internet, people worldwide couldn't band together, we just saw this in Haiti and other places, so quickly in a crisis, helping raise the alarm and to deliver support. Without the internet, repressive regimes, of which there are far too many, can deny their people a voice, making it far harder to expose corruption and wrongdoing. And without the internet, Europe would lose one of the most important, literally the biggest, driver of much-needed economic growth.

Here we were looking at this in the UK alone. The internet accounted for 7% of GDP in 2010, 100 billion pounds, big numbers. And that will grow to 10% by 2015. And companies who use the internet are growing four times faster than those who are not. So for those, I think everyone here is, but for the rest, go on with it. So in short, the internet is not making inevitable change faster, it has become an engine of change itself. It has recast the way that we communicate. It has transformed the way we learn and share knowledge. It's empowering people everywhere, making the world more open, fairer, more prosperous. You see it around you and just think about how far we've already come.

I encountered my first computer back in high school. It was enormous, I might add, and very, very clunky. Today my smartphone is a hundred thousand times faster than my high school computer, and it literally fits in my pocket. When I first became a programmer, to relay information, the first computer you had to use it with punch cards. Today you can talk to your phone, doing voice search, things like that. You can point its camera or even tilt it, and the phone understands. When I started working in computer science, we had big dreams, but the technology just could not deliver them. I remember being blown away by Doug Engelbart's demo in 1968 of the experimental prototype of a mouse. We take these things for granted. It was only invented a little while ago. It was utter science fiction to imagine one day that a computer might be able to respond to your facial expressions or decipher the nuances of human behavior as we can today. It's literally magic.

Of course, while I'm optimistic that computer science and, speaking as a computer scientist, and the internet are forces for good, I'm not naive. You know, John F. Kennedy said, 'I'm an idealist without illusions.' There are many, many challenges that we're still grappling to address. For example, how do you make the world more open while respecting privacy rights? Important balance, very important to get that right. How do we empower people without provoking anarchy? A really important question. How do we ensure technology enriches rather than devalues the relationships and the culture around us? These are hard and important questions. Now, why does this have anything to do with television?

Well, in 2010, UK adults spent as much time watching television in four days as they did using the web in an entire month. So television is clearly winning the competition for attention. You all representing the TV industry, on the other hand, all of us ignore, and you ignore the internet at your peril. The internet is fundamental to the future of television for one simple reason: it's because it's what people want, right? And ultimately what people want, they will get one way or the other. Technologically, the internet is a platform for things that traditional television cannot support. It can make television more personal, more participative, more pertinent, if you will. And people are clamoring for it, nowhere more so than here in the United Kingdom.

Give you some examples. The team behind the BBC's iPlayer has my utmost respect. It's now used, we looked this up, by more than 10% of the UK population every week. It's a great product with a vast range of content. It's much more advanced than anything else I've seen on the market. And it just launched, by the way, a European version, soon to be global, and as an iPad subscription app. Another example of innovation, and I'm sure it will be a success. And by the way, I have one more request of them while I'm praising them: please get an Android version going. That's a separate discussion. So in any case, the iPlayer is not the only show in town. There are numerous catch-up and on-demand television services out there, including the most global of them, iTunes. And YouTube now has long-form content thanks to pioneering partners like Channel 4, who in 2009 became the first broadcaster in the world to put their full catch-up service online. And long-form is in fact on YouTube the fastest growing YouTube category in both in terms of use and revenues, with more than 80 content partners. So pretty good.

But more choice is just the beginning, and it can backfire if you're not careful. Just remember how it felt when you would go, you know, to the video store in the old days of renting videos face to face with thousands and thousands of movies. Picking just one to take home was always a struggle. And that's why a system for recommending content is so vital. It's what channel schedulers have done since the beginning of television. But traditional scheduling is one-size-fits-all. Sometimes the recommendations suit me or someone else, but sometimes they don't. And online, for those of you who wish it and grant permission, things can be vastly different. Online, through a combination of algorithms and editorial nudges, suggestions could be individually crafted to suit your interests and needs. The more you watch and share, the more chances the system has to learn, and the better its predictions get. Taken to the ultimate, it would be a perfect television channel: always exciting, always relevant, sometimes serendipitous, surprisingly good at new ideas. But most importantly, always worth your time.

And we've already had a glimpse of this. If you take a look at Netflix, take a look at their recommendations. Around 60% of Netflix's rentals are as a result of algorithmically generated recommendations. And the underlying computer science and how that's done is really fun, but also now quite well established. Another example is Amazon. Their recommendations, like, you know, 'others who bought this also bought,' you all have seen this, incredibly compelling. In recent years, have accounted for between 20% and 30% of Amazon sales. But delivering on the promise of personalization is tricky, both technologically and culturally. Personalization requires data, and the more data, the better. The more we can compute a better personalized result for you. Because I've learned firsthand, any online service that involves personal data will be an absolute magnet for privacy fears. It will be vital to strike the right balance so that people feel comfortable and in control, not disconcerted by the eerie, 'oh my god,' you know, accuracy of suggestions. This is a new territory for your industry, and I don't want you to underestimate the challenge of this.

Now, I've talked about how the internet is transforming television choice, but there's also changes in how we watch. I remember the excitement about interactive television a few years ago. All that drama over pushing a red button, remember that? Wasn't that great? You know, maybe we were a little bit ahead of our time. Now we're riding a second, much bigger wave of interactivity. Seems more real to me this time. It's a convergence of television and internet screens. This time the interaction isn't happening by a red button, it's on the web, basically, through your laptop or tablet or mobile. But most important of all, this time it's social. For some shows, the online commentary that swirls around them, be it through Twitter or chat forums or blogs, has become actually a part of the experience. Now consider, in your case, think about BBC Question Time, how they're using Twitter to engage the audience, right? Once all you could do is shout at the television, right? This is what the average American does all day, shouting at the television, right? But the politicians that they see, and now you can tweet your rant to the entire world, a much larger audience for you sitting at home watching television. Adding a social layer to television will actually increase, in my view, television viewership.

It's interesting, we have some data on our side. A new product at beta called Google Plus, people are beginning to use it. It's been out for about a month. It has a really cool feature called video chats, called Hangouts, and you can watch a YouTube video in Hangouts in such a way that it's like being in the same room. So while the video is playing, you can chat over the top and text notes on the side, and then anyone in the Hangout can grab the controls and rewind or fast-forward or skip to a new clip, and it keeps everybody in sync around the shared YouTube experience. What an improvement over static linear television. How interesting that this might become a significant way in which people collaboratively view content. So a social layer is something that viewers, or at least a substantial number, seem to want, and I'd argue it's great for broadcasters. Trending hashtags, everybody here knows what a hashtag is, raise awareness of shows, they help you boost ratings, they help you predict what's going to be hot next week, next year, what have you. It can be a metric for viewer engagement, a vehicle for instant feedback, a channel for reaching people outside broadcast times, and it can also provide a great incentive for watching live.

In fact, I don't expect, and I want to be very clear here, I don't expect television viewing to ever completely switch to be on demand. There will always be a cultural pull, I mean, I think this is obvious, but I want to say that very clearly here, for some shows on some occasions to watch in real time. I mean, the data is quite interesting, and let's have a conversation based on some data. Then, live viewing remains remarkably robust. In 2010, 90% of broadcast television remained live in the sense of being watched contemporaneously. But I sense that the default mode will shift to more of the DVR type over time, for the reasons that are obvious. Try forcing a six-year-old, your son or your grandchild who's grown up on a DVR, to only watch live television. Once you've gotten used to such things, it's hard to give them up. No pause, no rewind, no choice. Already in homes with Sky+, it's claimed nearly 20% of the view is time-shifted. It gives us some data. And there are hints of shifts if you look beyond the headline figures, especially for shows that appeal to a younger demographic. Again, no surprise there. It's said more people watch ITV's hit show The Only Way Is Essex online than on television, although I must confess I have not seen this high-quality show myself.

But despite almost every broadcast outlet showing the footage, now the Royal Wedding, that's something to talk about, with live streams 72 million times on YouTube to 168 countries. Interesting. So what are the trends to watch? So let me sum it for you. There are three: mobile, local, and social. Now already, mobile search traffic on Google surpasses that from desktop in some countries. Globally, 40% of Google Maps usage is via mobile, and two hours of video are uploaded to YouTube every minute from mobile devices. Two hours just from the mobile devices every minute. Soon your typical internet user won't be indoors with a PC, they'll be out and about with their cell or mobile phone or their tablet or what have you. And reflecting this, I think genres of online content and services are amazing. But if content is king, context is its crown. And one of the most important contextual signals is location. If you search for coffee from your mobile, odds are you're looking not for a Wikipedia entry on coffee, you're trying to figure out where the nearest cafe is because you're thirsty.

Continuing my troika, social signals are another powerful driver of behavior. If three of my friends highly rate a television series, odds are I'll check it out, even if reviewers say it's rubbish. And we're just at the earliest stage of learning how best to use social signals and other taste indicators to provide more specialized content and services. Interesting. If you think this is all exciting or frightening, remember this is just the beginning. In technological terms, we're scarcely at the end of the first act of the internet. Now, I get all this represents a big upheaval for your industry, and I do understand that. And I'm trying to be respectful of this point because I know what it feels like. I was very much present at the birth of microcomputing. More recently, I helped Google change our direction to develop for mobile first, and I didn't get social networking as fast as I should have. But if any industry is poised to rise to the challenge, it's yours. And I say this with significant conviction on this point: your creative talent is unrivaled, right? We're not debating that. Your independent producers are famed for their entrepreneurialism. Your managers have fought hard-won battles for efficiency, and you've won. And let's face it, British television industry has an unparalleled, absolutely unparalleled global reputation, including journalism, comedy, and drama. I grew up watching your stuff. I know this to be true.

Now look, you cannot turn the clock back. And even if you could, why would you when you have such interesting strengths? The opportunities are really ripe for the taking. Let's look at, I have lots of examples. Sales of digital downloads. Apple has reported that they have more than 200 million customers with accounts tied to credit cards in their 1-click purchasing in the iTunes Store. Amazon has not released a similar number, but it's got to be roughly the same kind of number in at least numeric terms. And thanks to the internet, it's far easier than ever before for content owners to sell to a global market. And don't forget that the UK is the per capita e-commerce capital in the world. We know this very well at Google. Thank you very much for all that business success, right? So more generally, think about what on-demand means for traditional business models. Most television channels seem to practice a sort of a drip, drip, drip feed, whatever you want to call it, approach to releasing content. But in my view, that's an on-demand view, it's outdated. Doubt it? I mean, take a look at Netflix. In March, they outbid the networks to win the exclusive rights to screen the US version of House of Cards, and they're going to do it by making episodes available in clusters rather than once a week. This is experimentation. We'll learn something, we'll see a new model, we'll measure it, we'll see how well it works.

Consider too the way first-run airings attract an ad premium, which is good for everybody, I would argue. Now, that's a less relevant distinction as viewers shift to watch on their own schedule. But it's the first time you watch a show, it's first run to you, no matter how many times it's been broadcast. So you should be able to get a higher rate in that context. So as television becomes more personalized, ad models should adjust accordingly. Now, this requires new processes by which TV viewing and ad effectiveness is measured. But to that end, Google and others, I should add, are investing in research to better understand how viewers are consuming television and the web across multiple platforms. In the UK, we've recently teamed up with a company called Kantar to create a single-source research panel to measure web and television habits. There are big opportunities for creative processes as well. I'll give an example. Recognize that there are new opportunities for, and freedoms maybe we should say, in storytelling. David Simon, who's the writer for The Wire, put it: 'TV is no longer an appointment, it's a lending library.' Interesting way of thinking about it. Helped me think it through a little differently. He says you no longer need to worry about your audience missing episodes. They'll watch at their own pace. So the consequence of this, of course, is that writers can craft more complex stories and they don't have to keep putting signposted plot reminders, you know, those references you constantly see which give you, say, like, 'why are they reminding me again?' It's for the people who missed an episode, and now they can catch up on their own.

Another example: don't underestimate the internet's potential as a venue for talent spotting. More than 48 hours, that's the total number of content, is uploaded to YouTube every minute. Remember I said two hours of mobile, the rest is coming from traditional sources. The two is growing very quickly. Now to put it into context, it means that more video is uploaded in a month than all three major networks broadcast in the United States in 60 years. Frightening numbers. I'm not suggesting the quality is the same, I might add, but amidst the avalanche, the next generation of creativity can be and is being found. Now perhaps most exciting for all, and at least for a technologist such as myself, are the opportunities to integrate content across multiple screens and devices. We are busy exploring this with some of our experimental apps for mobile, as I mentioned. In our case, you can use your phone to control YouTube videos watched on a bigger screen and receive background information on each video it plays. A number of people have commented that more than half of television watching seems to involve having another screen next to you, a phone or a computer or something, or an iPad, what have you, or a game console. There are clever mobile apps, one in the US called IntoNow, can identify a TV show that you're watching from an audio fingerprint and then make it easy to share this with your friends. By the way, let's pause and say that's magic. They can listen to the show and figure out what show you're watching. Like, how do they do that? It's magic.

And while I'm giving examples, I'm fascinated by the notion of BBC's notion of orchestrated media, what they call it. In this case, the show you're watching triggers extra material on your tablet or mobile, synchronized with the program. They do it automatically. Again, another way of making the experience deeper. Now, so let me pause here and say, no matter what I say, no matter how enthusiastic I am, and you all are enthusiastic about the possibilities that is before us, there will always be some who fear the internet is set to destroy everything, right? Nothing new. Almost every invention that has reinvigorated and helped the immediate industry was first forecast to destroy it. It was very interesting, I didn't know this. In the 1920s and 1930s, the US newspapers fought a fierce campaign to prevent radio from news gathering, terrified that it would drive them out of business. And they lost eventually, but it didn't matter, as newspapers retained their influence and continued to rake in profits. Years later, they had a new target. Newspapers, that is. Said, and I quote, 'I look upon them as parasites,' unquote. 'They should handle their own news instead of cashing in on our brains and experience,' unquote. Does that sound familiar? These were not aimed at Google. They're from 1957. Again, the power of Google looking things up, as newspapers complained about TV's muscling in on their news turf. And again, their fears proved unfounded.

What about Hollywood? That's a special case. In 1982, Jack Valenti, who was running the Motion Picture Association at the time, compared the VCR to the Boston Strangler. Pretty rough. These guys are pretty rough. So the calamity that he predicted never happened, and in 2005, DVD sales alone accounted for more than half of studio revenues. Shocking. The Boston Strangler is profitable. And in fact, the DVD sustained the industry through its inevitable very tough business cycles. And Sumner Redstone later said home video was the bonanza that saved Hollywood from bankruptcy. A decade ago, Jamie Kellner lambasted TiVo for letting viewers steal TV by skipping ads. It's now looking like DVRs, as well, could be a savior by providing second-by-second ratings and helping broadcast television compete in an on-demand world. So let's take heart from these parallels. And if I can say anything in a historical context, it's clear to me the history shows that in the face of new technology, those who adapt their business models don't just survive, they prosper. This is always a surprise for every generation. The technology advances and no laws can preserve markets that have been passed by. And just to be a little obnoxious, listen to the entrepreneurs, not the lawyers. If you want to revitalize your business, listen to the people who invent a new business. They soon see a new way of building an audience, they see a new way of monetizing, because your customers are moving. And I would argue that the onus is thus on you, as producers and managers, we have all the top folks here in Europe, to develop business models that really work in the digital age. I'm absolutely convinced that this is possible. In fact, as with Sumner and VCRs, I would not be surprised if you look back in 20 years' time and say that the internet is the best thing that ever happened, rather than the worst.

In his 2007 MacTaggart, Jeremy Paxman dismissed the notion that there ever was a golden age of television. Now, I just completely disagree. As Shaf Bukas and others pointed out in Cannes this year, I think we're on the cusp of a golden age. A vast choice made manageable by a magical guide, right? Ensuring that there's something wonderful to watch every second of your waking moments. You can watch while you're sleeping, we don't care, just watch. All right? The option to sit back or lean forward, to watch alone or chat with a community, have that social experience that people really care about. All of that is possible now because of the invention of this new underlying technology that we can all take advantage of. And I, as I said before, I think the UK is very well primed to lead the way. Your production talent is on...

The pioneering formats have gone worldwide and have become global smashes in ways that everyone here is familiar with. The UK is home to one of the most competitive commercial broadcasters, Sky, with the courage, ambition, and deep pockets to innovate. I was looking at the numbers: in 2010, Sky invested almost as much on original content as Channel 4 and 5 combined, and Sky is upping its content investment by more than 50 percent to 600 million pounds in 2014. So there's no doubt that they're going to be a formidable player in the online television revolution. They're going to do both. ITV, another example, appears to be in strong shape as they restructure in this new digital age, with profits up 45 percent in the first half of this year, a tremendous feat showing courage, toughness, and leadership in responding to this opportunity. Of course, you have the BBC. Not only is the BBC the world's most, I think, the finest public service broadcaster, but it's arguably the most creative and technologically innovative as well. After a necessary pruning, the long-term settlement means that the BBC can count on what anyone would think of as a mouthwatering income stream. It has a recognized and admired brand globally, and imagine live streaming to that scale of audience, literally the Proms to two billion people. It means that the world, in many ways, is the BBC's oyster. So what could go wrong? Well, everything could go wrong. So if I may be impolite, and here's the insult that Mark advised that I throw in: your track record is not so good in some of these cases. The UK is home to so many media-related inventions. It's interesting that you invented photography, you invented television, you invented computers both in concept and in practice. It's not widely known, but the world's first office computer was built in 1951 by Lyons Chain of Tea Shops. Interesting, yet none of the world's leading players in these fields are from the UK. That's a problem. How can you avoid the same fate for your television innovations? This is a hard question. It requires a lot of serious discussion. There is no simple fix, but I have some suggestions, and again with apologies, I'll bring them forward. I think you need to bring art and science back together. Think back to the glory days of the Victorian era, which I have so much studied on television growing up. It was a time when the same people who wrote poetry also built bridges. Lewis Carroll didn't just write one of the classic fairy tales of all time; he was also a mathematics tutor at Oxford. But you didn't know that. James Clerk Maxwell was described by Einstein as one of the best physicists since Newton, and that's without doubt, but he was also a published poet. But over the last century, the UK has stopped nurturing its polymaths. I would argue there's been a drift to the humanities; engineering and science are not as championed. Even worse, both sides seem to denigrate the other. To use what I'm told by my British friends is the local vernacular: you're either a 'lovey' or a 'boffin'. Not good, not good. Sorry, I hope I didn't offend one group or the other, the loveys and the boffins. To change that, you need to start at the beginning with education. We need to reignite children's passion for science, engineering, and mathematics. In the 1980s, another interesting thing about the BBC: they not only broadcast programming for kids about coding, but in partnership with Acorn, they shipped over a million BBC Micro computers into schools and homes. That was a fabulous initiative, and it's now gone. I was actually flabbergasted. I've been working on this question in my new role, working on this question about math and science education globally, how the Western world competes with Asia, all those sorts of questions that are on everybody's mind. I was flabbergasted to learn that today, computer science is not even taught as standard in UK schools. Now, your IT curriculum, by the way, focuses on teaching how to use software, but it doesn't teach people how it's made. This risks throwing away your great computing heritage. And at college level, the UK needs to provide more encouragement and opportunity for people to study science and engineering. In the United States, President Obama announced a program to train 10,000 more engineers a year, so there's an example of somebody taking executive action, and I think in the obviously correct way. I saw the other day on The Apprentice that Alan Sugar said engineers are no good for business. Hmm.

Sorry, I just couldn't resist. If the UK's creative industries want to thrive in our joint digital future, you need people who understand all facets of it, integrated from your very beginning. Take the lead from the Victorians and ignore Lord Sugar. Bring engineers into your company at every level, occasionally including into the top. Now, second, that was sort of complaint number one, sorry to be blunt, but might as well. Number two: you need to get better at growing big companies. The UK, and this is very well established, it's an issue that your government has identified and many people have talked about it, does a great job at backing small firms and cottage industries. You are, I think, the world leader at it. But there's little point in getting a thousand seeds to sprout if they're left to wither or they get transplanted overseas. UK businesses need championing to help them grow into global powerhouses without having to sell out when they're literally forced to sell out to foreign-owned companies, including Google, I might add. If you don't address this, then the UK will continue to be where inventions are born and not bred for long-term success. Thank you for your innovation, thank you for your brilliant ideas. You're not fully taking advantage of them on a global stage. And I would say that you have to figure out a way to get smarter about the divide between the public and the commercial sectors to get the most out of your public sector innovations. I talked earlier about the iPlayer. It's a great product. Wouldn't it be better if the iPlayer were extended to more channels? In fact, there was a project called Project Kangaroo to do this, which looked great, but despite several valiant attempts, clever lobbying resulted in the regulator's block, seemingly on the basis that it would be too successful. Okay, so much for you. Right, it doesn't make sense. So why don't we start from a principle of we're going to have really successful products? Right now, there is a product coming along that goes by the name YouView, which looks pretty good to me. But even if YouView meets its revised timetable of 2012, you'll still have thrown away several years where the UK could have been in the lead, and that's a lifetime. It's a complete lifetime in my world. So since we're in a critical mood, at least for this minute, this is as good a moment as any to address the criticisms leveled at Google. That would be us that I referred to earlier. What I face a lot is that we're big, scary, and trying to take over the world. It takes many forms. I love these. Just wait, in January, Luke Johnson claimed, quote, 'Just as Rockefeller's Standard Oil was an oppressive enterprise that became so powerful it had to be broken up for the public good, so I believe that Google must be seriously tackled in the national interest,' unquote. And of course, we're currently the subject of antitrust investigations in both the United States and Europe. Now, obviously, I don't actually share these views, it should be clear, and I do respect that there should be a debate about it and so forth. And it's only natural that with success comes scrutiny. That said, it's hard not to perceive an undercurrent of protectionism in some of these attacks. Here's the other side: John Fingleton from the Office of Fair Trading put it, quote, 'While lots of people have talked to us about harm to competitors, nobody has articulated to us harm to consumers.' And that's the key. I would argue to you that consumers are the ones that are in the driving seat. All we're doing, right, all of us, is hitching a ride, and the door is open to anyone. And I think that the internet brings the consumer to the fore in a way that we've not seen in industries before. Online, as you know, competition is a click away. It's very easy for people to come, sample, and move. If you don't get it right, they leave very, very fast. And indeed, in our case, as history has shown, it's common for once-leading online services to be innovated and overtaken. Our rivals are formidable innovators, and who knows where the new startup stars will join the fray. So what we're doing is we have a survival strategy which is to place big bets on technology trends. Placing big bets, it does sound risky, but given the rate of change, we think it's the only logical result. When we were small, we did not have the capital to place big bets. Now we have access to more capital, and now we need to place even bigger bets to try to anticipate what consumers really want over the next few years. And not every bet will succeed, but it's safer to aim too high than too low, to strive for game-changing progress rather than to fiddle at the margins. It's better to launch and iterate fast, fast, fast, to fail fast, to learn from your mistakes, than to spend years of planning and end up miles off the pace. If you look at the online social world, which is where a lot of the froth and noise is right now, you'll see that they iterate every day. Imagine working in a company where everything changes every day. And indeed, it is possible with a focus around continuous innovation to actually drive change at that speed. Now, unfortunately, one of the downsides of this approach is that it can be quite disruptive at times. We've inadvertently made things worse by sharing our delighted innovations without appreciating the discomfort that we've caused, and for that, I really do sincerely apologize. We could have handled some of those things better, and I am actually really sorry about it. I don't think we'll ever stop, at some level, ruffling feathers. It's, I think, an occupational hazard of innovation. But I do hope that we're now sufficiently engaged in industry conversation, literally conversations today, tomorrow, next week, next year, to be sensitive to everybody's concerns and to be more responsive. In a fundamental way, I was thinking of an example, and Google TV is an example. This past year, when we launched it in the US, everybody feared that we were somehow competing with broadcasters and content creators. Our intent was, in fact, the opposite. We seek to support the content industry by providing an open platform for the next generation of TV to evolve, in the same way that Android is an open platform for the next generation of mobile. Okay, this is the way we think. So just as smartphones sparked a whole new era of innovation on the internet, I think we think that Google Television could do the same for television, creating more value for all. It's a platform that combines the browsing and web world with all of the wonderful things that broadcasters can already do, and a platform that's never been offered before. So we expect this to launch in Europe early next year, and of course, the UK will be within our top priority list for obvious reasons. Let me take you to the second barb or criticism that is thrown at us, where we've sometimes been accused of living off the back of others' content and not paying our way, by everyone from Michael Grade to Rupert Murdoch. Andy Duncan, I think, summarized it most succinctly by saying, quote, 'Google takes more ad revenue out of the UK than ITV makes. It isn't fair that it's not reinvesting that back into content and independent film production companies in the UK,' unquote. Now, some have suggested that Google should invest directly in television content. Now, I think when we get into that argument, it reflects a misunderstanding of what Google is, or who we are, and what we're capable and not capable of doing. We provide platforms for people to engage with content, and through automated software, we show ads next to content that owners have chosen to put up. But we have neither the ambition nor the know-how to actually produce content at large scale. I mean, can you imagine what would happen if you put us in charge of programming? I mean, bad sci-fi, strange-looking viral videos, and weird colorful things. I mean, what you all do is actually hard, and we're no good at it. Let's be clear, there's no confusion here. Everyone, well, I have to explain this to people at Google: we're not good at this. We're good at other things. So instead, what we're going to do is help fund content. Last year, we shared more than 6 billion with our publishing partners worldwide, with newspapers, broadcasters, and so forth. And we've been investing in deep relationships, for example, with Channels 4 and 5 and many other partners as well, to provide these catch-up services on YouTube. So what's happening instead is that we have growing audiences and online revenues, and these enhance, I'm quite convinced, rather than cannibalize existing viewers. We also invest in a variety of other ways that also benefit the television industry. This is an aside, but it's worth noting that over the years, we've invested billions of dollars of capital expenditure on IT infrastructure with direct benefits to the telcos and to the content owners. When a UK user clicks access to a Google website, we don't force their ISP to send it all the way to the US and all the way back. We build data centers and work with internet service providers to help them cache content locally. We cut transmission costs, we make everything happen much faster, and in a world where speed is everything, that fast loading, that fast distribution of content gives your content an edge. So don't underestimate the money and brain power that goes into creating and maintaining our software platforms. We employ thousands of the world's best engineers. As you know, it's all stuff that looks simple on the surface. Trust me, it's not. Search is one of the great intellectual challenges of our time. We tested last year about 20,000 improvements and we launched 500, to give you an idea of even we don't get it right the majority of the time. We're testing, testing, and testing. The most disturbing statistic, I think, of all is that 15 percent of the queries that we get each day we've never seen before. At our scale and the scale of the globe, it shows you how hard this is as a problem. This is now, of course, we have an army of spammers who are trying to game the results for one reason or another. So it is that sort of constant vigilance, innovation, investment that we do just to stand still. Google's R&D spend last year grew faster than any other company worldwide, and most of that went on core search. So who benefits from this? Users should get a better search tool, and content owners whose websites are better able to be found. Now, there are some exceptions. We do occasionally also fund content that's groundbreaking that uses our platforms, and I'm very proud of some of these examples. Sometimes you have to build a prototype and people have to see it for themselves. One example is Life in a Day, a unique experiment in social filmmaking. This was done with Ridley Scott and Kevin Macdonald, and the goal was to show the potential of YouTube as a commissioning platform by creating an entire feature film from user submissions. So this is not for the faint of heart. We had 80,000 contributors sharing 4,500 hours of footage into a two-hour film. It was premiered at Sundance in January to rave reviews and even got picked for a theatrical release. So it can work. We're trying to show the way, but it's an experiment. Being willing to experiment with new content is entirely different to doing this professionally at scale. We're never going to be in your league with respect to commissioning and creating content. It's not on our skill set, nor at our core business. We do care about great content, we absolutely do, but our strength, of course, is in developing platforms. And we're under no illusions: the great content is what makes them useful. So we want to support content industries as they embrace the online medium, and we want to directly fund prototypes. It's one way that we can help. More broadly, we're investing in initiatives to equip the next generation of creative talent to push digital boundaries. We had a contest called the NextUp contest that promised YouTube talent to take their ideas to the next level by offering training and seed funding. In a similar vein, I'm delighted to announce that we're partnering with the UK's National Film and Television School to help young filmmakers navigate the world of YouTube. So these are examples. The NFTS is one of the world's most successful film schools, as I think everybody knows, and I suspect quite a few of you are graduates from their programs. But they've gone on to gain credit both here as well as in Hollywood in fine productions. So starting in January, we're going to be investing to support an online filmmaking and distribution module as part of that curriculum. So we're always on the lookout for more of these kinds of ideas, so bring them to us in one way or the other. But ultimately, the bulk of our investment should focus not on creating content, but rather on the platform. You guys do the content, we'll figure out a way to jointly make money and have distribution. For us, a platform that offers distribution to a global audience of two billion people free of charge is a pretty good goal, and that's, I think, where our strengths lie and where we can make the biggest contribution, in my view, to the television industry's future. I want to talk, finally, in context with the issue that has generated some of the most vitriolic criticism of Google and, in general, of the internet, which has to do with copyright. And this is something we all care a lot about. So Viacom, who sued us over this a few years ago, alleged that Google made a deliberate, calculated business decision to profit from copyright infringement. And Sweeney from Disney said, quote, 'Serving up pirate sites when you search for our shows is something that we find unacceptable.' So I want to respond very clearly by saying that we respect copyright, that we've taken steps to prevent terms from search, for example, appearing in search autocomplete, which leads to copyright infringing links. We've built tools that make it simple for copyright owners to report violations. We're rolling out a system to act on credible or reliable takedown requests to remove sites from our index within 24 hours, and that's faster than any other web service in the UK. And I looked at it today: the good news is our average response time for removal is four hours. So pretty good, given the scale at which we have stuff coming at us. And I guess I'd hazard a guess that by now most of you have used YouTube as a free promotional tool, sharing trailers and so forth. So the power of YouTube as a platform is well proven, not least, by the way, by Viacom, who found it so valuable that they couldn't resist secretly uploading clips while they were busy suing us. So YouTube is a platform, and it isn't practically possible for us to explain the problem this way: it is not possible for us, with all the stuff coming at us, to human-review every piece of content that comes to us before it comes to us. If we had to pre-vet every new video, 48 hours every minute, we couldn't exist. Much of what you see in content sites on the web would not be able to exist. So we thought about this for a while, and this is a new and unproven area, and we worked hard to find a technology solution to give rights holders control over their content, including ways of making money from it. The centerpiece of this is called the Content ID system. Maybe you've heard of this. I suspect quite a few are using it. It cost us more than 30 million dollars. It took 50,000 engineering hours to develop, so a non-trivial amount of investment on our part. And the way this thing works is very simple: you send us a copy, a master copy, if you will, of video content you own and want to protect. Our system then sifts through the giant pile of stuff that keeps coming in to us, looking for anything that shares the same fingerprint. If a match is found, you decide what to do. A few companies want violations taken down immediately. Okay, we'll take it down immediately. Most prefer to leave it up and sell ads against it. Okay, a decision I prefer, but we respect your decision whichever one you make. And to help you with getting to the right decision, hundreds of content owners are now making substantial sums from their share of ad revenue on content that was originally illegally uploaded, caught by our system, converted to the proper and legal activity. So speaking of all of this, everybody says Google wants content to be free. This is not the case. We're actually agnostic when it comes to whether free or paid content models are the right ones. It's up to the content owners, literally up to you, to decide if you want to charge or give stuff away. In other words, do you want to have a subscription model or do you want to have an ad-supported model? It's up to the users to decide if they want to pay you or they want to not pay you or they want to do whatever they do with ads. All we want for content is it to be accessible, visible, if you will, to as many people as possible. But that does not mean that it has to be free. This is not rhetoric from us. We've built a range of tools to help businesses control and earn money from their content online. Earlier this year, for example, we launched a product called One Pass in February of this year, a tool that helps publishers erect a paywall for their content. We're experimenting with other pay-per-view and other transactional models on YouTube, such as click-to-buy. And of course, we would argue that Google advertising is the ultimate tool for content owners to monetize their work. That's enough about Google. I hope I've made my point clear that we're not your enemy and we want to help. I certainly am not suggesting we have all the answers, but we do have some insights into where things are heading. We want to work together and support you in this transition. So now you're probably wondering who I'm going to single out as the boogeyman. There must be a guilty party here. For me, no one has yet filled that role. But I think we should keep a close eye on your regulators. The UK's creative and broadcasting industries have done remarkably well so far, punching way above their weight. Home audience has been broadly happy with what you're doing. Innovation and content and delivery is actually quite good. I looked at the numbers. But has this happened because of or in spite of the UK's broadcasting regulation? I'm going to let you guys judge. The world is changing, and television is no longer a domestic affair. Online, any broadcaster can have a global reach. So playing to this wider audience needs a new mindset, particularly when it comes to laws and regulation. Now, overall, my amateur inspection of this: British television is subject to far more stringent regulation than your counterparts in the United States, and this means less flexibility and scope for UK companies seeking to compete on the global stage. And even though much of Europe is worse off still, it's irrelevant because your main competition, through shared language and similarities in culture, your former colonies, us, right, is from across the Atlantic. And I'm not suggesting that the UK should mirror US-style regulation. We have our own problems, trust me, I was listing them all day. But I know it may sound counterintuitive for me to call for lighter regulation when you all have just been through the hacking scandal and other things like that. But here's my argument, because I think it's important at least to be heard. It's no exaggeration to say that decisions made in the next year will determine the long-term health of your broadcasting and content industries for decades to come. I think you will understand this. These are critical, critical times because of all these changes. So if economic growth is the priority of the government, your regulators need to be cautious when making new laws in this space or risk stifling the growth of your content businesses. So since I have the stage, if you want my opinion, I'll give you some suggestions. As I said before, the government should put innovation front and center of your regulatory strategy. Television is going global. English, of course, is the global language, so congratulations and thank you for inventing it. Television is going global and transforming. You guys should own it, right? You invented it, you own it. In this new era where innovation and speed are paramount, it has parallels to the internet. To compete on the world stage, your content businesses need the freedom and legal framework to behave more like internet companies. I was surprised. The starting point for every new piece of legislation should not be 'how do we regulate this?' but rather 'how do we protect the space needed for innovation? How do we give people some room?' You, the entrepreneurs, the people coming right out of college, all of the smart people I've met on this wonderful island and in Ireland, listen to the entrepreneurs, not the lawyers, if you want your innovation to thrive. There was recently something called the Hargreaves Review of copyright law, which is a good example of how you can make some small changes that would create space for some new innovation. Putting a little more flexibility into copyright law without undermining the business of content creators or giving away people's content would enable new businesses to spring up, and it's estimated under one study to add maybe eight billion more pounds to the UK economy. Certainly would be helpful. Give you another example, a direct corollary: you need to stop all this micro-regulation that the broadcasters are facing. I appreciate that the public mood is we want to micromanage every single thing. I can't imagine an internet company being subject to these rules. There's nothing more stifling innovation than having to jump through endless hoops. Imagine if Facebook had to endure the regulation that you face in television. There'd have to be separate Facebooks for each region, staff would have to be spread out, Salford would have to be an engineering hub, there'd be rulings to enforce diversity of wall posts and quotas for religion and education, and you could forget about poking. Have I made my point? I can give you example after example. Oh yeah, in fact, I have another example now that I think about it. It has to do with advertising. This one is particularly egregious. It's micro-regulation around television advertising. Look at the creativity in your advertising industry for television. It's the lifeblood of the broadcasting industry outside of the BBC, and yet it doesn't get championed by policymakers. In fact, it's the opposite. Take the investigation into TV ad trading. In this tough climate with even more competition for the marketing dollar, it seems the right time to make things easier for ad-funded broadcasters by, for example, removing market-distorting constraints like the CRR rules that you guys have at ITV. They can't trade the stuff around. A similar principle applies when it comes to use of data, both in advertising and content distribution. You need data protection rules that reflect the realities of the digital age. And of course, you should be very careful, as I discussed earlier, about privacy, and you have to be respectful of user concerns. It's important not to overreact and prevent any kind of sharing at all to those who wish to have a personalized service. 'I want to opt-in, I want this service.' In many cases, your rules don't even allow it. That will stifle innovation. Now, Europe needs very sensible data protection laws to ensure when people share their data, it can be shared across national boundaries, again, when you opt in and when you choose it. Another example of something which would significantly enhance or change the outcome of innovation here in the country. So right now, it's the internet sector that's at the forefront of the data debate. But if you follow my reasoning, if you look at the number of people watching television, the amount of our technology opportunity that's before us of combining these two, as you all spread your wings online, it won't be long before you're going to be with us in this fray on this particular and incredibly sensitive topic. We have lots of experience at Google, and I believe that the key to any solution is to be transparent with people about what data is collected and why, and give them the tools to control it themselves. They are, after all, the customer. So on a broader note, let's talk about openness. It's very, very important that we keep the internet open. It's a prerequisite of innovation. No one should have to ask permission to launch a new product online. The more attempts to curtail the internet's openness, the harder it is for tomorrow's Larry and Sereys to become the next big thing. By the way, it's good for Google, right, if you think about it, because we're already well known. But it's not good for the ecosystem, and ultimately, the ecosystem makes all of us stronger. The adoption of this new technology, all of the new content, all the new innovation, all of the new competent competitors, all requires openness. Now, I'm not suggesting, again, a completely laissez-faire approach here. There is content and behavior that none of us want to encourage, whether it's copyright infringement or phishing scams or sexual abuse imagery. None of this is good. We obviously don't endorse it. But when legislators try to figure out how to minimize the harm of online content, technology solutions rather than laws should be their first thought. Give us an opportunity, as we did with Content ID, to come up with a solution which is a fair balance on these issues that works well and scales. It's stifling the internet, whether by filtering, which is shutting off pieces of it, or blocking, blocking the whole thing, turning the off switch. 'Oh, we know that nasty internet, I'll just turn that off.' Okay, it's a terrible mistake. And I don't blame them for wanting to apply what seems, in theory, a simple approach. The problem is that things are far more complicated in practice. For every ISP filter, there is a workaround. For every blacklist, there is a proxy server. For every well-meaning attempt to limit the bad stuff, there is good stuff that gets knocked out. Instead, policymakers, the government, if you will, people who think about policy, should work with the grain of the internet rather than against it. Harness the huge level of user engagement that we have online to find solutions. Encourage online innovators to find new ways for parents to protect their children. Working with the grain of the internet rather than against it makes sense, right? Allow the sharing of online data and ensure laws that allow innovation to flourish. These three principles would really help the television industry succeed globally. Thank you so much for spending so much time with me tonight. It's a great opportunity for me to speak to an audience that I've not had a chance to speak with before. If you told me ten years ago that an engineer like me would one day deliver the UK's highest television industry lecture, I would never have believed it. So I guess there's a lesson in that. The computing and creative industries are both on remarkable journeys. Sometimes our paths will intertwine where you least expect. Sometimes there'll be potholes, sometimes there'll be false starts, but sometimes I hope there'll be stunning shared success. In this journey, Google really does seek to be your partner. We do understand, we're trying to listen, we're trying to invent. We're not your foe. I would argue that we should focus on these vast opportunities, and British television, in particular, is uniquely well placed to take them for the reasons that I outlined, I think quite convincingly, if I say so myself. You guys really did invent this stuff. You really are better than anybody else. You occupy a global stage. So to end, what I would say is let's think big, right? Let's think global, and let's think beyond the TV box to what we can do with this extraordinary medium that you all have invented. The content that's coming, which I've grown up with, as I said, and you have fans all over the world. So thank you very much for listening, and I hope we see each other very soon. So thank you so much.