The Financial Times is reporting an interview in which Schmidt told the paper Google "considered buying a newspaper" and "using its charitable arm to support news businesses seeking non-profit status" before rejecting the ideas:

Google had looked at buying a newspaper but was "trying to avoid crossing the line" between technology and content, Mr Schmidt said. It was instead working with publishers to make their websites "work better" for online advertising.

(Annoying registration-required article at FT.)

Schmidt's just being polite: Newspapers aren't much of a growth industry these days. He seems to have more hopes for the movie business.

Google's YouTube, after all, has held talks with William Morris Agency about buying up rights to original celebrity videos to drum up traffic and advertising on the site. There's been no deal yet, but over several months Schmidt hasn't dismissed the arrangement the way he has for newspaper publishers.

That's probably because Schmidt, who last year bought a house in Southern California and has been cozying up to Hollywood players there, is eager to blur the line between technology and content where video is concerned. He's cut deals to acquire content from MGM and, as of last month, Sony and Lions Gate. Sure, he hasn't gone so far as to have Google itself make video, but the deals put to the lie the idea of a clear line between distributing content and creating it.

Obliterating old boundaries, be the technical (search, email) or social (privacy), is what Google's all about, after all. Provided it's interested in what's across the line.

Primarily through new ventures that not only go around the studios, but around traditional distribution entirely. While the networks and studios all have subsidiaries producing content strictly for online distribution, the talent contracts are still typical pay-as-you-go deals (and meager at that). Agencies have been most enthusiastic about new busines models — probably because they're already realizing efficiencies in terms of talent discovery using the Internet, which allows them to get around scouts and managers and reach new faces easily and cheaply.

A number of agencies have begun embracing new models. 60frames, an online video startup, took $3.5 million in venture funding and was incubated by the United Talent Agency. Creative Artists Agency is assembling a $200 million venture fund with partner Draper Fisher Jurvetson. International Creative Management is reportedly talking to Qualcomm about raising their own cash. And William Morris has helped back a $500 million SPAC to fund M&A deals, with Ashton Kutcher serving on the board. The draw for the agencies is the ability to own a piece of the company that distributes work from their own talent stables.

The only problem is, that gives them a conflict of interest when negotiating with the studios. Why pitch deals to the studio for the standard 10 percent cut when in-house deals would result in agency fees and back-end profits? And no one knows how this will shake out for talent. As LivePlanet producer Sean Bailey pointed out to reporter Laura M. Holson, "People in Silicon Valley too want their pound of flesh."

(Photo by Getty/Sharon Dominick)

AT&T exec Susan Johnson said she hopes the fund will focus on "mobile opportunities." Siminoff told the Times the historical friction between Los Angeles and SIlicon Valley won't be a problem. "The ethos of this fund is about reducing the friction," he said. "Hollywood people are not stupid. They are just not technology people." That line of argument will be a tough sell in the Valley.