Mr. Schmidt Goes to San Diego

On Monday, the Associated Press announced a new campaign to force Web sites that use its stories to obtain permission and share revenue with it. Although it's not entirely clear how the company will enforce this new rule, there's little doubt who will be the biggest target: Google (GOOG), whose Google News scans and aggregates headlines, angering publishers who feel the service makes Google money by mooching off their hard work. So when Google CEO Eric Schmidt gave the keynote address at San Diego's meeting of the Newspaper Association of America yesterday, there was more than a little tension in the room.

As you might have guessed, Schmidt declared that the old newspaper model was dying out and media organizations have to innovate if they want to stay profitable and relevant. While some subscription-based revenue models would work here and there, Schmidt said, the Internet is based on ubiquity, and media outlets cannot hope to control the flow of information. All they can do is be the most interesting and sophisticated deliverer of content; advertising revenues will do the rest.

Consider a future in which media consumers read stories on mobile Internet platforms, with links to user-generated content such as Wikipedia. The stories are updated as circumstances change, becoming an evolving animal that stays current almost in real time. Users' reading habits generate a profile for each reader, and each media outlet will steer stories to the reader based on his or her profile. Advertising, of course, will be targeted to the stories' subject matter; ultimately, the advertising will generate enough money to keep newspaper moguls in the black, and remake the industry.

(As usual with futurist visionaries, Schmidt spiced up his remarks with a lot of mystifying jargon. "Newspapers become platforms for the technology to use their services. To build businesses on top of them, and also to interlink—hyperlink—all of the different information sources that end-users will take." "One of the fundamental problems with the Internet is that it doesn't respect traditional scarcity structures." "You can architect a structure where innovation is welcome." Honestly, since when did architect become a verb?)

As Schmidt wrapped up his remarks, he only glancingly referred to his looming conflict with the AP and the resentment of newspaper publishers. He was, he declared, a "little confused" by reports that Google is the main target of the AP's new campaign, invoking the fair-use doctrine as he defended Google News' habit of taking and repurposing headlines from media outlets. In any case, he said, Google News redirects users to media sites, so they should be happy for the free promotion. In fact, Google News' aggregation and prioritizing of news is exactly the sort of service newspapers should be offering.

Obviously, newspapers and media companies are facing a serious crisis and must do something new if they are going to survive. Should they crack down on an Internet that expects everything for free? Or find a way to adapt to this new market, delivering content in new and distinctive ways that drive readers to their sites and boost ad revenue? Eric Schmidt clearly thinks the latter course is inevitable. If you'd like to hear his entire speech for yourself, it's just a click away.