McClatchy, Google Touch on Future of Newspapers, AP Battle

At the Newspaper Association of America’s annual meeting earlier this week, two top speakers - McClatchy chief Gary Pruitt and Google’s Eric Schmidt - touched on the future of newspapers.

Pruitt pointed to the opportunities online represents for newspapers in general and for McClatchy in particular. Currently, he said, 15% of McClatchy’s advertising revenue comes from online, for a total of $200 million dollars in digital revenue.

That revenue comes at a higher profit margin than its print business, he said (via Reuters).

The total amount of digital revenue McClatchy brings in is good news for the company, Pruitt said, pointing out that it is above the average newspaper publisher’s take from digital.

Still, McClatchy, like the rest of the industry, is struggling, having recorded a fourth-quarter net loss of $27 million in 2008, due in part to a write off of $5.3 million owed to it by companies that purchased McClatchy newspapers and then filed for bankruptcy protection.

Another speaker at the NAA meeting was Google’s Eric Schmidt, a controversial figure in the newspaper industry because Google is blamed by some for making money off already-beleaguered newspapers, without proper compensation, via its Google News aggregation.

Schmidt avoided touching too closely on the controversial issue, and the audience’s questions for the most part let him off the hook, according to another Reuters article. Schmidt focused on how newspapers will succeed in the future: by using several business models, such as advertising, subscriptions, and “micro-payments,” or small fees in exchange for reading articles. He also encouraged more personalized content that can be delivered via the web and mobile devices.

Schmidt said it was impressive to watch newspapers take to the internet back in the 90’s, but that their business models have not changed to suit the medium.

Earlier this week, the Associated Press announced that it plans to require websites that aggregate news content to obtain permission from news organizations and share revenue with them.

In response, Schmidt - who contends that Google’s use of headlines and short summaries of news stories is legal - said that the resolution of the debate will center around “how you interpret fair use,” The New York Times reports. Google News sends a vast amount of traffic to newspaper sites, which can then monetize that traffic through advertising. Newspapers can easily keep their content from appearing on Google, but few, if any, want to do that. Rather, they want Google to share revenue with them.

So far, newspaper companies have been unwilling to take Google to court, where Google’s fair-use arguments could win the day. It is not clear whether the AP plans to take the issue to court.

The AP’s fight against news aggregators includes plans to create its own online destination where web users can find and read AP news stories and stories of other content creators. The AP says Google’s algorithm for collecting news stories is “wacky” and does not lead people to authoritative sources, according to BusinessWeek.