Without doing the “calculus,” I’d guess option 2 is more profitable. And it has the bonus of serving a public good (financing journalism at a time when it’s beginning to fail our society).

Maybe Google is too big now and just another Microsoft. But I think of it as a different kind of company that wants to do the right thing. “Do no evil.”

Google letting journalism badly decline because it chose option 1 would be “doing evil,” no?

The more optimistic answer is that their content is worth a lot more than they’re fetching, they just need Google’s packaging skills.

Google has to worry, though, about getting outmaneuvered by the competitor I mentioned and others. A Google Newsish aggregator can be built strictly on totally free new media sources right now (Twitter, blogs, professional Web publishers) and be very powerful without paying a cent. Does adding newspapers+AP+Reuters etc. really give enough of an edge financially to justify the payouts? That’s the tough calculus Google must now do. Far from an easy call IMHO.

So I don’t feel like the newspaper industry has much bargaining power any more. They hesitated too long, and they basically blew it.

The argument I’m trying to make is that the full gamut of news providers — from legacy institutions like newspapers, to underfunded start-ups like VoiceofSanDiego and Minnpost.com, to promising news sites like Politico and Talking Points Memo — do not have enough money in the overall pool to support an effective press for this new age. Google and other successful aggregators and search companies need to help this situation, or else their news assets (Google News, et al) will lose value.

I just don’t see the AP’s growling as being loud enough any more to force Google to cut them in on the deal. Better to make the case that the situation for news providers is so bad that it will hurt Google if it doesn’t help out.

We’ll see how it turns out. I strongly suspect my advice will be ignored and we’ll quickly see a bunch of papers step backward and erect pay walls.

No doubt – Tom Curly has brought a desperate sounding, ham-fisted voice to the table – “beacons”, “fair use”, “policing”, etc. But that doesn’t mean there isn’t a fundamentally important issue here. Unfortunately, the issue is being misunderstood as everybody enjoys a debate driven by emotion, personality and the specific question of Google (bad) vs. AP (dumb).

I think the question we need to consider is a general one: how will content providers charge content aggregators for content links – who, when, and how much. Especially how much. Forget about “walled gardens” vs. “linked economy” – we get it: inbound links must not greet users with a paywall. But that has nothing to do with the financial arrangements between bussinesses like Google and AP. But, you say: Google has a “multi-million” dollar licensing deal with AP? WOW – you mean “wahn MEEELYON dollars”?!! How about we try some other figures – how about, say, $500M annually? And Yahoo – how about another $300M annually? And HuffPo – how about $5M? And your local community news site – how about $0? Point being, I have no clue what those specific figures should be or how the scale should be applied, but it seems clear that whatever amount is currently being payed by successful aggregators is too close to zero.

None of this is to suggest the news industry should be off the hook for past failures or working to innovate going forward. But AP does have a legitimate argument around the specifics of licensing content aggregators. “If we could ‘please just all get along’” is a nice idea, but this is about cold, hard business – the syndication business in particular. Content aggregation players are enjoying a bonanza for the moment b/c there is little or no cost for the raw material (and a headline link *is* a valuable raw material). And that is a good thing – for now – b/c it gives rise to innovative new models like HuffPo’s link-journalism + added commentary. But things eventually have to change enough to support the cost of producing that original content. Call it a system in chaos starting to find economic equilibrium. Call it whatever you like, but as the dust settles, and the bottom lines come into focus, there are going to be adjustments.

If all Eric Schmidt has to offer is, “We figure out ways to send you even more traffic, then you news guys monetize that,” the based on the sentiment of old-school publishers who remain in power, the biggest news companies will remove themselves from Google News’ reaches and build pay walls. You can argue that that would be a dumb move (and I’d argue that), but it looks like the news industry is dead set on going that route.

“Why should it have to share the upside?” Because if it doesn’t, everybody loses, including Google, and including the public. (I view news as a public good, and the current online news landscape means that more people have access to more news and knowledge.)

As for “setting a precedent,” so what? It doesn’t have to have an impact on any other entity. They’re free to implement similar programs IF IT BENEFITS THEM. But just like Google, those other entities operate in the interests of their shareholders and investors, not news providers. They’ll act to benefit news providers if it is in their interest.

Let’s keep the lawyers out of this (since they’d have a dubious case suggesting that what Google and other aggregators do is a violation of “fair use”). Google has the money to fight hard against any legal precedent that would tighten what we regard as the definition of fair use. I doubt struggling news companies could afford to put up much of a fight.

As long as a revenue-share plan is mutually beneficial and not coercive to anyone, it shouldn’t affect start-ups in this space. That would only happen if this thing turns the wrong way, the news dinosaurs decide to sue to tighten fair use online, and we get a bad court ruling that upsets the link economy.

I find the mindset of the AP (as expressed by its CEO) to be archaic, and also dangerous. If we could “please just all get along” and find a plan to works for both sides, then we reduce the risk of damaging the Internet and high value of the link economy. I would hate to see old thinking by powerful interests ruin a good thing.