One reason, says Schmidt, the internet “replaced the economics of scarcity with economics of abundance and all of us are dealing with the consequences of that.” Another: in the always-on internet world, “our children know about now, precisely now, in a way that our parents did not.” That always-connected sense isn’t for kids alone. Turn off your internet connection for an instant, Schmidt suggested, and get a taste of how jarring the result can be. “It takes away your sense of connectedness.”

Schmidt insisted at the start and again in an informal chat with a few reporters that he wasn’t there to tell newspapers how to run their business. That didn’t keep him from riffing on ways Google “and others” might be able to help them make money while briefing the smallish opening night crowd on the primacy of mobile and the wonders of the cloud. So where’s the money? Where it’s always been for newspapers—advertising and subscriptions.

Google is still looking for approval of its AdMob acquisition—Schmidt says Apple’s just-announced iAds plans should help—but that’s not holding him back from painting a pretty picture of the potential for targeted mobile ads. Part of that picture includes display ads “that look like an awful lot like the ads in traditional newspapers.” With that plus Google’s success in text ads, “we should able to do very successful advertising against this kind of content.” (It may not be able to do it against murders—a “real business problem.”) As for approval: “It seems obvious to me that with the number of players and different choices, this is one that should go through.”

Subscriptions and higher profitability: As for subscriptions, Google “and others” are working on “ubiquitous ways subscriptions can be bundled, packaged, delivered. You see this today on the Kindle and the iPad, both of which have subscriptions models you can test and find out what people will pay for it. Eventually that model should have higher profitability because it has lower cost of goods. ... There’s every reason to believe that eventually we’ll solve this.”  He added later with reporters: “I think some combination of advertising plus subscriptions will work. I think it’s too early to say exactly what that combination will be. ... It will be a mixture. Something you want everyone in the world to see, you advertise. Stuff that you want your subscribers to see, you’ll have a smaller but more lucrative audience. You’ll have a mixture.” He compares it cable television.

Mobile first: “When I say internet first, I mean mobile first,” Schmidt explained, echoing a recent Google refrain that has been growing louder. “That’s where the action is. That’s where the growth is. It’s a completely unwashed landscape.” Holding up in succession a Nexus One, a Kindle and an iPad, then nested together, he added, “each of these form factors, tablets, represents in many ways your future.” Then he warned them, again ever so gently, against thinking any one kind of device is the answer. People like different devices for different reasons because a mobile device is personal in a fundamental way newsprint couldn’t be.

Schmidt’s news reader concept: “If you look at the most recent one of these, the iPad, there are a number of very compelling applications but by organizations here in this room, each of which represents a different experiment.” Schmidt suggests a not-too-distant future where the next version of a news readers know not only who you are but where you’ve been—“the newspaper doesn’t realize whether I read it yesterday” and it will be more interactive and real-time, it will integrate everything. “When I go to a news site, I want that news site to know more about me, what I care about. I don’t want to be treated as a stranger.” To avoid what we used to call “daily me” where all you see is what you want and ask for, though, in Schmidt’s ideal news world, the site offers him options he might not like. “I want you to challenge me. Here’s something new; here’s something you didn’t know; here’s an opposing view.” Two thirds will ignore the option; he wants to reach the third that won’t. This has particular resonance if you think about the way Google has been using actions to predict behavior or to deliver information with Google Buzz, ad targeting in GMail and other areas.

Murdoch: As for his own Rupert Murdoch problem, suggested Schmidt, “It’s best to look at Rupert’s comments in context of a business negotiation.”

How did it fly?: When I asked him afterward if he feels a change in tone in the way ASNE and others in newspapers respond to him and Google these days, he replied, “I think these issues have been around for a while. I think Rupert’s comments have sort of galvanized that.” Does he see any improvement? “I think there’s more communication. This problem will be solved when newspapers are making bundles of money and the sooner we can make that happen ...”