Google CEO Eric Schmidt spoke at a convention of the Newspaper Association of America in San Diego earlier today, telling newspaper executives to create a “new format” for news – one that gives consumers more ways to personalize the news they read.

Mr. Schmidt is quoted as saying:

“We think we can build a business with you. That is the only solution we can see.”

With the newspaper industry flailing in a sea of bankruptcies, cutbacks and closing print versions of their publications, the above quote is sage advice. What should be even more eye-opening for newspaper executives is the following statements made by Schmidt:

“Advertising still is the best way to reach a large audience,” Mr. Schmidt said. “It’s very difficult to hold information back” on the Web.

This is the kind of thing 10′s of 1000′s of bloggers have been saying for years now – Change or die. Yes, a lot of online newspapers have begun to embrace things like social media and search engines, but the majority of them have went about it with a completely anti-productive attitude – using rogue SEO companies to try an gain the upper hand in search and in some instances, trying to pay for votes on social news sites so their content gets favored over others, among other things.

Recently and in the past as well, newspapers have asked the big players in search to favor their content first and when that didn’t work, did some saber rattling by saying they were considering taking legal action against sites like Google news. They’ve even went so far as to declare war on fair use. Now they think they can litigate their way back to profitability?

After watching the internet just as long as the rest of us, you’d think the newspaper industry would have embraced online publishing as a way to save their industry from collapse. Instead, they’ve been fighting tooth and nail to have their cake and eat it too.

Note to the big newspapers – now that you’ve got the attention of the 800lb gorilla in the room and he’s telling you to change or die, you may want to act on the advice he gives.