Mathew Ingram points out what a lot of people in the newspaper business are continuing to miss:
As Mark Potts at Recovering Journalist points out (along with a few others), this entire argument is based on a fundamental misunderstanding of the industry. Newspapers have *never* been paid directly by readers for the news. When readers pay for a paper at the box or at the store or by subscription, they are paying for a small fraction of the content in the newspaper â maybe the first half a dozen pages or so, for a large metropolitan daily. Everything else is paid for by advertising.
I think there's one thing lost in a lot of the analysis though: the entire consumption model for news is changing. Not just the flip from paper to net, either. Newspapers - like broadcast news - are trying to do broad coverage of "everything". The NY TImes, for instance, has a metro section, a sports section, an editorial page, style (etc, etc).
Compare that to what you read on the net. Gadget news? Engadget, Gizmodo. Politics? Opinions from various political bloggers. Tech news? Again, subdivided down by segment. What you're seeing is a vast creation of niche news reporting, and the existing media giants are stuck in the old "everything" model. Jeff Jarvis is only partly correct when he says that newspapers have to go hyper-local; they also need to find a specific niche.
Even aggregators tend to focus - Techmeme doesn't aggregate non-tech news, for instance. That's the big change hitting the media right now. Most of the people in media are focused on the decline of paper - they should be paying attention to the decline of generalism.