We spent a fair bit of time researching this trend at Google News (former TL), and talking to the industry. I cannot speak for the company anymore, but the major finding was:<p>"The newspaper industry was not in the business of delivering the news, it was the the business of delivering ads."<p>News was their product, but they made their money by delivering ads to everyone's doorstep on a daily basis. The subscription rates they charged consumers were insufficient to cover their costs (by a large margin). The rest of the revenue was made up in classified ads, job listings, consumer ads, etc. None of those markets were particularly efficient, and as a result the industry was highly exposed to any changes in those markets.<p>Enter the internet, and:<p>1) Craigslist probably dropped the industry revenue about $20B/year.<p>2) Monster.com and competitors took another $10B/year or so.<p>3) Google, Yahoo, DoubleClick, etc took another bite. Though less so, ironically, because newspapers are still considered a great vector for brand advertising, and that sort of advertising is still difficult to quantify online.<p>4) Equal access to worldwide publication means that you (the consumer) are no longer fully reliant on your local paper. You can read the best article from the best source. This has multiple consequences, good and bad for publishers. The good (well, for cost reasons, not quality reasons) is that publications can skip covering events that will be better covered by a syndication partner (like AP), or just re-hash content from the local sources. The bad news is that the local market no longer has to buy your paper, and can now find a better source online.<p>The industry also continues to make a lot of strange choices, which don't help. For example, they make more with an extra 20% distribution on ads (publication dependent) than they do from the entirety of their subscription revenue. Given the demand elasticity for news content, one would then expect publications to drop subscription fees entirely. That they don't is somewhat mind boggling, but the explanation I received was that "distribution" (printing, shipping, etc) has its own P&L (for historical reasons). The other angle might be "exclusivity" (you value something you pay $6 more than something you get for free), but I am not enough of a brand expert to judge this argument.<p>The industry also tries to latch onto online subscriptions and micro-payments, which is maybe the stupidest thing I have seen them do from an economics standpoint. The numbers just don't add up (the number of people willing to pay versus the opportunity cost from lost ad revenue). Even if every person on the internet paid into a newspaper subscription fund, we are still back to <i>the industry was never in the business of selling news</i>.