Mathew Ingram puts his finger on the problem newspapers are having - the new ad model won't prop up the same stuff as the old model:

My friend Scott Karp at Publishing 2.0 -- and others such as Lost Remote -- have already put their fingers on the crucial point that the newspaper industry is struggling with: namely, when your entire business model is predicated on scarcity (i.e., the scarcity of pages for advertising), how do you deal with the sudden abundance that the Internet has created? Supply and demand gets thrown out the window and other dynamics take hold.

What newspapers are facing is a large scale business model shift. The old model featured much higher ad revenues (which in turn allowed them to do more things). The new model doesn't have that, and this kind of change is hard - ask anyone who bought a house and then had their income drop, for instance.

This kind of thing is hardly new, of course - lost of companies have had products that "brought home the bacon" for years, but couldn't manage to find anything that completely replaced those products as they declined. No one enjoys a shrinking business, even if it's possible to run it profitably after the shrinkage - and it's often very hard to let go of "the god old days", when (insert old, expensive habits here) was possible.

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