Interesting concept. As someone who works at a publishing company I can tell you we wrestle with this issue every day. As of right now, all of our content is available on line for free, no registration required, but many others in our niche are locking their content down and going with a pay model.
I have no problem with locking content down and paying for it, but print media is going to have to find a market that's willing to pay for it. A lot of folks read the news online simply because it's there. If the DM Register stopped making their content available for free, I probably wouldn't read it. I certainly wouldn't pay to read most of it. I might pay a small amount to read a few choice articles, though, if it was something that was actually worthwhile (which I would argue hasn't applied to the register in quite a while). My suspicion is that the money they would make off of me paying for the 2-4 articles per week is not much more than they would make by just selling advertising.
Essentially, they're giving the news away as it currently stands, and the quality shows that. If a newspaper is expecting me to pay for something, they better be offering something more than what they are currently providing - or what's available for free.
Section by section, the traditional newspapers really have very little to offer against the free competition:
International/National news - Extensively covered by the national outlets
Business - Mostly covered by national outlets; Local business briefs, if not covered by local publications certainly have a niche here.
Classifieds - Craigslist
Lifestyle - No possible way can the newspapers expect to compete with the variety and depth of coverage out there in the web. Some "niche" publications have a great place here, though (DM Juice for instance)
Sports - National news is drowned by the major outlets. Local/State sports clearly have a place here, but the traditional outlets are really no better off than the "new media" message boards and specialty sites. Gone are the days that I would look to the Register or KCCI for authoritative news on ISU/Iowa/UNI/Drake. Today it's either on the pay sites, or on sites like CF.
Opinion/editorial - Blogs really shine here. The amount of effort that goes into writing one of these pieces is not much more than the average layperson blogger can muscle up.
Essentially the only real "news" that the local papers have left to do all on their own is local news. Stories on accidents, police reports, state and local government. Those are the sorts of things that are going to have to pay the bills for traditional media. And, quite honestly, I think that's a losing battle. It wouldn't take much to have the sum total of all that reporting replaced by a few dedicated bloggers/reporters.
"Press release journalism" is nearing it's end, and I can't say I'm horribly upset by it.
