Let's be fair; that's not really why papers are hurting financially. It was a sudden and drastic drop in advertisers, not people switching to blogs. Newspapers used to make lots of money on ads from national retailers, auto dealers, financial companies, and real estate. Those are four of the worst possible groups to have as your clients.
I think this goes back to whether newspapers are selling their content or the medium. From what I recall, the general rule of thumb (used to be?) that a newspaper gets a third of revenues from advertisers, a third from classifieds and a third from subscriptions.
The much broader problem that affects all of the above has been that readerships have been in decline - in some cases rather steep decline. Further, from the supply side of the argument, the supply of media that's available to advertisers has broadened considerably because of the internet. But there's always been demand for valuable content - and that's what I would suggest has been a problem. That for quite some time that demand was captive - people didn't have alternatives.
Now they do, and now they're looking elsewhere. Even when the businesses in the retail, auto, financial and real estate sectors come back, traditional media won't - it's been in decline far longer than this current/past recession. This I think has a great deal to do with the value (or lack thereof) that people see in traditional media versus the alternative sources they can find increasingly available because of the net.
I mostly agree, but I think it's important to note that readership has been on a steady decline for decades, but the ad market crashed very suddenly and drastically in just the last few years. And you are correct that many of these advertisers won't come back.
