Not only do I agree with Ezra (who, I guess, is agreeing with me) about this newspaper business, but one should go further -- on the internet, nobody even knows you're a newspaper. Which is to say that in our bold digital future, and even to some extent our present, the distinction between a "newspaper" a "magazine" a "television station" a "radio network" a "wire service" etc. all collapses. At the moment, true, nobody's confusing The New York Times with CNN, but it's still the case that nytimes.com contains a mixture of words and video clips, whereas CNN.com contains . . . a mixture of words and video clips. For that matter, TheAtlantic.com also contains a mixture of words and video clips.
Because that's the nature of the internet. It used to be that television stations produced television shows, because securing access to the channels of distributing television shows (a broadcast license or wide distribution on cable networks) was extremely difficult. What's more, things broadcast over said channels of distribution could only be displayed on a television screen. A newspaper, conversely, just couldn't put any video clips onto its giant bundles of pulp loaded in trucks.
Media convergence of this sort is, of course, something everyone in the business claims to believe in. But it's something that few people actually do seem to believe in. Yesterday, your local newspaper's comparative advantage was being a newspaper it didn't need to cover any particular area of life better than alternative sources. The Boston Globe isn't, in a classical sense, in direct competition with ESPN. But once it's all websites then, yeah, if you want local sports fans to read your sports coverage it's going to need to be better than the coverage offered in sports specialty sites.
To me, that sounds implausible. Why should your local paper be good at covering local news, and be good at covering national news, and be good at movie and television criticism, and good at covering major sports, and have a solid book review section, and maybe something about cooking, etc., etc., etc.? It's not that there's anything wrong with trying to be good at everything simultaneously, but it's actually very hard. The most useful contemporary music reviews will probably be done by an organization that specializes in covering the subject. Similarly, sports specialty sites will have the best sports coverage. A handful of movie critics could satisfy the entire nationwide demand for professionally-written movie reviews, etc.
What's left for the local newspaper -- or newspaper-like website -- is to cover the local news. This is an important task, a crucial social function. There's an audience for it. But it's a radically scaled down vision of what the mid-sized newspaper should be doing. Paring papers down to this function would result in a veritable holocaust of newspaper writers, just as the digital transition has already eliminated an untold number of typesetting jobs and so forth.
What's more, as Atrios points out covering local news would need to be something that the people doing it regarded as a worthy enterprise. Right now local news is a devalued line of reporting to be in even though it's also the obvious thing for most newspapers to focus on.