People see through this over time and lose faith in the local organization. Meanwhile, the real result is that the reporting pools shrink to a point where they can be manipulated. To cover something like the war in Serbia, reporters need access to the Pentagon. One critical or negative report and they lose both access to the Pentagon and their job. So the public is fed government pap.
Newspapers then lose credibility.
I thought we learned our lesson about government reports from Vietnam. TV is partly to blame, but TV was only a jab compared to what the Internet is doing to newspapers. Web-based news is all many of us read. There's a bigger pool of sources and the entire world can be accessed for reports. There are still newsmen to be found here and there around the world.