My theory of newspapers (and magazines, but focusing on newspapers).

Lets back up a century or three. Many years ago newspapers sold news,
printed on paper (see Benjamin Franklin
http://en.wikipedia.org/wiki/Benjamin_Franklin). They charged a lot of
customers a small amount each for that news, and made a business out of
aggregating lots of pennies. They also could sell advertisements and
notices because they were a conduit to a relatively wide audience.

Google http://images.google.com/images?q=benjamin+franklin+newspape...

Front page:
http://www.ndsu.nodak.edu/instruct/rcollins/436history/pictu...

Example advertisements:
http://mitchellarchives.com/wp-content/uploads/2007/11/1748-... and
http://www.earlyamerica.com/image/earlyamerica/past/past.jpg

Over time, newspapers and magazines reduced their reliance on aggregating
lots of "pennies" subscribers paid and increased their reliance on
advertisements. From a business point of view, this made lots of sense
because aggregating pennies is much more difficult that getting large chunks
of money from advertisers... and they could.

What newspapers ended up doing was outsourcing the bulk of their news
gathering to news aggregation companies like the Associated Press (AP). The
up-side was it was cheaper to buy news from AP than create it independently.
It was also much more efficient, obviously, since only one source could feed
many, many papers. The down-side was that the papers became dependent on
the outsourced news feeds and advertisement money. The dark side is that we
can have hundreds of papers all feeding the same news source - it looks like
there is independence in the news reporting, but it is a mirage.

The result is that newspapers became more and more an intermediary broker
("middleman") and generated less and less actual content. They brokered
their local eyeballs to advertisers and outsourced the creation of the
product the eyeballs were looking for (news) to aggregation companies.

This made/makes newspapers very vulnerable to disruption by Google,
Craigslist, and bloggers/tweeters because they (Google et. al.) are able to
use the internet to bypass the local newspapers, to cut out the middleman:
the newspapers no longer control access to (local) eyeballs. As a result,
they lost their ability to broker eyeballs (acquired by outsourced news
stories) for advertisements.

Just to aggrevate the problem for newspapers, the internet is a MUCH more
efficient path to eyeballs. The cost of the medium is small compared to
physical products (well, internet access is pretty expensive, but it is
already purchased by the eyeballs so the incremental cost to layer news on
top of the internet is nearly zero). Couple that with the internet-based
advertisement to be able to target specific classes of eyeballs, and you
have a compelling case for lots of advertisement dollars to switch from
printed medium to internet medium.

News aggregation companies are also suffering as a "knock-on" effect. The
internet cut deeply into the primary funding source of newspapers -
advertisers. As a side effect, this "cuts off the oxygen supply" to news
aggregation companies.

Moral of the story? You can make a lot more money as a middleman than as
a company that produces a product, but it also makes you very vulnerable
to disruption by companies that are more efficient (or more hungry) brokers.