As enjoyable as it is to bash the newspapers for all of their real flaws, I don't understand how people have come to find paywalls outrageous. I really don't. The difference between newspapers and random hearsay is (in the best cases) a lot of effort in developing broad and balanced sources, fact checking, having an editorial process for some degree of fairness and accuracy (as much as that's suffered in the past decade) and generally putting out a "report" on a subject (that's why we call them reporters). That's a lot of hard, often tedious work that is not going to get done well unless someone is paid to do it. And frankly we should all want to pay for that kind of good content to be made, even when we disagree with it.
What newspapers are you reading. None I've ever seen offer anything close to your "best cases" on even a semi-regular basis.
It's become trendy to say that bloggers do much of the work of the media and that is simply delusion. First of all, nearly all blog entries (including a large fraction of those on this site) are built around a link of a publication which employs its writers. Bloggers do a great job adding bits, contextualize and bringing together info, but they are most often not the generators of solid base information they work with. So if we really do lose newspapers we are not going to have the People's Republic of Blogistan stand up and replace them with real reporting, we're just going to have gasbaggery in its place.
Again, what blogs are you reading? Of course there are a lot that are simply trash. They cost nothing to put up and lets any idiot bask in an imagined sense of self-importance. However, there are some that are simply amazing. Try looking for some and your opinion will change quickly.
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My hope is that the newspapers will force the issue on micropayments. I would gladly pay $1, maybe $2 a day for a combination of stories from the Washington Post, NYT, LA Times, my local newspaper, the Pittsburgh Post-Gazette, and on occasion some random others that I learned about from some blogger. I absolutely will not pay $20/mo to each of those. So if they can figure out a joint payment scheme that makes sense, I'm all for that. Double bonus points if they can use it to make their archives affordable and not priced for company and institutiional use.
MICROPAYMENTS SUCK!!! They are a huge inefficiency (the mental transaction cost) to the process of getting news because before reading each article you need to consider if the article is worth the 5c or whatever the cost is. However, the solution you propose is call a subscription, which is better but only marginally so. Newspapers have never made money selling subscriptions. The cost of a paper barely covers printing and delivery, if even that. Newspapers made money on advertisements, or more specifically, selling their readers attention. I sincerely hope a bunch of papers start charging. When they go bankrupt soon after, it will put this silly debate to rest. If they all do, they will all go bankrupt and then you will see the smart journalists starting blogs (the good kind, not the bads ones you use to soil the word) and make their money that way.
All constants are variables.