There's plenty of reasons why newspapers are struggling nowadays. Just yesterday the Houston Chronicle and Atlanta Journal-Constitution announced layoffs. There will likely be more next week at some newspaper somewhere.
There's three major reasons behind this decline: the overall economic environment, bad management and the Internet. While part-time, hobbyist bloggers can never replicate even a small daily newspaper, they can highlight and emphasize news that newspapers nowadays are missing because of ideologically homogenous newsrooms.
A couple of cases in point: Last Saturday marked the sixth anniversary of the Iraq War. Unsurprisingly, the left marched and protested. These protests were a shadow of their former glory, because so few Americans are dying in Iraq. A few hundred marched in Los Angeles. Cindy Sheehan managed to draw "more than 200" here in San Diego. The count was provided by protest organizers, so the actual number is almost undoubtedly lower than that.
That same weekend, there were numerous "tea party" protests against President Barack Obama's proposed budget -- but the Associated Press moved no story. Make no mistake, these were no small protests; thousands showed up in some areas. However, these protests weren't on the national radar.
And it's not just the big media that's clueless on this. Take, for example, Sunday's Connecticut Post:
That centerpiece is this story. How many activists/protesters were there? You have to scroll down to the third paragraph from the end to find out that there were 30. (No, I'm not missing one or more zeroes.) Thirty protesters get a main story, sidebar and two big photos.
There was another protest in Connecticut that day -- one of those tea parties. That story was buried inside the paper, and had no photographs. Aside from the different outrages at different topics, the other thing that made this story different was the number: It had an estimated 300 protesters.
So, what happened? The editor planning coverage for the weekend assigned a reporter and photographer to the AIG protest, thinking it would be the bigger draw. The editor was wrong. When, it should've been obvious that the AIG protest was a carefully choreographed show nothing was done -- by the reporter, photographer or editor. When word undoubtedly came that the tea party protest was big, it was probably too late. No photographer = no front page centerpiece. So the editor went with what they had.
Was there an alternative solution? Once you're in the situation the Post found itself in, the best they probably could've done was to pick a centerpiece-able story from the wire and run the tea party story low on the page and the AIG story inside. Normally, it'd be good journalism to run the locally produced photos on the cover, but good journalism also dictates you don't over-play a story.
The easy answer would've been to be in touch enough with your readers to realize ahead of time that the tea party might be big and to have prepared for it.
The fact that the easy answer wasn't available is a symptom of the sickness afflicting many newspapers.