Newspaper circulation has been dropping for years, and there's no reason to expect that to change — it's just too hard to compete against free and constantly updated online content. Newspapers are even purposely contracting their circulation to cut costs and focus on their core readership.
I predict that the end of printed newspapers will happen in the time it takes for most people to upgrade their cell phones two more times. The iPhone, and its inevitable copycats, (let’s call them iClones) are newspaper killers. When you have a web browser in your pocket, a printed newspaper is redundant. Eventually, all cell phones will have Internet browsing built in. You might not have a web browser on your next cell phone, but the one after that will have it as a standard feature.
The problem (if there is one) is that as newspapers abandon print circulation, the barrier of entry to reading one rises: you must own an internet device and subscribe to an internet service, which together are more expensive than simply picking up a daily paper. Of course, more and more people have access to the internet, and you'd be hard-pressed to find people without it. But those you do would be poor, and, in a theoretical future of the nonexistent printed paper, those people will find it increasingly difficult to be informed enough to fully participate in civil society.
Knowledge and access are power, especially in local politics, as Houston is finding out as the wealthy residents of Southhampton effectively fight a new high-rise where other, less-connected neighborhoods have floundered.
Another major cost-cutting trend is that newspapers are relying more on user-generated content. Scott Adams predicts this will only increase:
I also imagine the business model for bloggers changing. Now bloggers run ads and make money based on the traffic to their sites. In the future, I can imagine bloggers opting in for a system where they allow newspapers to grab their content any time the newspapers want, move it into the newspaper’s own content model on any given day, surround it with their own ads, and pay the blogger a percentage of ad revenue. In other words, every blogger (and cartoonist) would be self-syndicated, but newspapers wouldn’t print the same bloggers every day. They’d grab only the best writings of the day based on social voting and the newspaper’s own editorial opinions.
The problem with user-generated content is that is produced by amateurs, not by professionals. Now, professional journalists aren't flawless and don't possess any superior innate ability to gather news. And newspapers cater their news towards popularity in a buying demographic. But any amateur that blogs or writes has one or both of the following characteristics: he possesses the leisure to write, and is sufficiently interested to do so. The local who cares enough about city politics to post about a city council meeting probably has a strong point of view. Sometimes this works, if he is upset about corruption or incompetence. But anyone with sufficient leisure to write as an amateur will have a certain income level, and therefore tend to have a different vested interests and assumptions than someone without that income. News written by and for a certain economic demographic can only tend to reinforce that demographic's world view. To the professional journalist, for better or worse, it's just a job, with all the detachment that brings.
Now, I have no illusions about how newspapers really function, and have no nostalgia for an imagined past of hard-nosed and civic-minded newspapers. Newspapers publish for the demographic that has the income to buy things. They are businesses that need to make money. And I am also realistic about the actual demand from any demographic for hard, responsible news. But I wouldn't be surprised if the twin developments of internet-centric news access and more user generated content will exaggerate the information and influence disparity between the rich and the poor.