Yeah, they are -- at least, that was the general consensus on the News Hour on PBS this evening, in response to the news that the Chicago Trib was in bankruptcy.
There was a bit of discussion on what the problem was, and I think all of the guests they had kind of missed the point -- particularly after one of them said "news is free".
Well, no, news isn't free; at least, not while it's still news. There are some silly expenses associated with collecting news: for starters, the salary of the person doing the collecting. Then there's the cost of maintaining the infrastructure (hardware, staff, communications, and that kind of silly shit).
From my perspective, "news" is a service, not a product, and I think that's where the newspapers are going off into the weeds. Sure, Back In The Day, they HAD to print newspapers -- the Interwebs simply didn't exist. But the newspapers simply haven't adapted (physically or mentally) to the technology. They've still got those same big-ass presses (that can crank out a couple hundred thousand copies of the same newspaper overnight) and think that they still have to use them.
Instead, what I think the newspapers should be doing is getting leaner and more flexible: instead of offering everyone the same copy of the same big-ass newspaper (which most folks don't read half of), they should try customizing their news-delivery service. For example, I don't subscribe to the local rag (the Billings Gazette) simply because they want more than I'm willing to pay for what I'd get (but with a twist): as mentioned, for my half-dollar a day, I'd get the whole damn paper, which I don't want to deal with; I NEVER read the 'fashion' section, and rarely read the classifieds, for example. I'd almost certainly go for subscribing for a hardcopy of the sections that DID interest me, though: news, comics, and editorials. Hell, go fully customizable, and let me select what regular columnists to include (i.e. Dear Abby/Ann Landers, but no horoscope), and they could likely charge a little more for the 'trouble' (remember, they're doing damn near all this with computers).
Most of the online editions of the papers that I've seen have gone one of two ways: making ALL of their content online for free, or trying to charge for the "premium" features. Again, I think both of these examples have missed the point, and that the way to go would be to offer the (common) basics for free, but charging (much smaller prices, of course, since online costs should be so much lower) for the things that people want, when they want them: access to some classified ad sections, for example, with online payment (such as PayPal). Shucks, even for online classifieds, they could charge a little extra for more features: seller-provided digital photos of that house/car/boat for sale, for example).
The last part of the problem, as I see it, is that newspapers are lumped in with Main Stream Media and perceived (usually correctly) as being biased one way or another. They need to knock that crap off, and go back to reporting the NEWS without any bias or slanting: if an apple falls to the ground, don't report it as the big bad ol' Earth picking on a small defenseless apple, or as a renegade apple being brought to justice by the forces of Good Ol' Mother Earth -- just tell me the damn thing fell off a hundred-year-old tree in Farmer Jones field, okay? I got at least two brain cells to rub together, and I'm quite capable of deciding what I think about it without your "help".
Basically, I think that the newspapers would be doing fine IF they could make the transition to providing us the information we want, when we want it, in the way we want. As long as they're going to insist on thinking like dinosaurs and using dinosaur sales methods, they're going to continue losing out to those dinky little upstart mammals.