You figure with the all the doom and gloom news about the future of newspapers (declining readership, newsroom layoffs, etc.), we might as well close the paper mills and tell all those fresh-faced journalism students to go right into P.R. (otherwise known as the "dark side") USA Today adds fuel to the fire with a story on how average weekly circulation in the U.S. dropped 2.5% to 45.4 million in the six months ended March 31 as younger people gravitate to TV and the Web for their news fix.  
So what, if anything, can newspapers do to revive their fortunes? Surely, organizations with well-respected brands and expertise in gathering and packaging news have a leading role to play in how consumers get their information. But falling circulation does suggest there are people who don't read newspapers but still want to get the news. As a result, it's pretty obvious if newspapers want to cultivate, retain and attract these people, they better go to one of the key places where these people consume news - the Web. Unfortunately, many newspapers have pursued the subscription model with limited success (even the New York Times' new premium service hasn't won over many people). The road to riches for newspapers is simple: offer consumers well-written, credible online content complemented by relevant, contextual advertising.  It's important for content to evolve from just digital news stories to include podcasts, blogs and video blogs so people can consume the news in whatever format they want - whether it's a newspaper, iPod, PC, etc. This will mean re-training journalists to become multi-media reporters, and for advertising teams to sell cross-platform packages rather than just high-commission full-page, four-color ads. Both these role changes will be challenging  because they require new skills and a shift in long-engrained working habits.
  In the meantime, newspaper circulation will likely continue to decline but newspapers will  not disappear - unless something like the Sony Reader can somehow replicate the paper experience. One of the key reasons paper will stay viable and popular is it has a huge advantage over a Web site: the ability to let people easily discover content they would otherwise never read. The Sunday newspapers, for example, are popular because people can sit, drink far too much coffee, scan through the different sections and somehow ending up reading stories about the poppy industry in Afghanistan - whereas they normally read nothing but technology stories on the Web. The sooner newspaper executives realize to worry less circulation numbers and more about the new opportunities the Web provides, the sooner they can start really starting serving the needs of consumers AND advertisers.
Update: For people who get their news from Google News, it is important to remember news organizations create all that content so it's not like Google pulls it out of thin air. By the way, the future of newspapers will be one of the panel sessions next week at the mesh conference.