Publications that have differentiated content (e.g. Wall Street Journal, NYT, Economist) seem to be doing just fine, but having thousands of papers that rehash the same content without any edge on each other whatsoever is just not sustainable given the current state of information technology.
EDIT: I only considered revenue from the subscribers, and ignored downward pressure on advertising revenue. The point still stands - the market can no longer sustain undifferentiated content (people don't pay for it anymore, and advertisers will pay less than before because they have better options), and differentiated content is probably a worse business than it used to be (people will pay for it, but the revenue from advertisers is still being diverted to Google).