From Scott Moore, former publisher of Slate, on Frontline
In other words, you'd take a pile of money -- not even all that much money in relative terms -- and go and create new staffs in a handful of cities around the country and start creating an online-only competitor to the local newspaper. You wouldn't have the same cost structure as the newspaper, but if you were putting out a product that was of equal quality and perhaps much more attractive and Web-like in its approach, you might take a lot of their audience away. And because your cost basis would be lower, you could make a lot of money on that.
People already get a lot of their local information this way, but it's just not tied into a newspaper. What happens when somebody turns that into a central news portal that is super-local? The traditional newspapers won't be able to compete.