Yeah, this concerns me as well. I do think "bundle" deals (coffee + $1 more for a newspaper) might actually work. I know that I pick my local coffee store just because it has free newspapers and magazines to read (it is part of a local bookstore).

But I know plenty of people that are not willing to pay anything for "news", and their argument is always that there is enough free content on the web. The quality of news is something that is very difficult to assess, unless you are a domain expert.