I think what changed with the internet is un-bundling. The newspaper used to provide a lot of functions, such as news, entertainment, puzzles, what's on tv, movie reviews, sports, etc. Now there are individual services that provide better individual components focused on our interests. For instance, a publication dedicated only to your sport will provide a better product that the newspaper's sports writer.

The reason people had all these subscriptions before is because they were covering all their bases of interest. Now you can shop around each individual component. Since you're not going to enjoy as many aspects of the newspaper anymore due to more specialized alternatives, you won't value the newspaper as much and may not be willing to pay for it.