Because that completely replaces the front page of the news site, a page people normally visit just to find out if there are any articles worth reading. I can see how that leads to less ad impressions on the news site itself if people only visit it when they found an interesting article (and just that article) on google news.

To be fair most newspaper websites form pages I have seen have been eyebleedingly bad; stuffed to the gills with anti-patterns, obnoxious amounts of ads and some of the worst user interface designs I have seen on the internet. is it any wonder people use google instead of newspapers own sites?

For a lot of people, the headlines are all they really want to read plus maybe a snippet of a sentence or two. News outlets that expect to sell those eyeballs lose out and consider this unfair competition from Google.

Google, for its part, has been perfectly happy to remove publications from Google News at their request. Or leave entire countries.

A competitor you can shut down at any time by asking isn't much of a competitor.

I agree with you that it's an exceptionally self-serving way of approaching the subject.