It's a grey area. It's illegal under the GDPR, but some newspapers in Europe are taking the gamble and seem to be getting away with it for the time being.

I'm not sure if it's been tested in court, but there are certainly newspapers as you say that are doing this - including from quite major publishing houses. Personally I just open their pages in private browsing tabs anyway, if everyone did that it would probably kill the business model (even before we talk about uBlock).

My (non-lawyer) opinion is it's probably illegal if you're making a sham paid tier to justify working around the GDPR, and probably fine if you're a "real" paid product which offers the extra option of paying with data instead of cash. I guess in a court case it would be interesting what percentage of daily active users are on the paid tier.

Only kills the business model if they give you free reading articles.

It's specifically and explicitly illegal. You can't distinguish service based on consent, because then your consent is no longer consent, it's extortion.