I agree with Matt, if you could simplify the whole experience of publishing an online newspaper or magazine and make it a hosted solution, I think you could make a killing. I know for a fact several of my previous clients would have paid a nice premium for something like this.

Well, I could build it as a hosted service, but that means I don't release the code. I'm worried that a hosted service won't be able to achieve critical mass because, in this attention economy, it's difficult to get word out there.

I figured if I make it open source, it will spread faster and further.

Wordpress did/does both and so can you.

+1

It's weird how ideas come up at the same time. I was reading the Santa Cruz Sentinel website, and thought how crappy their online offering was.

This is needed and is a nice niche market.

Nah, I believe same ideas arise all over the world all the time, but we usually only know about our own :)