I've had this debate with newspapermen before. Newspapers have 2 customers: Readers and Advertisers.
The reader side of the revenue stream is pretty well covered, but people often neglect the negative impact that paywalls have on advertisers.
Advertisers pay for eyeballs. Paywalls reduce the eyeballs on ads, making adspace on their sites less valuable. Either advertisers won't want to pay existing rates for the now-less-valuable opportunity, or they'll just go straight to Google Adwords and host their own business site that's under their own control.
Paywalls are just a faster death to the paper, making the news site less relavent both in terms of a source of news, and as a marketplace for advertising.