But remember one of their largest costs is also disappearing. Newspapers almost certainly lost money per copy by selling it for 50¢, and made up for it by selling ads. The problem will be selling that same metaphor of "copies" or subscriptions, when each additional subscription costs them next to nothing.
But the real cost was never the production of the physical newspaper - it was always centered on content. Content really hasn't gotten any cheaper to produce, though... the fact that they're saving a few pennies a copy (that they used to sell for money) by distributing their content for free online is really little comfort to them I'm sure.