Get small fast, hire hackers, leverage your position as a middle-man between a local audience and local businesses online, and capitalize on the decades of valuable content sitting in your archives. Forget breaking news in print, focus on investigative stories that no one else is going to do but some will pay for. Reduce your publishing cycle to one or two times a week. Adopt a "can't beat 'em, join 'em" mentality when it comes to Craigslist and other local competitors. Launch your own local self-serve ad network. Map your area to an insane depth and resell that content to local businesses and utilities. Watch what Google is doing with Google Local and Street View, mimic and surpass.

All of this is possible, but the change is so dramatic that most newspapers will not do it or will go into shock and instead of focusing on long-term recovery will destroy the one asset they have (a local audience) by adopting fast-money tactics (obnoxious banners and spammy marketing).