Not a great business model giving all your content away free online.
Smart move to run, given the outlook. Problem is that falling fees for photogs or journalists in general change the content, 7d2 or 7d1.
One of my recent jobs was organizing a congress dealing with this: if ads get out of print newspapers, there's no budget left for investigative or quality journalism and you depend more and more on ready-made stories you copy/paste from lobby organizations.
As you pointed out, people loading content on the devices they own aren't prepared to pay for it, esp. if it's more convenient than trying to unwrap an old-school newspaper in a subway train.
With very good photogrphy gear becoming more accessible (even to me!) and even iphones producing decent pictures, there's only one way it'll go, as you described: A small team buying content and duplicating it to every media channel, while everything else is outsourced.
I just happened to see the movie "all the president's men" yesterday with the old-school newsroom, oh my, those were the days :-o