I partially understand bailing out industries like automobiles, insurance, or banks. These are services that should be thriving because people need them, and they need to thrive because much of the financial system in this country is based on those companies succeeding. I may not agree with the method, but I understand where it comes from.
Newspapers are dying because capitalism favors the Interwebs. People have found a better alternative to print news, and they are flocking to it. It's not only the quality of Internet news sources that are drawing away subscriber; most Internet news is free. Free is a powerful marketing tool. Newspapers are therefore put in a situation that every Internet-affected industry has been in: Adapt or die. If you can't be free, you need to find reasons for people to pay you for your services. At this point, there is nothing in my local newspaper that I wouldn't be able to find online, free of charge. Until my newspaper provides a service I can't get somewhere else for free, they don't deserve my subscription.
That being said, why on Earth would you bail them out? It would just keep them afloat for a few more years, and they would still eventually sink. It's a perfect example of a situation where throwing money at something doesn't fix the problem. The only way to save the newspapers is to improve the service provided. As of now, aside from a few papers offering online subscriptions, I haven't seen any novel ideas that will revitalize the industry. I'm not sure there are any. I believe that the print media is an old model that will fall out of the public interest naturally. It is the job of the executives to find profit elsewhere. Bailout money won't stop the Interwebs.
Some say that this is Obama repaying the paper media for largely supporting him in the elections. I say that it is a much less juicy issue. Newspaper magnates are simply in denial that paper is going out of print, and that newspapers will soon be old news.