Are newspapers getting the message at last? Giving away your content for nothing, tying your entire business model to the fickle winds of consumer advertising, smacks of an ill-thought-out strategy, particularly in a recession.

The free paper is dying if not dead. Metro International, the company which established the model all over Europe, has seen its sales plummet by 11%, racking up trading losses of €20m in just one year. It has been forced to undertake a rights issue to strengthen its balance sheet and is retreating from key European markets. It has given up entirely on the United States.

In London, Rupert Murdoch is shutting his freesheet, thelondonpaper, and soon to follow will be the Evening Standard's freesheet. Here in Ireland Independent News & Media (IN&M), Daily Mail and General Trust and the Irish Times have called a halt to the battle between Herald AM on one side and Metro Ireland on the other. In their place there will only be Metro Herald.

Online, some titles are giving unlimited access to readers for free, although others are having their print circulations cannibalised at dangerous levels and will now have to come up with some kind of charging model for their more unique premium content. In the print business, the decline of freesheets is a small comfort, but a comfort nevertheless.

The crucial dynamic behind these changes is the balance between what a newspaper churns out in circulation revenues and its advertising revenues. For example total revenue at Daily Mail & General Trust is split almost evenly between advertising and circulation. The New York Times used to have a two-to-one advertising to circulation ratio; it now looks like heading towards 50:50 before the year is out and by next year circulation income will be higher than advertising income.

This shifting pattern has the obvious effect of tempting newspapers to push up their cover prices. It also tends to favour broadsheets, whose readers are more willing to bear higher prices than tabloid buyers. Either way there is a sweeping move to use circulation income to offset declining advertising revenues. It won't work fully of course, but will at least provide a cushion.

Newspaper groups are also scrapping dividends, cutting costs and coming up with ways to charge for online access. It's clear they are finally dealing with the realities of protecting their fragile revenue streams. Yes, circulations are dropping, but not as fast as advertising. Who could have thought it? Readers are more loyal than brand managers.