To those interested in what is occurring worldwide with free newspapers, I think you will find this article informative.
One point he makes here.
2. The more newspapers rely on advertising, the
more vulnerable they are. This explains why free
papers and paid newspapers that rely mostly on
advertising (like in the US) are hurt more.
This is exactly what we are seeing now in Australia, the more a publication depends on advertising the more affected it is by the current economic conditions.