The regional press business model is becoming 'uneconomic' and has been made worse by the growing power of search engines and aggregators, GMG chief executive Carolyn McCall has warned.
The Guardian Media Group boss has made an urgent call for the government to intervene to save the local newspaper industry - and added to demands for a rethink of the competition laws governing the local media.
"Independent local regional journalism and access to local information ... is certainly under threat," McCall told the Westminster Media Forum in London this afternoon.
"It's not just about migrating revenues, it's about the entire business becoming uneconomic as a result of convergence."
She added: "The current model for the provision of quality local news and journalism is becoming uneconomic - reducing the incentive for commercial players to invest.
"Regulatory intervention is absolutely required to address this."
McCall called on the government - which is about to produce a major report on the future of the media - to completely rethink the Office of Fair Trading ownership rules governing the local press and radio.
But she added that this move, which has won the support of former Johnston Press chief executive Tim Bowdler and Trinity Mirror chief Sly Bailey, was merely a "step in the right direction" and was unlikely in itself to be "the entire situation".
"There is a need for further consolidation within the local and regional press. That could certainly be a solution," McCall said.
"We would like [communications minister] Stephen Carter to get the OFT to relook completely at this in light of current market conditions."
'Search engines do not invest in content'
Online news aggregators such as Google News provided sites such as Guardian.co.uk with "enormous traffic", McCall said, but this was becoming increasingly difficult to make money from.
"The display [advertising] model is extremely difficult. A year ago people would have been confident about saying there was a display model going forward online," she said.
"At the moment it's becoming a commodity. What you can charge is unbelievably low."
McCall added: "The government really needs to think seriously about the effects of aggregators.
"If this is not on their agenda it will be difficult to put in place the building blocks for a successful digital economy."
Keeping the BBC in check
McCall welcomed the BBC's offer to create partnerships with other media groups – sharing technology, facilities and some non-exclusive news footage to alleviate rivals' funding concerns.
The corporation has already struck a deal with the Guardian's online rival, Telegraph.co.uk, to provide more BBC content on the second-ranked national newspaper website.
But McCall said the corporation needed to provide "more clarity" on exactly what was on offer – and how any sharing regime would work.
She also joined the Newspaper Society, Trinity Mirror chief executive Sly Bailey and shadow culture secretary Jeremy Hunt in questioning the independence of the BBC Trust - the governing body tasked with holding the corporation to account and keeping its growth ambitions in check.
"We believe that the BBC Trust needs to be a credible regulator by proving its oversight, becoming much more transparent and demonstrating its independence from the BBC executive," McCall added.
"We find it difficult to see how the Trust can simultaneously regulate, champion the BBC and set BBC strategy."