That may be true for larger papers, such as the ones that have targeted newspapers for suburbs but it isn't necessarily true for small town newspapers. Our local paper ran a subscription special, 6 months for $10. There is no way they can be making money. If every family in the three surround towns subscribed at the rate they offered, they would still operate at a loss. They did close their offices for a short period of time, and have recently started publishing again. As much as I dislike the NY Times, I would hate to see the loss of our local paper.
That's why it is a scandal when it is discovered that papers are inflating their subscrition base. It means that they were defrauding the advertisers.