People who think that there are too many newspapers assume that papers are static things -- that the publications and the people who make them up can't take them in new directions or respond to market pressures.
So, yes, perhaps if we assume no newspaper will ever change, it's clear that there are too many. But if you think, as many (probably most) well-informed observers do, that papers are in the process of developing into niche products -- local newspapers becoming hyperlocal, metropolitan dailies focusing on their surroundings, and national papers and wire services becoming the exclusive sources for national and political news -- it's not so obvious that there's an incredible oversupply of them.
Let's wait and see what all these publications can do. I wouldn't pronounce their demise quite yet.
P.S. Just so I don't come off as a hopeless optimist, I do think that most newspapers will see sharp staff reductions (a combination of their financial state and the efficiencies created by new technologies) and that a decent number will probably shut down. I just don't think it's clear that there will be a ton of papers that fall into that latter category.
