One could imagine that the Internet could be either a complement or a substitute for traditional media, although casual empiricism suggests that it is a substitute. This new paper finds that to be the case. From the abstract:
A growing literature documents that electronic media draw consumers from traditional media markets. Less work examines how the internet has altered the audience for traditional media. Using zipcode-level newspaper circulation and market-level internet penetration, this paper provides evidence that the internet differentially attracts younger, educated, urban individuals away from daily newspapers. Greater internet penetration is associated with higher newspaper circulation among blacks and Hispanics, who thus far are less likely to connect.
But here's the part of the paper that is pretty cool--the print media has to some extent responded endogenously to this development by changing its coverage patterns to increase focus on issues of interest to those who have not switched to the Internet, as well as issues (such as investigative reporting) where the Internet is not as close of a substitute:
Evidence suggests the spread of the internet is also associated with changes in newspaper coverage, with greater emphasis on minorities, education, crime and investigative reporting.
The paper is on BE Press and I can't figure out whether this is generally downloadable or what, so I apologize if you can't get to it.