This will seem like an odd stance to take, since I help out a lot with a high school and college newspaper, but I always shrug my shoulders when I hear news reports about people under 25 and under 30 not being interested in the newspaper. Shockingly, kids this age are also not interested in owning minivans or eating caviar, yet both of those industries seem to be surviving. Only the newspaper industry seems to be frantically afraid of not appealing to this demographic.
The argument that this segment is important goes along the lines that if they're not reading now, they won't be reading in their 30s. This will create a downward spiral of readership that will result in newspapers toppling over the cliff.
As a result, this leads to a fracturing of the news product that just creates a garbled mess that nobody likes. I've always found that the worst features a newspaper does are when it tries to be "hip" and cover a subject it has absolutely no grasp, or worse, if it just responds to hype or terror stories about drugs. The most prominent example of this would the craze about reporting on "pharm parties" as if they were real.
Instead of trying to diversify the product, newspapers should stick to what they do best: Deep, investigative analysis of local issues, and providing content that can't be found in other medium.
As far as the kids go, don't worry so much about them. Here is a dirty little secret: If I wasn't involved in newspapers, I'm not sure how much I would have read them either. If you're under 30, you probably don't own property that is effected by a new property tax, or have a good enough job to care about the tax rate, or be in a stable enough financial situation to contribute to the library drive. You are also trying to jostle time away from studying, sports, or the eternal struggle of under 30 relationships.
Newspapers, just be patient. When young people start acquiring these things, they will naturally become more curious about the underlying systems that fuel them. Until that time, targeting stories at the demographic seems like much ado about nothing.
The picture is from this site here. See? I still know how to source! Journalism is obviously alive and well.