Newspaper staffs are shrinking and niche Web sites are popping up all over the place.

Newspapers and staffs should get physically smaller and only cover what is in their niches. Some papers have technology sections, movie review sections, health sections, etc. Those are all non-local niches.

A newspaper will get killed trying to compete in that space. Why would I want want to read tech news in a newspaper when I can get better and more current news from sources like Engadget and CNET? I knew about Apple’s iPhone SDK announcement while it was happening. Why would I want to read about it the next day? (Hint: I don’t.)

Why should I care what a local movie reviewer has to say when there are niche sites like Movies.com that provide much more in depth coverage and useful features like movie times and upcoming release dates?

Mens Health/Womens Health are both way better than any health and fitness section I have ever seen in a newspaper. If you’re not ESPN or Sports Illustrated, you should probably not be covering national sports. I know I’m not reading it.

But there are things that Mens Health, ESPN, Movies.com, etc can’t do that a local newspaper can do: namely cover a local community. Many people call it hyper local, but I think hyper local is where our focus should have been all along. Local is why people buy the local paper.

I know of a sports editor for a weekly newspaper that uses his sports column to write about national sports issues. There are countless columnists and talking heads who do a much better job. People aren’t reading the local people to read his thoughts on national sports, especially since he doesn’t even cover or travel to national sporting events.

I know of a small daily newspaper that asked a copy editor to review cell phones for a one-time feature. Not only is she not a technology writer, but she is also not a writer in general. If someone wants to know about cell phones they’ll go to one of the many strong technology Web sites and blogs (by people who cover technology for a living).

This is why newspapers should get smaller. Getting smaller will make them more focused. I don’t just mean cutting a few pages here or there or trimming the width of the paper. I mean cutting out whole sections and positions that make no sense for a local publication.

The Web is the home of the niche audience. The only niche that a newspaper has is its local market. Stick to it.

Many newspapers have been shrinking in recent years, yet they are still trying to cover as many beats and put out similar levels of copy. Does anyone honestly believe that writers and copy editors will magically be able to turn out the same quality of work while doing much more of it each day? No one with a brain does, and this is why newspapers are constantly printing mistakes and running embarrassing corrections.

Quality will trump quantity any day of the week. And maybe what we know as a local newspaper will have to change drastically. Maybe we’ll need to completely blow up how we cover news in order to cover it better.

I’m fine with that because what newspapers have been doing hasn’t been working.

Trent Reznor rejoiced when his contract with a major label lapsed.

He felt he could finally make new kinds of music and make music for himself and his fans — not just music that his labeled wanted. Nine Inch Nails’ latest album Ghosts I-IV embodies the bands newfound freedom. The album, from a popular industrial rock band, is completely instrumental. It’s closer to a classical music album than a typical rock album.

It’s the kind of music that no major label would ever produce, especially since it weighs in at 36 tracks and nearly two hours of music, and you won’t see Ghosts in typical stores like Best Buy. If you want it, you have to order it online.

NIN is offering the first nine tracks from Ghosts as a free 320 kbps download (higher quality than iTunes or Amazon sells music in). The whole album is available for download for $5. That may seem really cheap, but if an artist doesn’t have a label taking the vast majority of revenue, an artist can charge a lot less and still make a nice amount of money.

Ghosts is also offered as a $10 two-CD set that also includes digital files (either MP3s or lossless; your choice). But things get really interesting beyond that: NIN is offering two deluxe versions, one selling for $75 and the other $300. Sounds pretty crazy, right?

That $300 package is the kind of package that a major label artist could never release: It comes with all the music on standard CDs, a Blue-Ray DVD with all the audio in high def, a data DVD with every song in multitrack format so they can be remixed and reconstructed in audio editing programs like Garageband or Logic, three booklets of images and art and more. Plus every package is individually numbered and signed by Trent Reznor himself.

The $300 version sold out of all 2,500 copies in less than a day. That’s $750,000 on day 1 from only one of four distribution options NIN set up. The $75 version also offers the data CD of multitrack songs, which I’m willing to bet will be rather popular. Imagine being able to completely change an artists music (the guitars, vocals, drums, bass, effects, etc are all in separate tracks) and make your own music.

This album would have never been released on a major label, and that’s because it will probably never be a big enough commercial success to ever make enough money to spend millions on music videos and marketing. But on the Internet, you don’t need millions in marketing and music videos — you just need a Web site.

And yet NIN will make millions off of this latest release. That’s because they’ve completely left behind old distribution models and tried something new.

The point is there is money — a lot of money — to be made in new, online distribution models. Don’t let the past slow you down or hold you back.