What I have not seen in this discussion on the media is the role that the profit motive has come to the fore since the early 90s, despite, as Roger correctly noting, the media does not generally make money from reporting.
The problem is this: rolling, 24-hour news stations and websites mean you need to be able to collect, analyze and disseminate news faster than the competition. You get it out first on TV and on the web, and people will be visiting your site, watching your channel, boosting your ratings, driving up the cost of advertising on your channel.
But to do so, you have to have exceptionally quick turnover times. The BBC, for example, gives about 10 minutes from a story appearing on a newswire agency (who do not investigate their own stories - they either rely on government spokesmen, NGO public officers, or PR releases) to research all aspects of it, reconfigure it, spellcheck it and put it up on the news site. Ten minutes.
The drive to making news a profitable industry has also involved getting rid of a lot of staff. Researchers and investigative journalists typically took the heaviest blows from these measures. So you have less people, doing more work than ever.
Given how government in the mid 90s tended to be dominated by media savvy types (Alistair Campbell, anyone?), it didn't take governments long to realise how to game the system and introduce misinformation into the news cycle. Up to 70% of all stories on any given day in the UK come directly from wire agencies, meaning in probability at least 50% of news comes from government PR types. Through the careful manipulating and leaking of information, governments can mislead the public and create popular support for measures people would otherwise be far more sceptical of - such as invading Iraq, for example. Relying on a mixture of "official releases", ambiguously worded information from government ministers and orchestrated leaks from intelligence agencies and oversight committees, it became very simple to create a sense of unease through disinformation.
Nick Davies, the reporter who broke the phone hacking story, detailed this at great length in his book, Flat Earth News, which is well worth reading.