It's not about distribution. Much like ordering a book from Amazon, buying software, or going to see a movie, distribution is typically not the most relevant cost.

I think the NYTimes is one of the best bargains out there, and lucky for those who don't pay the benefits spillover to other journalism, especially the blog/twitter world.

If you get the same news, and you were happy with what you were paying to get high quality news (you're not buying a sheet of paper, you're buying the news), then what's the problem?

Why should moving to digital mean reducing the price versus print?

Perhaps the NY Times should keep the margin difference as profit, helping to restore their financial condition from the recent disaster it has been, so they don't have to go crawling to Carlos Slim again. Building up their financial position would assist in their independence as a news source.

Perhaps the NY Times should put that margin back into the business, and create more / better content, thus more than justifying the price staying the same.

Either way, the argument in favor of reducing prices just because of cheaper distribution, is not inherently a good one.

Does the printed edition have videos? Real time updates? RSS?

You're not paying for distribution (ok, you are, but not very much). You're paying for the content to be created.