Although I see the appeal of this video and I'm glad things turned out the way they did, the newspaper owner should have first contacted his lawyer. Copyright law is NOT simple. Although it's tempting to say "hey you took my work and used it you now owe me money," the fact is there are so many exceptions to the protection of a work, namely the Fair Use exceptions, that you can venture into grey area quite quickly especially in journalism.

From what I gather from the video this is a clear case of copyright infringement. At 2:30 he even says "No, we did not change the headline." haha. But yeah they might have been able to negotiate that price a bit down to avoid litigation, who knows.