It's a cultural thing. In Sweden, where I live, there have been a substantial change from broadsheet to tabloid.
In Sweden (and perhaps other countries as well) the broadsheet format was introduced because taxes was based on the number of pages. Thus, fewer but larger pages led to a lower tax for a copy of the newspaper.
More reading about the change in Sweden can be read at http://mindpark.se/mindpark-49-tabloidtisdagen-%E2%80%93-5-oktober-2004/ (in Swedish).
In short: the newspaper community was conservative, but the readers complained about the big format, so after a lot of resistance, newspapers changed.
Since paper newspapers are slowly fading away in favor of Internet-based news services and the change in format is rather expensive, I would say that there is no incentive to further reduce the size of newspapers. A book-sized newspaper would reduce the differences between tablets and newspapers even further, up to a point where they will simply be replaced altogether by tablets and other devices due to the benefits of digital distribution.