Merely raising the price is not necessarily a solution, as price increases will also drive more casual buyers of the issue away. The question then is would that price increase help enough to make it economically viable, or would it make the situation even worse than it is already? There may not be enough 'hard core' buyers to make it feasible.
Our local daily dead fish wrapper recently raised the price of the paper from 75 cents to $1. Daily circulation was around 40,000, meaning they made $30,000 a day from sales. With that price increase, as long as 10,000 readers did not stop buying the paper, they would be making the same or more money daily. Those are rough numbers, not including a number of factors, but they give an idea of what we're talking about here. The numbers for GSM must not be nearly as favorable to see it dropped rather than increased in price.
Finally, I personally won't miss it. While you can claim it is an 'inspiration' to see these models (it doesn't do anything for me really), contest modelling is a tiny niche of a niche hobby. I'm not surprised in this era of the hobby that an issue devoted to it can't survive in the marketplace here.
A final question to the forum out there - is this mostly an American phenomena (the death of scale modeling magazines?). There are quite a number of European mags out there that seem to be doing well, yet FSM is all that's left in the US. As an aside, while the Euro mags usually cover contests, it is usually done with a regular couple pages an issue, not an entire special magazine.