The OA is E but I am not fully convinced

Step 1: First blank
The phrase says: media report on a range of issues $\_\_\_\_$ by the demands of the readership.

If the demands of the readership limit the range, then the range is "circumscribed" (limited) by those demands.
If it were "unbounded," that would mean not limited by the demands - but then the later part of the sentence wouldn't fit logically.
If it were "sensationalized," that's about style, not range.
So B. circumscribed fits: the range is limited by what readers demand.

Step 2: Second blank
The "those who believe..." think that when a media outlet dies, the scope of news shrinks lamentably.

But the sentence says: traditional media's range is actually already limited by reader demand - so if that's true, then the demise of an outlet isn't really reducing an unlimited range; the range was already small.

That fact should discourage or rile up those people?
If you show them their belief is wrong, you'd discourage them (make them less confident in their belief).
"Rile up" means make them angry - but the logic is that the truth should upset their belief, not make them emotionally agitated in the sense of "rile up" - though it could, but the more logical SAT-style completion is "discourage" (undermine their worry).

Let's check "mollify" - that means soothe. If the range is limited, that's worse, not soothing, for someone who thinks each closure reduces range. So not "mollify."

So D. discourage fits: the fact that range is already circumscribed should discourage those who think every closure reduces the range.