• by Erik Sass  @eriksass1, May 5, 2008

Rupert Murdoch may find it more difficult to acquire Newsday than he first thought. After it was revealed last week that he made a deal to buy the newspaper from Sam Zell's Tribune Co. for $580 million, a bevy of rival suitors has appeared. One--Jared Kushner, a real estate magnate and owner of the New York Observer--has already bowed out. But that still leaves a three-way bidding war between Murdoch, Mortimer Zuckerman, owner of the New York Daily News, and Cablevision.

Zuckerman put in his matching $580 million bid last Friday, arguing that he didn't need to bid the price up because Tribune should find his offer attractive for other reasons--namely, that it won't fall prey to regulatory interference, as Murdoch's bid might.

Murdoch already owns two New York City newspapers and two TV stations, technically violating a 1965 Federal Communications Commission rule that forbids this kind of cross-ownership in the nation's top 20 media markets. Murdoch has received waivers from the FCC in the past, exempting him from this rule, but with each new property, the hurdle gets higher.

(Murdoch's New York media empire would also be in violation of the revised FCC rule, adopted in December 2007, which allows cross-ownership of just one newspaper and one TV station per market. However, this rule change is mired in controversy, and may be blocked by the Senate.)

Now Cablevision is making its own $650 million bid--upping the ante for the first time, according to a report published recently in Newsday, citing sources close to the auction process. Cablevision made the bid by itself, opting not to cooperate with Kushner, but is expected to seek a partner in Long Island to manage the paper. However, Murdoch is also expected to up his bid.

So why the struggle for Newsday, given the well-publicized woes of the newspaper industry?

Ken Doctor, an analyst with Outsell, Inc., says "each of the buyers is interested because of its value in combination with something else." For both Murdoch and Zuckerman, it would allow them to cut costs on printing and distribution, while achieving substantial ad synergies with a bigger metropolitan footprint. Currently, Murdoch is said to be losing about $50 million a year on the New York Post, but ownership of Newsday would turn that into a $50 million profit.

Doctor added that for both moguls "there's a defensive rationale too, not wanting your cutthroat competitor to get a leg up on you by getting Newsday."

Meanwhile, Cablevision founder Charles Dolan wants to integrate the Newsday brand with his cable TV business--an idea "we're seeing more and more of," Doctor said, especially as broadband penetration increases and Internet video grows in importance. "You can use the Newsday brand beyond Long Island, and go metro-wide with that," incorporating its content into both cable TV and Internet video channels.