Rupert Murdoch got beat on this one: Cablevision of NY buys Long Island’s Newsday newspaper.

You might be asking what the big deal is about a New York cable company buying out a lesser-known suburban New York newspaper. Let’s take a look at the players:

Rupert Murdoch – The Fox / Newscorp media mogul currently owns the uber-popular New York tabloid, the New York Post, and also recently acquired the Wall Street Journal after a lot of discussion. He was very interested in adding one other big jewel to his NY media crown with Newsday.

Tribune – The previous owners of Newsday are currently sitting at the #2 spot behind Gannett as the largest newspaper publishers in the country. Not for long. After selling Newsday for $650 million to Cablevision, the company will drop to the #3 spot behind McClatchy, but will still have a 3% stake in the Cablevision’s new Newsday venture.

Cablevision – Obviously the big winners in the deal. But it’s still not completely clear what they plan on doing with this otherwise dying newspaper. Cablevision already owns the The New York Rangers, the Knicks, and Madison Square Garden, so maybe they’re looking to leverage their monopoly on sports coverage?

It looks like things are starting early today. In what seems like one of the best cross promotional schemes of late, the Newsday website is filling its Business Section with stories about the Cablevision network expansion and potential backlash from loyal Newsday reader.

No matter what Cablevision now does with its new find, things are not looking good for the newspaper business in general. Newsday, in particular, is big on using their classified ads section to gain revenue, but it’s a dying section of the paper. With free postings on Craigslist that are viewed with much more frequency, why would anyone want to advertise their moldy couch in a paper anymore?

Here’s another real promising tidbit for investors. A big part of the purchase is being funded by Bank of America. Do ya hear that? A big bank grew a pair! After the banks have been sitting on the sidelines/licking their wounds/biding their time (and whichever other overused Street clichés you’d care to use) for the past quarter+(with some exceptions like Countrywide), things might be looking positive again for them.

If they’re able to step out into deals again, then perhaps the financial industry as a whole isn’t the black hole it’s being chastised as?

AP: Cablevision buys Newsday from Tribune, May 12, 2008

TheStreet: Cablevision Buys Long Island’s Newsday, May 12, 2008