By MATTHEW KARNITSCHNIG, SHIRA OVIDE and VISHESH KUMAR

Tribune Co. announced a deal to sell its Long Island newspaper Newsday to Cablevision Systems Corp. for $650 million, in a move that will help relieve Tribune’s debt.

The bid from the Long Island-based cable operator bested matching $580 million offers from News Corp., which owns the New York Post and The Wall Street Journal, and New York Daily News owner Mortimer Zuckerman. News Corp. had had an informal agreement for Newsday, but was unwilling to match Cablevision’s offer and revoked its bid on Saturday.

“It is both an honor and privilege to return Newsday back to Long Island-based ownership after nearly 40 years,” Cablevision Chairman Charles F. Dolan said in a prepared statement. “We are committed to maintaining Newsday’s journalistic integrity and important position in the market place.”

Under the agreement, Cablevision will have about 97% and Tribune about 3% of the equity in a partnership that owns Newsday. The deal was expected to be structured as a joint venture for tax reasons.

Tribune Chairman and CEO Sam Zell said: “This agreement enables us to maximize the value of Newsday and still retain an interest in this valuable asset.”

Cablevision will contribute newly issued bonds with a $650 million fair market value on the contribution date, with Bank of America Corp. providing that amount of senior debt financing. Chicago-based Tribune will receive $612 million in cash, and an equity stake in the partnership valued at $20 million. It will also get $18 million as prepaid rent on certain facilities used in the business.

The Newsday businesses will report to Cablevision Chief Operating Officer Thomas Rutledge.

Clinching the deal puts Cablevision in control of Newsday and related assets, including the free New York City newspaper amNew York.

Newsday’s sale reflects the troubles of the newspaper industry. Mr. Zell, who led an $8.2 billion buyout of Tribune in December, had said he hadn’t wanted to sell any of the major papers. But conditions worsened. However, the deal also shows how certain local buyers see strategic value in individual newspapers.

The transaction will help Tribune dent nearly $13 billion of debt largely stemming from a December deal to go private. Tribune owes about $650 million in debt repayment before the end of this year. The company also faces rising interest expenses — $263 million in the first quarter alone.

With advertising declining quickly at Tribune’s newspapers, the company may face pressure to unload other properties to meet debt and interest payments next year. It owns papers including the Los Angeles Times and the Chicago Tribune, and television stations. It is selling its Chicago Cubs baseball team.

While a Newsday deal will ease Tribune’s debt load, the company will lose an important asset. The daily and its related businesses had nearly $500 million in revenue last year, about 10% of Tribune’s revenue, according to the company’s annual report filed with the Securities and Exchange Commission.

For Cablevision, the Newsday acquisition provides an outlet to cross-sell advertising and promote its own services and properties in the New York area. As the company’s cable, telephone and Internet offerings face competition from Verizon Communications Inc., Cablevision seems to be to doubling down on its local focus in an effort to retain customers. Last week, the company announced it would spend more than $300 million to build out a local wireless service.

Still, Cablevision has faced skepticism about its pursuit of Newsday. Some analysts have argued it would be better for shareholders if Cablevision were to return the cash it generates in the form of stock buybacks.

Cablevision could use its footprint in Long Island and adjacent areas of New York City to increase the newspaper’s circulation by about 100,000, predicts Kevin Kamen, chief executive of media appraisal firm Kamen & Co. Newsday currently has a weekday circulation of about 380,000.

The Newsday deal could mean changes in the New York media world. With the inclusion of Newsday, News Corp. could have improved the financial performance of the New York Post, which was expected to combine advertising, printing and other functions with Newsday. Now the Post is expected to be more aggressive in cutting costs and finding new revenue streams. News Corp. Chairman Rupert Murdoch has said the company plans to double the cover price of the paper to 50 cents. He also said the paper had taken steps that would save more than $20 million in costs this year.

A Newsday takeover by either News Corp. or Mr. Zuckerman also was expected to face more regulatory hurdles than a Cablevision deal. Both rivals could have faced tougher antitrust scrutiny, given their existing New York newspaper holdings. Because of News Corp.’s ownership of two New York TV stations, a Newsday deal might have made it more difficult for the company to receive waivers from regulations that typically bar ownership of local newspapers and TV stations in the same market.

For his part, Mr. Zuckerman seemed unfazed by the outcome. Reached at his home Sunday, Mr. Zuckerman said he was taking a piano lesson, adding that his daughter had just expressed admiration for his rendition of Andrew Lloyd Webber’s “Memory.”

 By Gillian Wee and Dan Hart

New York – News Corp. withdrew a $580 million offer for Long Island newspaper Newsday, three days after its chairman, Rupert Murdoch, said talks with owner Tribune Co. were in a “pretty advanced stage.”

News Corp. spokeswoman Teri Everett said in an e-mail the bid had become “uneconomical,” while declining to elaborate. Cablevision Systems Corp. has offered $650 million for Newsday, a person familiar with the bid has said. Cablevision spokesman Charlie Schueler declined to comment today.

“Of course, they’re overpaying,” said John Morton, an independent newspaper industry analyst in Silver Spring, Maryland, in a telephone interview commenting on Cablevision. “Murdoch was overpaying. If somebody didn’t have a hometown interest, this paper would’ve sold for $400 million to $450 million, possibly $500 million.”

Murdoch, who completed News Corp.’s $5.2 billion purchase of Dow Jones & Co. in December, had planned to combine Newsday’s printing and distribution operations with his New York Post. The move would have helped News Corp. increase cash flow by $100 million a year, Murdoch said on a May 7 conference call.

Stable of Newspapers

The 77-year-old billionaire sought to add Newsday to a stable of more than 110 newspapers that stretches from Sydney to New York to London. He began building News Corp. in 1953 after inheriting a daily newspaper with a circulation of 75,000 in Adelaide, Australia. Today, News Corp. also includes satellite television, cable and broadcast TV stations and film studios.

A News Corp. purchase of Newsday would have triggered a review by the U.S. Federal Communications Commission, which enforces restrictions on common ownership of daily newspapers and broadcast stations in the same market.

Sam Zell, who took control of Chicago-based Tribune last year, is cutting jobs and selling assets to repay debt as print advertising and circulation decline. Tribune is the second- largest U.S. newspaper publisher after Gannett Co.

The owner of the Los Angeles Times and Chicago Tribune has $1.85 billion in debt maturing by the end of 2009. The company also plans to sell its Chicago Cubs baseball team and the Cubs’ home stadium, Wrigley Field.

Tribune spokesman Gary Weitman declined to comment when contacted by Bloomberg News.

Mortimer Zuckerman, owner of the New York Daily News, also has made a competing offer of $580 million for Newsday.

News Corp. Class A shares, down 14 percent during the past year, fell 35 cents to $18.49 yesterday in New York Stock Exchange composite trading.

The Wall Street Journal reported on the bid earlier.

 By Juan Carlos Perez

Responding to the momentum around data portability, MySpace has launched its own “Data Availability” effort with big-name partners Yahoo, eBay, Twitter, and fellow News Corp. unit Photobucket.

The initiative’s goal is to let MySpace members share their public profile data outside of the walls of the social-networking site.

“Today, MySpace no longer operates as an autonomous island on the Internet, by allowing the data that creates the engaging and collaborative experience that is MySpace to now be shared across all the sites our users visit,” said Chris DeWolfe, CEO and cofounder of MySpace, during a press conference.

Enter Information Only Once

As the popularity of social networks keeps rising and people set up multiple profiles in such sites, they are demanding the ability to carry their data, content and connections from one site to another, so that they don’t have to re-enter all that information again.

This is what the MySpace initiative aims to address, DeWolfe said. “Your personal online social profile will become your Internet address. Social activity isn’t about creating a walled garden. Socially dynamic Web destinations should be portable and allow users to import and export aspects of their platform,” he said.

The functionality will become available at some point in the coming weeks to both users and third-party sites. At the core will be privacy and security controls so that users retain tight control over what data they share and in which site.

“The initiative is founded first and foremost on allowing users to have comprehensive control over their own content and data. Users will have complete control over what information they share and who they share it with,” said MySpace Chief Operating Officer Amit Kapur.

Outside of MySpace

Data and content that users will be able to carry outside of MySpace will include public basic profile information, like their bios, interests, favorite music and movies, as well as their photos and videos.

Changes made to these elements on their MySpace profiles will be dynamically updated on the third-party sites. This also includes decisions to drop a site from their network of updates, which is key to privacy and security principles, MySpace officials said.

“Rather than populating new profiles and updating information across every Web site … users can now update their status on MySpace and dynamically share that information with the other sites they care about,” Kapur said.

MySpace will make this functionality available not only to large Web sites like the initial partners, but to sites of all sizes, including “mom-and-pop” ones with little technical know-how.

The main tool for MySpace members will be a control panel where they’ll be able to manage their “data availability” parameters. The granularity of the controls in this panel will increase over time. Meanwhile, MySpace will also release client-side and server-side tools based on open standards for third-party Web sites that want to participate.

Part of the initiative includes MySpace’s joining of the DataPortability Workgroup. Data availability is MySpace’s first step toward embracing all aspects of data portability, said Jim Benedetto, MySpace’s senior vice president of technology.

Asked whether Facebook would be welcome to participate in this initiative, DeWolfe said that the rival social network would indeed be able to participate, as well as any other site on the Web that’s interested.

By Michelle Quinn and Dawn C. Chmielewski

SAN FRANCISCO — Apple Inc. has surpassed Wal-Mart to become America’s No. 1 music store, the first time that a seller of digital downloads has ever beaten the big CD retailers.

Apple sold more albums in January and February than any other U.S. retailer, market research firm NPD Group said Thursday, underscoring how the music industry is on the front edge of a digital media shift that is upending businesses as diverse as bookstores and video game makers.

U.S. consumers still buy more CDs than digital downloads, but the gulf is narrowing rapidly. Only five years after launching its iTunes digital store, Apple has dominated the fast-growing download market so completely that it jumped ahead of individual CD sellers such as Wal-Mart, Best Buy and Target.

“It’s a major milestone,” said Tom Adams, president of consulting firm Adams Media Research. “It is the first instance of an electronic venue surpassing a [bricks-and-mortar] retail venue for any kind of media delivery.”

Many industries are feeling the pain. Bookstores are shutting down, unable to compete with online sales and huge retail chains. Newspapers are laying off thousands of employees as advertisers and readers move to the Web.

Television networks are making more of their shows available online to reach people at their computers and prevent advertisers from abandoning them for other forms of online entertainment. Video game companies and other software makers are selling more of their products as downloads rather than CDs.

But the music industry has been rocked by the digital transition much harder than TV, movies and other entertainment media. CD burners made it possible for anyone to create playlists of favorite songs, hastening the shift from albums to singles. Songs could be downloaded faster than movies or TV shows, both legally and illegally. And devices such as Apple’s iPod made songs easy to listen to anywhere.

“We are thrilled,” Eddy Cue, Apple’s vice president of iTunes, said in a statement.

NPD Group, based in Port Washington, N.Y., did not release figures on how many albums each company sold. It said it counted every 12 singles sold as one album, and that Apple probably received a boost during the two months by people cashing in iTunes gift cards — which Wal-Mart and other retailers also sell — received during the holiday season.

But NPD Group analyst Russ Crupnick predicted that Apple’s music industry power would only continue.

“If you look at what is happening to the CD and the growth of the digital side, it’s a pattern that is going to hold,” he said.

Apple launched iTunes in 2003, creating an online business model for a music industry that was struggling with plummeting CD sales and online piracy. In addition to selling albums, iTunes offered hundreds of thousands of individual songs for 99 cents each. That was ideal for customers who wanted to buy hot singles or old favorites without buying the whole album.

Apple doesn’t disclose financial results for iTunes. But in the first fiscal quarter ended Dec. 29 it reported $808 million in revenue for a category that includes iTunes store sales, a 27% jump from the same quarter the previous year.

The Cupertino, Calif., company has pushed into other entertainment markets in the last few years, offering downloads of TV shows and movies for sale and rent. It’s trying to capitalize on the digital transition that’s sweeping through those industries, albeit more slowly than the music industry.

Like other TV networks, CBS has put many of its shows on the Web and sells them through iTunes and other download stores. Quincy Smith, president of CBS Interactive, said he believed that the DVD market wasn’t going to vanish any time soon, but he added that the network could cater to a different demographic by offering shows through iTunes and Wal-Mart.

“I think it’s a sign of things to come, if you believe in evolution,” Smith said.

Consumers already are making the shift. In the first 18 weeks of the fall TV season, Disney-ABC Television Group said viewers watched more than 124 million episodes of its shows on the Web — an increase of 178% over the same period a year earlier.

In 2007, 9% of all broadcast and cable network viewers watched TV shows on their computers, up from 6% the previous year, according to Convergence Consulting Group. The Toronto-based market research firm predicted that 23% of TV viewers would watch episodes online by 2010.

Advertisers haven’t flocked to the Web as quickly as viewers. Their spending online last year was only 2%, or $1.4 billion, of the total spent on all broadcast and cable TV advertising, Convergence said.

That highlights the central challenge facing many media companies — the switch to digital does not generate the same revenue as traditional means.

Convergence’s president, Brahm Eiley, said TV and movies would move online more slowly than music because the experience of buying, downloading and watching video on a computer isn’t better than simply turning on the TV.

“It’s going to be a long time before people give up watching video on TV for their computers,” he said.

Although Apple has given the music industry a new way to sell songs, it has become so powerful that music companies have sought to help create and fortify potential iTunes rivals.

The newest of those is MySpace, the social networking site owned by Rupert Murdoch’s News Corp. Apple announced its ascension to No. 1 on the same day that MySpace revealed plans to launch a competing service. MySpace Music will let users sample and download music from three of the four major record labels, as well as buy merchandise and concert tickets.

By Alex Woodson

NEW YORK — Generate, the digital production studio run by former WB Network CEO Jordan Levin, has secured $6 million in financing from Velocity Interactive Group, the new-media investment group run by former News Corp. and AOL execs.

Generate, which manages clients and creates original content, was founded two years ago by Levin and had an exclusive production contract with MTV Networks, which yielded Web series “Home Purchase Club” on VH1’s Vspot among other offerings. That agreement, though, ended last fall, and the studio is looking to spread its content through different Web destinations or traditional media.

“We’re talking with all platforms,” said Levin, Generate’s CEO. “We view our job as creating quality content that uses digital primarily to incubate and feed ideas and tying advertisers in as partners to ride alongside that distribution strategy.”

Former Fox Interactive Media president Ross Levinsohn, a partner at Velocity along with former AOL CEO Jonathan Miller, said Levin has proved that he’s able to “produce cheaply and manage efficiently,” a must in the Internet world, as evidenced by the relatively small $6 million investment.

“It could set a new model for all media, and he’s willing to try that,” Levinsohn said. “He’s a risk-taker, and in any industry that’s trying to reinvent itself you need risk-takers.”

Levin’s management team includes former CAA executive Jared Hoffman and “Bernie Mac” producer Pete Aronson.

Velocity also recently invested in online video ad company Broadband Enterprises. Levinsohn said that stake, along with the one in Generate, “certainly resonate together.”

Generate also unveiled a new production slate. “Pink — The Series” is a follow-up to a Web show that bowed in September and has garnered more than 4 million views; “LaQuisha” is based on a character created on L.A. radio station KROQ-FM; and “Knockers” is a comedy show from sketch group Good Neighbor.

Generate clients include Trevor Moore from Whitest Kids U Know, a comedy troupe with a show on IFC. The company is also one of the producers of the “Andy Milonakis Show.”

By MICHAEL LIEDTKE

Facebook Inc. has raided Google Inc. to hire a new chief operating officer, providing the popular online social network with more seasoned management and advertising savvy as it strives to make more money without alienating its audience.

Sheryl Sandberg’s defection from Google, announced Tuesday, represents a coup for Facebook just three months after it suffered a humiliating setback in its effort to inject more commercialism into its fun-loving Web site.

As Google’s vice president of global online sales and operations for the past six years, Sandberg helped build the Internet search leader into one of the world’s most prized companies. She also helped set up Google.org, the Mountain View-based company’s philanthropic arm.

Before joining Google, she served as the U.S. Treasury Department’s chief of staff during the Clinton administration.

With Sandberg’s hiring, effective March 24, Facebook fills a void created last summer when it reassigned its previous chief operating officer, Owen Van Natta, to chief revenue officer. Van Natta left Facebook last month.

Besides helping steer Facebook’s expansion, Sandberg, 38, could serve as a mentor for the Palo Alto-based company’s 23-year-old founder and chief executive, Mark Zuckerberg, to whom she will report directly.

Sandberg said in an interview that she is just one of several veteran executives who can act as a sounding board for Zuckerberg. She also pointed to Gideon Yu, who became Facebook’s chief financial officer in July after stints with Yahoo Inc., Google’s YouTube and a venture capital firm.

“Mark is inspiring,” Sandberg said. “He has more clarity and vision than just about anyone I ever met.”

In an interview, Zuckerberg said he is counting on Sandberg to minimize Facebook’s growth pains.

“Anyone who has ever worked with her raves about how she helped make them better managers,” he said. “She has a terrific track record.”

Sandberg’s departure from Google comes amid widening fears on Wall Street that the advertising sales propelling Google’s growth are bound to slow as the U.S. economy flirts with a recession.

Worries about a general economic slowdown are the main reason Google’s market value has plunged about 35 percent, or $75 billion, already this year.

Google shares dropped to a new 52-week low of $435.78 Tuesday before bouncing back to close at $444.60, down $12.42.

“I am certainly not leaving Google because there is anything wrong there,” Sandberg said. “I think Google’s best days are still ahead.”

She said she simply couldn’t turn down the chance to help Facebook shape the social networking craze that has swept up millions of teenagers and young adults.

Facebook’s audience has more than tripled in the past 11 months to 66 million users, making it the second largest social network behind News Corp.’s MySpace.com.

With 500 employees and more than $100 million in annual revenue, Facebook is far smaller than Google, which has nearly 17,000 employees and more than $16 billion in annual revenue after less than a decade in business. Facebook hopes to double its payroll to 1,000 employees by the end of this year, Zuckerberg said.

Facebook’s rapid rise since its inception four years ago has caused some analysts to wonder if the startup could blossom into the Internet’s biggest success since Google went public in August 2004.

Having already rebuffed a chance to sell Facebook to Yahoo Inc. for $1 billion in 2006, Zuckerberg had indicated he hopes to take his company public in 2009 or 2010.

Microsoft Corp. stoked the exuberance about Facebook late last year by paying $240 million for a 1.6 percent stake that valued the privately held company at $15 billion.

But Facebook stumbled badly shortly after winning Microsoft’s stamp of approval by rolling out a new advertising system that infuriated thousands of its users and raised questions about Zuckerberg’s judgment.

The marketing tool, called “Beacon,” tracked Facebook’s users’ purchases and actions at dozens of Web sites and then broadcast the data on the pages of their listed friends within its social network. After days of protests, Zuckerberg finally apologized and made it easier for Facebook users to block Beacon.