Murdoch sets his sights on $400m 'Newsday'

Rupert Murdoch is looking to increase his influence on the New York newspaper market with a deal to take control of Newsday, the Long Island daily which has been put up for sale by Sam Zell's Tribune Group.

Mr Murdoch is hoping to combine Newsday with his loss-making, but politically influential, tabloid, the New York Post, but it is believed he faces competition for the business from two other New York media magnates.

Mort Zuckerman, who owns the rival Daily News, and James Dolan, who controls the Long Island cable operator Cablevision, have also been approached about making a bid.

Some analysts say the paper could fetch around $400m (£200m). Newsday is the 10th best-selling newspaper in the US, with a circulation of 387,000, compared with the New York Post's 667,000.

A bid by Mr Murdoch would come just months after the septuagenarian mogul won control of The Wall Street Journal, a must-read for the New York financial community. He has promised a revamped Journal will fight the New York Times for readers at the top end of the newspaper market.

Meanwhile, the New York Post failed to make a cover price rise stick last year and remains deep in the red. Mr Murdoch has talked with Newsday's owners about combining the printing and advertising businesses of the two papers, a deal which he said last year could turn the Post profitable at a stroke. A similar "back-office" combination, which would leave editorial control of Newsday in the hands of Tribune, might be on the table again, if an outright bid does not materialise.

Mr Zell, the property billionaire, took over Tribune – which also owns the Los Angeles Times and Chicago Tribune – last year, promising to keep the stable of papers intact.

However, the weak US housing market has contributed to a collapse in classified advertising revenues and made it harder for the highly leveraged company to service its debts.

Last week, addressing employees at The Baltimore Sun, Mr Zell signalled a change of plan. "Our goal when we started this ad-venture was to keep all the assets together," he said. "We also started with the assumption that print advertising would be down 2 or 3 per cent this year, not 18 per cent."

On Thursday, Tribune reported a fourth-quarter loss of $79m, with advertising revenue down 15 per cent. Earlier in the week, Standard & Poor's, the credit rating agency, downgraded the company's debt.