Murdoch Concedes in the Fight for Newsday

Rupert Murdoch has abandoned his $580m (£300m) attempt to buy Newsday in an about-turn likely to relieve campaigners pressing for diversity in US media ownership.

Murdoch's News Corporation withdrew its bid for the Long Island daily over the weekend because it was unwilling to match a $650m offer from a cable television operator, Cablevision. "It became uneconomical for us to continue," said a News Corp spokeswoman.

A daily tabloid with a circulation of 387,000, Newsday has a largely blue-collar following on Long Island and in New York's outer boroughs. The paper is being sold by Chicago-based media group Tribune, sparking an energetic bidding battle.

A third potential buyer, the Daily News owner Mort Zuckerman, has offered a similar figure to News Corp, but Cablevision appears to be the favorite.

Murdoch wanted to combine Newsday's printing and back office operations with those of his rival paper, the loss-making New York Post, to provide annual cashflow benefits of $50m.

News Corp's decision is an abrupt change of heart. When asked about the Newsday offer in a conference call with reporters on Tuesday, the Australian-born media mogul said: "I don't think Cablevision will prevail. Just wait a couple of days, please."

The prospect of News Corp buying Newsday dismayed press advocacy groups, which pointed out that Murdoch already owns the Wall Street Journal and the Post, plus two leading television stations serving the New York area.

Even without Newsday, the media group's position in the New York market has been permitted only through special waivers granting News Corp exemption from the Federal Communications Commission's restrictions on cross-ownership of print and broadcasting assets. A purchase of the Long Island paper could have sparked a legal battle with the FCC.

Democrats in Congress opposed any further Murdoch takeovers. Byron Dorgan, a North Dakota senator, said recently: "It's exactly the kind of consolidation I would hope the commission finds is not in the public interest because the free flow of information in this country is not accommodated by having fewer and fewer voices determine what is out there."

Newspapers throughout the US have been struggling with weak advertising revenue as its economy falters. In order to bolster the New York Post's finances, Murdoch revealed plans last week to double the paper's cover price to 50 cents. The paper's circulation dipped by 3.1% to 702,488 in the six months to March.

Newsday was put up for sale after a takeover of its parent company by the property magnate Sam Zell a year ago. Zell's $8.2bn buyout of Tribune left the group with debt of more than $13bn and, faced with disappointing cashflow, the newly minted press baron has opted to sell assets in order to lighten this burden.