Cablevision starts Long Island local media group

* Local media group to include Newsday daily newspaper

* Ex-Reed Business CEO Tad Smith to lead new group

* Reed may seek ways to get people to pay for Web news

NEW YORK, Aug 12 (Reuters) - Cablevision Systems Corp (CVC.N) said on Wednesday it has started a local news media group on its home territory of New York's Long Island and appointed a former trade news company executive to run it.

The group will include Long Island's Newsday newspaper, which Cablevision bought from bankrupt newspaper publisher Tribune Co (TRBCQ.PK), and its News 12 cable news network.

The Long Island-based cable operator recruited Tad Smith, the former chief executive of Reed Business Information U.S. to oversee the group, which will organize its local media and programming properties under one unit.

Smith, who will report to Cablevision Chief Operating Officer Tom Rutledge, likely will be in charge of finding ways to get people to pay for its news online.

Rutledge told investors earlier this year that Cablevision plans to end the distribution of free Web content.

Cablevision bought Newsday last year in much criticized $650 million deal that it later wrote down by $420 million in February. Newspapers have been out of favor with Wall Street and investors for several years as paying consumers and classified advertising have moved to the Web.

Cablevision is working on plans to use local content and information as a differentiator in its competition to win and retain customers against rivals such as Verizon Communications (VZ.N) and satellite TV companies.

For example, local news channel News 12 is not available on Verizon's rival FiOS TV service.

While at Reed Business, Smith's oversaw Hollywood industry bible Variety magazine and cable business title Multichannel News, and oversaw the group's digital media business.

News 12 chief Patrick Dolan and Newsday Media Group chief executive Timothy Knight will report to Smith.

Cablevision shares fell 30 cents, or 1.43 percent, to $20.75 on the New York Stock Exchange. (Reporting by Yinka Adegoke. Editing by Robert MacMillan)