SYDNEY — Oz abolished its decades-old protectionist media laws in October and, although the new laws don’t come into effect until the New Year, the media landscape is already altered beyond recognition.

Within weeks of the changes — which allow foreign ownership of media assets and remove restrictions on cross-media ownership of TV, radio and print assets — two huge overseas private equity firms swooped in on the leading terrestrial webs.

James Packer’s Publishing and Broadcasting inked with Blighty private equity firm CVC Partners to form PBL Media in a A$4.5 billion deal ($3.5 billion) that included selling half of the Nine Network.

A month later, Kerry Stokes entered into a similar arrangement with Stateside equity group Kohlberg Kravis Roberts, valuing his terrestrial web Seven and its assets at $3.1 billion.

In both deals, the equity groups receive convertible notes that can’t be converted until the media laws take effect, probably in February, although the government hasn’t set a date yet.

The appeal of high-risk media biz to equity firms, which usually strip assets and sell what’s left, has surprised many observers.

“The value of the Oz industry has been distorted for 20 years by laws that saw it heavily protected,” says a media analyst who did not want to be named. “And it is still effectively an oligopoly, as no fourth network will be allowed.”

Communications Minister Helen Coonan has ruled out any new player in free-to-air TV, which goes some way to explaining foreign interest.

However, there are fears the high prices paid by the equity firms might not match the true value of the assets. With declining auds and assaults from new media, price tags in the billions seem high.

Topper John Stewart, of Aussie bank NAB, warns that all this private equity movement “is going to end up in tears.”

He joins a growing list of Aussie banks and brokers concerned that the flurry of activity may be creating a bubble that can only burst.

Nevertheless, in the case of Seven, some of the investor appeal is the flow of U.S. product from its output deals with ABC/Disney.

In 2008, the web will benefit from two of the biggest frosh hits, “Heroes” and “Ugly Betty,” as well as returning juggernauts “Desperate Housewives,” “Grey’s Anatomy” and “Lost.”

“We are blessed with the highest-rating four new series on American TV,” Seven’s Simon Francis tells Variety. “And we have (Australian rules) football and the Australian equivalent of NASCAR on our network beginning in’07.”

But the reliance on output deals also underlines the dangers of buying Aussie media, where they can arbitrarily determine a network’s fate.

As recently as 2004, Seven was considered dead in the water, with no joy from its output partners.

KKR’s Justin Reizes, who brokered the Seven deal, said his company bought into the web because KKR believes it can make money in the media sector.

“We paid the price for the future not for past performance,” Reizes says. “It’s about where we are going to take the business, and we found a great partner who has capital.”

This pressure to churn out hits also raises the specter that riskier fare, such as Aussie drama — which has struggled in the ratings for years — will be nixed under the private equity model.

Not so, says Francis.

“We see our partnership as adding further strength to our commitment to Australian programming including drama series,” Francis says. “We have the two highest-rating Australian drama series , and we have a number in development for ’07.”

What is clear is that there is going to be a high-stakes poker game to see who can buy up the rest of local media when the rule changes go into effect in the new year.

Stokes’ cashed up Seven is expected to be the more aggressive, as PBL’s priority is gaming, such as its consortium proposal for a $2.3 billon casino in Singapore.

Two newspaper groups are emerging as early targets, Western Australian Newspaper, in which Stokes already has a 14.9% stake, and John Fairfax Holdings.

Of the two, Fairfax is the most interesting.

James Packer’s father Kerry Packer tried to purchase Fairfax before his death, but was stopped by the cross-media ownership rules.

James Packer may be trending away from “old media” but would no doubt like to see his father’s dream realized — but Rupert Murdoch’s News Corp. is also eyeing Australia.

Although he professed disinterest in TV assets — calling them “pretty expensive” at the recent News Corp. annual meeting — Murdoch last month took a of 7.5% stake in Fairfax, suggesting the mogul wants a say in who buys into the company.

Fairfax is News Corp.’s only real newspaper rival Down Under.

Investment fund Macquarie Media took 14.9% in regional TV and radio group Southern Cross Broadcasting in October, regional broadcaster WIN Television has spoken openly about its willingness to be bought and there is talk that Canwest-owned Network Ten could strike a private equity deal similar to its rival webs.

Such a scenario would have been unthinkable 20 years ago, when the government, unions and journalists fought hard against concentration of the Aussie media. At the time, Kerry Packer’s interest in Fairfax resulted in mass strikes at the paper.

The impending free-for-all does not seem to have captured the public interest in the same way, beyond the odd antimerger bumper sticker, usually sported by Fairfax journalists.

Perhaps the government is right, and the access to new media means that old media can be sold to the highest bidder without restricting the flow of information. But the new crop of media speculators should take some lessons from the past.

In the 1980s, property magnate Frank Lowy lost A$1 billion on his purchase and subsequent sale of Network Ten, while Alan Bond famously bought the Nine Network from Kerry Packer for A$1 billion, only to sell the struggling web back to him for A$250,000 a couple of years later.

And while these transactions may have suffered from the 1987 stock market crash, they illustrate that the media sector does not always take kindly to outsiders.