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CHCH briefly suspended newscasts, temporarily laying off all staff, after filing for bankruptcyHand-out

An ambitious plan to remake a Hamilton television station as a model for revitalized local news has come undone.

CHCH-TV, which reaches four million homes across Ontario, briefly but abruptly cancelled its newscasts last Friday as its owners announced that the company that created local news for the channel, Channel 11 LP, had filed for bankruptcy, triggering massive cutbacks.

The network laid off all 129 full-time and 38 part-time staff members, claiming losses of $130,000 per week, then offered to hire back 71 people to similar roles under a new, numbered company contracted to create daily news. On Monday, it revived CHCH's 6 p.m. and 11 p.m. newscasts with a skeleton staff, whose members have rallied to begin a new, leaner era.

The restructuring signals the collapse of a vision for CHCH outlined in 2009, but it is also symptomatic of a larger problem afflicting local news.

The industry has suffered steep revenue declines from lost advertising in a crowded television market. Local channels across Canada are fighting for survival, including those run by giants such as BCE Inc., but independently owned CHCH was supposed to be a hopeful outlier.

Until last week, it aired 80 hours per week of local programming, far more than most stations. Now, its lineup has just 17.5 hours made locally.

The channel, founded in 1954, has been on the brink before. In 2009, independent media company Channel Zero Inc. stepped in to buy CHCH from bankrupt CanWest Global Communications Corp., rescuing CHCH from a possible shutdown. At the time, Channel Zero was bullish, calling CHCH "a real hidden gem" and promoting a business model – news throughout the day, old movies at night – intended to bolster local stations.

Until two years ago, CHCH was profitable. Since then, a drop in national advertising revenue that still fuels local broadcasting combined with the loss last year of the Local Programming Improvement Fund (LPIF) – created in the depths of the recession to prop up local TV through a hard time – have pushed the channel deep into the red.

"It's only been over the last 24 months that we've seen a real rapid decline in revenues [that] outpaced anything we could do to control the cost," Chris Fuoco, vice-president of sales and marketing for Channel Zero, said in an interview.

That left Channel Zero with few options. Mr. Fuoco said conventional layoffs and severance packages were more than the company could afford, and would have led to a "complete shutdown, bankruptcy, off the air, lights out."

The chosen course, including bankruptcy for Channel 11, keeps CHCH's morning and evening news shows intact, but upset many employees.

"The [choice] we made, I guess, was the least of all evils," Mr. Fuoco said.

It also meant some staff members learned the first details of the changes from other media, before Channel Zero chief executive officer Romen Podzyhun announced it on air.

"It was brutal," said one staff member, who spoke on condition of anonymity, having been rehired. But as remaining employees returned to work on Monday, "it was heartening to see how willing everyone was to jump back in."

The warning signs for local TV have been dire. From 2010 to 2014, combined annual revenue at Canada's private conventional television stations fell by $338-million, according to the Canadian Radio-television and Telecommunications Commission.

The situation went from bad to worse in 2012 when the CRTC elected to phase out the LPIF, which funnelled $106-million to local broadcasters in 2011, including millions to CHCH. Advertising revenue appeared to be rebounding, but has since taken a nosedive to levels not seen since the late 1990s.

Despite that grim reality, employees were caught off guard. The union that represents CHCH staff, Unifor, had been in conciliation seeking a a new collective agreement as late as last Thursday – with no sense of the drastic shakeup to come the next day.

Full-time staff members who were let go received at least $4,000 in salary and vacation pay owed to them, plus top-ups, but the rest of their severance is now tied up in the bankruptcy proceeding.

The way the cuts were handled was "despicable" and "shows a certain measure of disrespect and contempt" for the staff, Unifor representative Liz Marzari said.

In late January, the CRTC will hold an eight-day hearing to review its local-TV framework.

"There is a crisis in local broadcasting," Mr. Fuoco said. "Maybe this is the time to pause and reconsider, and look at new structures or new policies."

Editor's note: A Tuesday Report on Business story on CHCH-TV incorrectly said the CRTC will hold a two-day hearing in late January to review its local-TV framework. In fact, it's an eight-day hearing.