Unravelling of Zoomer deal final blow for Sun News

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The sinking Sun News Network ran out of lifelines a week ago when talks to try to sell the channel fell through. But its fate was effectively sealed much sooner, on Oct. 2 last year.

On Friday, the network cut its signal at 5 a.m. ET, permanently closing the upstart station that promised "hard news and straight talk" after nearly four years in operation.

Since late last year, the network's owners at Quebecor Inc. had been trying to make a last-gasp deal to sell Sun News Network to ZoomerMedia Ltd., the company led by television entrepreneur Moses Znaimer.

Initially, Zoomer showed great interest, but as talks wore on, the two sides moved further apart. About a week ago, it became clear the deal was dead, and executives finalized the decision to close the station on Wednesday.

To some of the 200-odd staff now out of work, its demise came abruptly. Many first heard the news through other media outlets on Thursday night, and had to wait until morning for confirmation from their employer.

"This is an unfortunate outcome; shutting down Sun News was certainly not our goal," said Julie Tremblay, president and chief executive officer of Media Group and Sun Media Corp., in a statement on Friday. "Over the past four years, we tried everything we could to achieve sufficient market penetration to generate the profits needed to operate a national news channel."

Quebecor has scaled back its media ownership, particularly in English-language markets. The company agreed to sell the Sun newspaper chain to Postmedia Network Canada Corp. in early October, but Sun News Network was left as the odd property out.

Yet the unravelling of the proposed deal with Zoomer was only the final blow. The network that launched in April, 2011, with a Conservative bent, struggled to boost low ratings, suffered heavy losses and endured rebukes from broadcasting authorities. Then, with a single ruling from the federal broadcaster regulator in October, it lost what it saw as its last chance to climb back to profitability. The senior leadership at Sun News concluded at the time that the network wouldn't survive in its current form.

"We have been sort of living on the edge, if you will, for two or three years," said David Akin, the network's first editorial employee, who hosted the program Battleground. "It was that [regulatory] decision that was kind of the straw that broke the camel's back, or made it very difficult to present a business plan that we'd be able to move forward on."

The Globe and Mail interviewed multiple sources close to Sun News, some of whom were not authorized to speak publicly. Spokespeople for Quebecor and Zoomer declined requests for interviews.

The fateful decision came in a final offer arbitration process between Sun News Network and Rogers Communications Inc., held last fall. In late 2013, the Canadian Radio-television and Telecommunications Commission (CRTC) appeared to give the network a boost when it mandated that national news channels must be treated equally, offered à la carte and bundled together in packages of channels.

Sun News and Rogers had been unable to negotiate a deal. The TV station wanted upwards of 20 cents a subscriber each month to carry its channel, in a bid to boost subscriber revenues. The cable giant was offering much less. The arbitrator sided with Rogers.

In the eyes of management, that decision not only undercut the revenue the network would receive from one of Canada's biggest broadcasters, but set a precedent that left little prospect of a better deal with another crucial broadcast giant, Shaw Communications Inc.

Sun News Network's relationship with the CRTC had always appeared fraught. Before its launch in 2010, vice-president Kory Teneycke mocked the notion of "mandatory carriage," a privilege that places a channel in every basic cable package, as "tantamount to a tax on everyone with cable or satellite service."

Three years later, Sun News Network was in about 40 per cent of households with television – about 4.8 million out of 11.5 million across Canada – and Mr. Teneycke argued to the CRTC that Sun News Network needed mandatory carriage to expand its reach. Anything less would be a "death sentence" for the channel, he said, drawing charges of hypocrisy. The CRTC denied that bid, too.

The network had launched believing, perhaps naively, that it could negotiate its way to wide distribution and profitability in the open market. But it wasn't to be.

Its day-to-day ratings never substantially improved, and many day-time programs attracted only a few thousand viewers on average. Small audiences, in turn, kept advertising rates low, and the company lost $46.7-million between 2011 and 2013. That left little cash to recruit top talent or invest in sets and equipment.

"There were so many barriers to success from the beginning, it's not very surprising," said Kaan Yigit, president of Solutions Research Group. Among them was stiff competition from a crowded market with established news channels at CBC and CTV, as well as local and regional networks such as CP24 in Toronto and Global News's BC 1.

"Even these established brands are seeing a great deal of pressure from a consumer who doesn't need TV as much to follow current events or breaking news," Mr. Yigit said. "There is ample choice."

A series of on-air missteps almost certainly didn't help. Just six weeks after launch, an interview host Krista Erickson conducted with dancer Margie Gillis drew 6,676 complaints (it usually receives about 2,000 a year), with many saying Ms. Gillis had been ambushed and treated unfairly. And in the years that followed, the Canadian Broadcast Standards Council twice censured the network for off-colour comments made by provocative host Ezra Levant.

In the meantime, Sun News Network's finances had fallen so deeply into the red that Zoomer, its lone serious suitor for a purchase, came to realize the network was ultimately worth less than nothing. With its efforts to get wider distribution or higher subscriber fees thwarted, the network saw no way out.

"Unfortunately, those efforts did not bear fruit because of the numerous roadblocks to carriage that we encountered," Mr. Teneycke wrote in a memo to staff on Friday. "… The result is our closure today."