While Fox honchos were touting the future at the weblet’s annual affiliate confab in Los Angeles, staffers of the Fox News Service on Thursday were told that June 11 would be the fledgling operation’s last day.

“We knew we were in store for some changes, but we didn’t anticipate a total shutdown,” said Jim Schultz, the executive producer of FNS. “This is simply devastating.”

What was FNS will be rolled into WTTG, the Fox owned-and-operated Washington station, which will feed out news packages to Fox affils provided by the weblet’s station group.

It was unclear what that will mean for the 30 full-time staffers and 17 freelancers at the D.C.-based division, which feeds material to affils eight times a day and is part of Fox News.

FNS managing editor Cissy Baker was moved out along with another 11 staffers in recent months.

Reordering priorities

According to Les Hinton, the chairman and CEO of the Fox station group, who oversees its news operation, the action at FNS is an attempt to reorder news priorities at the Fox-owned stations.

“Our stations in Chicago and L.A will be getting three-hour morning news blocks,” said Hinton. “We’re adding an hour of news at our station in Houston and a noon news in New York. Our station in Dallas and the one we just acquired in Atlanta will get news operations. All of this costs a lot of money.”

Talk that FNS was on the endangered species list heated up last January when Murdoch began to shake up his domestic operation. Hinton, a longtime Murdoch lieutenant put in charge of all Fox News operations, quickly replaced FNS president Paul Amos with another News Corp. veteran, Piers Akerman.

FNS was announced with much fanfare almost three years ago as an essential cog in Fox’s attempt to become a network on par with the Big Three. Top Fox executives, including News Corp. chairman Rupert Murdoch, reasoned that to compete they had to get their affils, the vast majority of which didn’t have news departments, into the news business.

They saw FNS as a way to help ease their affils into news by providing them with a steady stream of national and international material. In return, these local stations would be an information source not only for Fox, but News Corp.’s worldwide news organization.

While a number of Fox affils entered the local news arena — 41 currently are in the business, along with seven of the eight Fox owned and operated stations — the weblet had anticipated more rapid growth. A recession-riddled economy derailed many Fox affils’ plans to start news departments.

Tough competition

In addition, Murdoch hoped that FNS would allow the Fox O&Os to free themselves from having to purchase CNN’s affiliate newsfeed for hundreds of thousands of dollarsin yearly fees.

But after a monthlong experiment last year where the O&Os attempted to operate sans CNN and using only material from FNS, it became clear the news service was not yet up to the task.

“In order to pull off what Murdoch originally wanted, it would have taken a lot more time and money than he was ready to spend,” said a Fox veteran. “The news service was a victim of lousy economy.”

The fact that Fox O&Os pay dearly for CNN, said Hinton, was a central part of his decision to drastically scale back FNS. “Waco taught us a lesson,” said Hinton. “There was CNN’s satellite truck at the compound and there was ours 50 feet away and we were in effect paying for both.”