IF THE CURRENT RECESSION is even half as deep or as long as predicted, it will wreak havoc on Canada’s media landscape. A perfect storm of technological change and economic malaise—the worst in 80 years—is eroding the foundations of once dependable business models. In the United States, even the most hallowed print institutions—The New York Times and the 10-paper Tribune Company—are in serious trouble, while such major TV networks as CBS and NBC have had to take staggering writedowns. Here, virtually every major media company has already announced significant layoffs and offered grim earnings forecasts for the year ahead. Among these, the most vulnerable may well be the largest: Canwest Global Communications, the sprawling, 10,000-employee, Winnipeg-based conglomerate controlled by the Asper family. Says one Toronto TV producer, “I would not be surprised to see a TV environment in which there is no Canwest.”

Only a year ago, Leonard Asper, Canwest’s 44‑year-old president and CEO, painted a glowing picture of the company’s health. The mammoth publishing division—the National Post and 40 other newspapers across the country—appeared stronger than ever. In Australia, Canwest’s Network Ten TV had earned more than $1 billion in revenues. There were encouraging developments in other parts of its far-flung empire as well, notably Turkey, where the company owns several radio stations. It was actively exploring ways to extend core content onto new on-line and wireless platforms, avenues for future growth. And it had recently acquired Alliance Atlantis Communications in a $1.5-billion takeover, funded largely by Wall Street investment house Goldman Sachs. The deal was considered a stroke of brilliance. The Alliance properties—13 specialty channels, including Showcase, the Food Network and HGTV—constituted the only segment of the TV market still showing appreciable growth in audiences and thus revenue. And Asper had won them by risking a relatively small amount of Canwest’s own money: $262 million.

But if the acquisition was bold and strategic, it was also imperative. Income from Canwest’s conventional TV operations had begun to plateau, a victim of the digi-verse, the ever-expanding world of specialty and digital channels, which has continued to fragment the traditional audience. Eyeballs are, of course, the sine qua non of any media enterprise; without them, there is nothing to sell to advertisers, which account for close to 85 per cent of all Canwest revenues. If ownership of a mainstream television network was once a licence to print money, it is no more. CTV, Canwest’s number one rival, had spent $1.4 billion in 2007 to acquire CHUM and its 21 specialty channels, including MuchMusic and Bravo. (Full disclosure: I am employed by The Globe and Mail, which is owned by CTVglobemedia.) Leonard Asper had no choice but to go big or go under.

Although the amount of Goldman Sachs equity (65 per cent) threatened to run afoul of Canadian media ownership restrictions, the deal had been cleverly structured so that Canwest retained majority control of voting shares. Despite opposition, the company had successfully navigated the takeover through the CRTC’s snarly approval process. Asper had gone big and won, and the profit omens, he assured shareholders last year, were positively auspicious.

What a difference a year makes. In the past few months, the pillars of Canwest’s world have been profoundly shaken. For Canada’s biggest media company, the cash-flow squeeze is on, and its grip is stubborn.

THE FIRST BIG DOSE OF BAD NEWS came in the fall, when Canwest released its year-end results. The company reported $1.02 billion in losses in a single quarter. The corporate carnage was worst in what had long been its most reliable money-maker: its conventional TV operations. Results were no better abroad, where revenues at Network Ten suddenly plummeted 14 per cent. By November, DBRS, Canada’s largest credit agency, had downgraded Canwest Media’s rating, citing the moribund ad market and the company’s massive debt load—a red flag to lenders and investors alike. It was rumoured that, in December, at least one bank that provides bridge financing to independent film and TV producers refused to make further loans against Global broadcast licences or even future tax credits, fearing the network would lack sufficient funds to honour the contracts. One condition of the CRTC’s approval of the Alliance deal was that Global commit $137 million to new programming. It has financed several dramatic pilots, including Paul Gross’s new show Lawyers, Guns & Money, but few of these are expected to be approved for full production; the money simply isn’t there.

To stop the hemorrhaging, Asper quickly shifted into austerity mode, axed 560 jobs and, in his own suggestive phrase, started “culling the herd”—selling radio stations in the U.K. and closing other non-performing assets. In search of administrative synergies, the company put its digital broadcasting and publishing teams under one umbrella and, to give itself more breathing room, renegotiated terms with debt holders. It wasn’t enough. Releasing its first-quarter results in January (another $33 million lost), Canwest bluntly warned that it “may not be able to comply with its existing…covenants in fiscal 2009.”