The San Diego News Network seemed like a model for local news development but now its future is less clear. Launched last week after nearly a year of development, the network was built to provide compelling local content to the area’s broadcasters, cable news networks and local papers. At the same time, its own site would be a major destination in itself, perhaps eating into The San Diego Union Tribune’s Signonsandiego.com, $19 million annual take (per news reports).

The effort describes itself as following:

“SDNN is San Diego’s source for breaking and local news, sports, events, lifestyle, and entertainment in San Diego. SDNN is where you live, where you work, and where you play. It’s where you can share your thoughts about restaurants, movies, the Padres, and anything else that’s on your mind from the silly to the serious. SDNN is bringing life back into San Diego news.”

In addition to nine in-house reporters (primarily laid off staffers from The Union Tribune), four local sales people were hired, with five more expected to join the site by the end of the month. In addition to the inhouse staff, SDNN developed a concept to pay freelance reporters on a rev share basis that splits advertising related to article views, just as The Street.com once did.

But suddenly, it is getting messy. Site founder Ron James, who created the site after being laid off last May as Signonsandiego’s head of content, was abruptly fired.

Local blogs carry speculation that there may have been over-spending on the site, which had raised $1 million from San Diego’s Tech Coast Angels. There was also speculation that the venture leaders, Barbara Bry and Neil Santuria, who had originally backed non-profit Voice of San Diego, didn’t see a way for the site to be profitable within a reasonable time frame. (Bry has now taken over as executive editor). Whatever is the truth, James tells us that the matter is with the lawyers.

James has long been at the vanguard of local San Diego media innovation. He had previously been in charge of broadband content for Time Warner’s RoadRunner; and launched San Diego Magazine in 1995. At SignOn San Diego, he launched several progressive ventures, including online multimedia, radio and video efforts.

Bry, for her part, is cheery in a statement announcing her new position. “I look forward to the opportunity and challenges of working directly with such a stellar cadre of editors, journalists and media partners who are committed to making SDNN the most trusted, respected and valuable source of news and information about San Diego,” she says.

“We’re on track to launch 30 additional editorial sections over the next three months and provide the most comprehensive, hyper-local news that cover where San Diegans live, work and play. The opportunities to truly converse and interact with our readers are tremendous!”