The War for Late Night

by Carter, Bill

  But he also bluntly denied any responsibility for Conan’s disappointment. “It had nothing to do with me,” Jay said. He also repeated NBC’s claim that Conan’s show was going to lose money for the first time in Tonight Show history. And he fired off his most direct and pointed response when Oprah cited Conan’s assertion that moving to 12:05 would be destructive to the franchise. “If you look at what the ratings were,” Jay said, “it was already destructive to the franchise.”

  When Oprah chided Jay about the joke about Letterman and his wife, saying it was “beneath him,” Jay defended it as funny and characterized the back-and-forth between the comics as “big-time wrestling.”

  He also speculated that almost anything NBC could have done would have been better than the eventual outcome. “If they’d come in and shot everybody—I mean, it would have been people murdered. But at least it would have been a two-day story. I mean, yes, NBC could not have handled it worse, from 2004 onward. This whole thing was a huge mess.”

  Seeking further advice, Jay also reached out in a much more unexpected direction: He called Lorne Michaels.

  No one at NBC had a longer or deeper connection to Conan than Michaels, but Jay had reason—possibly as a result of his and Debbie’s conversations with Ebersol—to suspect Lorne had not bought a ticket on the Jay’s-to-blame train. He was right about that.

  Leno and Michaels had interacted little over the years; Jay’s style of comedy hardly matched Michaels’s sensibilities. Lorne saw him as more of a Bob Hope-like figure—a safety valve for viewers. And while Jay’s brand of setup-punch line humor would never have landed him in the cast of Saturday Night Live, Michaels realized that people in America tended to admire and accept a “well-made one-of-those, even if it isn’t a one-of-those that they liked.” And Jay had obviously been making a good one-of-those for a long time.

  Lorne had made no secret to Jeff Zucker what he would have done with the late-night plan had it been his decision to make. He was the one whispering in Zucker’s ear to let Jay go, because the ten o’clock show was so awful. Everyone would understand the move in that context, Lorne had told Zucker, and now you put your bet on the younger guy, give him a full run, and stand behind him.

  But when it didn’t fall that way, Michaels understood the rationale: Jay would still make a good one-of-those. As much as he understood the facile comparisons of Conan and Jay as Harvard versus the garage, Lorne recognized that, every once in a while, Jay was not quite the garage and Conan not quite Harvard. Jay did smart jokes as well as dumb ones. He just did a lot of jokes because, well, that’s what he did. Conan remained, like Letterman, more of an attitude comedian, as Lorne saw it.

  Lorne also understood on a personal level Jay’s mind-set about wanting to keep working until either he dropped or they changed the locks. That was Lorne’s intention as well. As long as NBC continued to pay the electricity bill for 30 Rock, Lorne would produce Saturday Night Live.

  More than anything else, Michaels dismissed as nonsense any suggestion that the actions of recent years and months had been driven by Jay’s Machiavellian genius. Lorne did not believe in the puppets moving the strings.

  So he gave Jay some counsel, listened patiently as Leno laid the blame for the decision at Ludwin’s door, and told him that was silly because surely Jay realized a move of this magnitude could not emanate from Rick Ludwin’s pay grade.

  One thing he did not discuss with Jay, but which staggered him when he finally got convincing evidence that it was true, was the fact that Jay had won a pay-and-play commitment. Michaels continued to be baffled by the implications of that deal and what role it actually played in the way the drama eventually unfolded.

  Mostly based on what he’d gleaned from his conversation with Zucker, but also from what his representatives continued to tell him, Conan believed that Jay’s pay-and-play contract had been impossibly forbidding for NBC. Polone suggested that the network had looked at the cost of extricating itself from the deal and blanched: It could ultimately have cost as much as $100 million to pay Jay off. Whatever the price, it had to be a consideration in the decision to retain him and let Conan hit the street.

  Without taking a public stand on the matter, NBC’s executives begged to differ. They apparently decided it was necessary to clarify that their decision was based on programming and not financial considerations—especially after Conan went public in a 60 Minutes interview seeming to endorse the suggestion that NBC was on the hook with Jay for about $150 million. (Though Conan himself did not bring up the figure, the reporter, Steve Kroft, did, citing other reports.)

  NBC argued that Jay’s deal for ten p.m., while admittedly unusual, did not constitute a burden so onerous that the network could not countenance trying to pay him off. NBC’s legal department stressed that the entertainment side was free to make the smartest decision, with no regard to contract implications. The reason, they said, was that the pay-and-play would have become relevant only in a situation where the talent demanded the right to stay on the air or pressed to sue for liquidated damages based on the impact a cancelation might have on a career. Neither case would likely have ever applied to Jay Leno, NBC argued, because suing would mean a bitter, drawn-out fight during which he wouldn’t be on television telling jokes. And would Jay really want to stay on the air in a show the affiliates were abandoning, guaranteeing failure?

  The easy answer was that Jay and his lawyer didn’t have to think much about either prospect, because NBC had come to them promising to slide Jay right back into late night, thus satisfying his need to keep telling jokes on television.

  Had NBC decided Conan truly was the future and bid Jay a fond fare-thee-well, resolving his contract would have been a relatively standard procedure, according to the NBC legal department’s analysis. Not that it would have been cheap—certainly it would have cost more than paying off Conan. But that was principally because Jay’s salary was more than double Conan’s, they explained.

  One NBC executive did concede that NBC had signed a bad contract with Jay Leno, but insisted that the deal had not determined the network’s decision. Had Conan been tearing it up at 11:35, NBC would have stepped up and done what it had to. The advice given to Zucker and the others in New York had been simple, the executive said: Jay would not be able to get an injunction, even though it was a pay-and-play deal. Ultimately it would still come down to writing Jay a check. Yes, the check would have to be slightly bigger because of the unusual promises in the contract, but, in the end, NBC was going to have to write a guy a check—one guy or the other.

  Kevin Reilly had begun Fox’s courtship of Conan O’Brien even before Conan was fully settled out at NBC; he used the customary back channel: Jeff Ross.

  From his days at NBC Entertainment, Reilly had developed a warm relationship with Ross, concluding, as so many others did, that Jeff was a totally appealing guy with no artifice in him, no bullshit, as straight a shooter as you were likely to find in Hollywood.

  Reilly was dead serious. He was hungry to break Fox into late night at last, and here was a performer who was not only an established star—and one whose name had lately dominated the news—but also a guy with a sensibility that was a perfect fit for Fox. He met Ross at Rick Rosen’s house.

  “Could this be any more insane?” Reilly asked, opening the conversation. He laid his cards out quickly. Fox had an intense interest. But there were likely to be complications.

  “Back of the envelope, my instinct is, I don’t know if we’re going to be able to clear the show,” Reilly said. By “clear,” he meant get the full complement—or close to it—of Fox stations to commit to carry a Conan O’Brien late-night show. “I’m gonna do the math and we’ll see where we end up.”

  Reilly’s enthusiasm fell on welcoming ears. Team Conan knew that, in the current landscape, if they were going to find a new network home for their man, Fox represented the only real option. Polone had tried to argue that a new kind of deal made sense for Conan—maybe he didn’t need a n
etwork play at all, given how much of his audience found their entertainment choices online now. Many of Conan’s younger viewers already watched him only in highlights the following day on the Web (a factor that had hardly helped with the ratings impression he wanted to make with NBC). But others on Conan’s team leaned heavily toward locking up a base that was an actual television show and building the new media possibilities from there.

  Back in his own jurisdiction, Reilly began his sales job. Chase Carey, who had replaced Peter Chernin as the top executive overseeing all of Fox’s entertainment operations, made it clear he simply didn’t get Conan, but he accepted that his was a business perspective more than a creative one, and he remained open to the idea. Reilly had the unqualified backing of Peter Rice, the chairman of Fox Entertainment. Rice, who had previously headed Fox Searchlight films, had forged a reputation as a keen evaluator of breakthrough material (Bend It Like Beckham, Slumdog Millionaire ). Rice became Reilly’s partner in the pursuit of Conan.

  Rice and Reilly had reason for their enthusiasm. A talent of Conan’s stature simply did not fall into a network’s lap so conveniently. On any checklist of qualities most appropriate for a late-night host on the Fox network, Conan would have filled in virtually every box: hip, creative, irreverent, youth oriented, special appeal to male viewers. It was no accident Conan had truly broken through as a writer on The Simpsons. He was all but the embodiment of the Fox comic sensibility.

  As the Fox team saw it, Conan most definitely did not embody the Tonight sensibility. The fit was just off, in some fundamental way, beginning with that big Vegasy stage and the long, traditional monologue. He might have gotten there over time, but the whole traditional format didn’t seem built for the scrappy, off-the-wall Conan, in their view. But if he came to Fox, playing the underdog again, they were sure he would get the magic back, overnight.

  Rice and Reilly were well aware of who represented the main impediment to a quick annexation of Conan: Roger Ailes. An imposing figure internally at the News Corp., Fox’s parent, given the spectacular financial results for his personal baby, the boisterous Fox News Channel, Ailes had added the portfolio of the stations owned by Fox Broadcasting. He could be expected to apply his customary aggressiveness to representing the interests of the stations, no matter how rapturous the network guys might be about Conan.

  Reilly knew the easiest way to get Conan in the door at Fox. All it would take would be the ultimate voice at the network, News Corp. chairman Rupert Murdoch, delivering one simple message: “I don’t give a shit. This is another Wall Street Journal. I want it.” That always produced results at Fox. But Murdoch remained noncommittal on Conan. His position boiled down to: “If you can make it work.”

  That quickly proved a prodigious challenge.

  Though Fox in earlier years had a clause in its contracts mandating that its affiliated stations take any late-night show Fox decided to program, that clause had been dropped from more recent agreements. With the network never having made a dent in late night, the stations loaded up on syndicated reruns of recent sitcom hits like The Office and Family Guy, along with perennials like Seinfeld, which always rated well. The shows were expensive and, making the issue even more complicated, the stations, short of money during the recession, had secured what were known as barter deals for many of them. That meant that instead of dealing in cash, the stations offered the syndicators big chunks of commercial time in each show.

  In order to insert Conan at eleven p.m., after the late local news on the Fox stations, the stations would have to relocate the sitcom reruns; in doing so, however, the barter deals would become far more complex. If the sitcoms slid back past midnight on the schedule, the prices of the commercials would change. All the deals would likely have to be renegotiated.

  Peter Rice was undaunted by this prospect. By his calculation, Fox would have to buy the stations out of their expensive barter deals at a cost of something approximating $100 million. That didn’t include the start-up costs for a new late-night show, which could run to another $70 million. Rice and Reilly still wanted to do it. The word from the advertising executives was positive; they had already started to receive calls from big clients like Intel, Ford, and American Express. They all wanted in on a Conan late-night show on Fox, convinced it would be a demographic home run.

  Even so, the stations remained cool, approaching icy, to the idea. Like NBC’s station group, Fox’s tended to be led by men in their fifties and sixties—a Jay crowd. If Jay had come on the market instead, Reilly and Rice knew they could have signed him and simply flipped a switch: The stations would easily have lined up. But Conan was again proving to have a narrower appeal to station owners.

  Reilly and Rice knew there was another reason they faced such a high degree of difficulty in completing a Conan deal: Fox and its stations were already on the brink of a civil war of sorts. Nationally, broadcasters had finally reached a point where they were uniting in demanding compensation from cable systems for the right to retransmit their programs onto cable. Retransmission rights suddenly became a path of survival for the struggling networks, most of which were projecting losses in their network business. (According to one inside estimate, NBC was looking at about a $300 million loss.)

  Subscription fees from flush cable operators could change all that. The problem was, networks themselves could not extract sub fees from cable systems. Local stations controlled the rights the cable operators would pay for. Even though the vast majority of programs viewers wanted to see were being supplied (and paid for) by the networks, the local station was in line to claim the $1.50 and up per subscriber that the cable systems might be compelled to pay.

  Fox’s plan was to negotiate tough deals with its affiliates, pointing out that the leverage they had over cable systems mainly came from the programming on Fox: NFL football, American Idol, House, and Family Guy. The Fox network shelled out the big bucks to acquire that programming; why should it not command the largest piece of the retransmission money?

  So just as Rice and Reilly were contemplating pitching the stations on the merits of removing those high-priced and high-rated sitcom repeats in favor of the guy who just disappointed NBC on The Tonight Show, the Fox network was readying an onerous demand on retrans fees. If a station was able to get $2.00 per subscriber from a cable operator, Fox intended to skim $1.75 off the top—that was the price for obtaining all that great network product. But Fox’s executives didn’t kid themselves that the stations were simply going to bend over and take this spanking without a whimper.

  When Reilly and Rice had a chance to sit down with Conan’s group, the message back sounded beyond promising. The other options Conan’s people mentioned seemed like posturing to the Fox executives. They became convinced it was their deal to lose. In direct meetings with Conan and with his representatives, the Fox team laid out the issues clearly. Initially, the signs pointed to a heavy lift. The number of stations willing to go along would be limited for maybe two years, as the syndication deals worked their way through the system. Rice and Reilly explained that they could not be sure they could get this deal through the News Corp. hierarchy: They wanted it badly, though, and they would work at it over a period of months to see how far they could get.

  Conan, naturally, expressed reservations, given what he’d just been through, largely due to pressure from NBC’s stations. “I’d want to be with you,” Conan said. “But frankly, I don’t want to be in a place that has to jam it through.” If Kevin and Peter couldn’t look him in the eye and assure him this was going to work, he didn’t know if he wanted to pursue it.

  They all agreed to keep at it.

  Reilly did have a recommendation he wanted to run by Gavin Polone: Put Conan first on Fox’s sister cable network, FX, an ad-supported entertainment channel on the basic cable tier. Maybe after a year or so there, they could make a shift over to Fox on broadcast. Reilly couldn’t actually guarantee that would happen, but he thought FX would be a good home for the show, and having
it in the Fox family would certainly make a transfer easier. For Polone that was a nonstarter; they were not going to entertain offers from basic cable channels.

  The biggest player on the other side of the retransmission issue happened to be in the process of acquiring its own broadcast network. But even though Comcast’s top executives were making the rounds in Washington that winter, shaking hands, giving public testimony, doing the whole regulatory dance, their opinions on the current NBC leadership remained opaque.

  Media analysts on Wall Street, in the press, and online believed one coming decision was totally transparent: Jeff Zucker had to be a dead man walking. How could he hope to survive with his GE patron, Jeff Immelt, going out the door and two media professionals like Brian Roberts and Steve Burke coming in? Surely the latest NBC misfire, this late-night fizzle—purely Zucker’s handiwork—could only have hardened the resolve that big changes had to be made in the new Comcast-led NBC Universal.

  But if the Comcast executives had a judgment to make about Zucker’s fate or the late-night train wreck they had at least partially witnessed, they did an exceptional job of keeping it to themselves.

  Although no one admitted it directly, more than a few NBC executives welcomed a management change, because GE’s parsimonious ways, especially as NBC was being readied for sale, had squeezed the network dry. Gaspin believed NBC’s entertainment properties simply had no future without significant new investment. He conveyed that opinion to Zucker, and the CEO approved a plan to spend much more freely, acquiring new programs from some of the top television creative talents.

  That seemed consistent with Comcast’s message to Washington: They wanted to be in the business of content. They signaled that they knew that took money.