NBC to Pay $40 Million to Show Conan O'Brien the Door

[Zoneboy]

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Conan O'Brien is close to signing a nearly $40 million agreement to walk away from his dream job hosting NBC's "The Tonight Show," bringing down the curtain on one of the entertainment industry's biggest programming debacles.

The comedian's exit, expected to be finalized as early as Monday evening, agreement prohibits Mr. O'Brien from bad-mouthing his former NBC bosses, according to people familiar with the matter, but paves the way for him to land another TV gig within a year.

The expected departure caps nearly two weeks of an unusually public spectacle engulfing NBC, after the network decided to displace Mr. O'Brien from his 11:35 p.m. Eastern slot and move him to 12:05 a.m., restoring rival Jay Leno to the perch following the local news that he held for 17 years. The decision prompted the two comedians to take on-air swipes at each other and at NBC.

"What does NBC stand for?" Mr. Leno asked viewers the day the news broke of the shake-up. "Never Believe your Contract." While he said that "so far, nobody's said anything to me," people familiar with the matter say Mr. Leno had already broadly agreed to abandon his four-month foray in the 10 p.m. Eastern slot and return to his familiar late-night position.

Mr. O'Brien shot back on air: "No matter what happens, it's been a real honor to sit in the same chair as Steve Allen, Jack Paar, Johnny Carson, Jay Leno, and Jay Leno."

NBC Universal Chief Executive Jeff Zucker said in an interview that "we were not surprised that Conan was disappointed in having his show back up a half hour. But we were very surprised and disappointed at how nasty it turned."

The fallout is embarrassing and costly for NBC. In addition to the settlement NBC must pay Mr. O'Brien, it faces an expenditure of perhaps tens of millions of dollars to find replacement programming for Mr. Leno's vacated slot.

NBC executives believe higher ratings that could result in prime time and late night could defray many of those costs—but there remains the incalculable damage to the 56-year-old "Tonight Show" franchise, and potentially to Mr. Leno's reputation as well.

"From a financial standpoint this is the right move," Mr. Zucker said of swapping Mr. Leno for Mr. O'Brien, but he dismissed the notion there would be any long-term damage to the brand. "We didn't want to do it, because we wanted to keep Conan. But we're going to be fine, even paying Conan to go away."

The late-night fracas caps a tumultuous decade for NBC and majority owner General Electric Co. The network has tumbled in the ratings, on GE's financial statements and in the public eye. It has become the butt of jokes—including on its own airwaves during Sunday night's Golden Globe Awards broadcast. "Let's get on with it before NBC replaces me with Jay Leno," host Ricky Gervais said in his opening monologue at the awards.

The standoff stemmed from NBC's move in 2004 to retain Mr. O'Brien by promising him the "Tonight Show" job in five years. As the handoff neared, Mr. Leno's late-night ratings remained strong, and NBC offered him a five-night-a-week spot at 10 p.m. Eastern.

But Mr. Leno's show didn't do well in the ratings at its new time. Mr. Zucker repeatedly urged patience and said it would be a "marathon, not a sprint." But local TV stations lost as many as half their key viewers for the late local news following "The Jay Leno Show."

"I think NBC fairly accurately projected how the show would do at 10 p.m. but did not contemplate the drastic falloff in [NBC's local stations] and affiliate late news as a result," said Perry Sook, chief executive of Nexstar Broadcasting Group Inc., which owns or operates a dozen NBC stations.

Mr. Zucker and Jeff Gaspin, tapped last summer to lead the company's entertainment-TV businesses, in recent weeks made their first approach to Mr. Leno's representatives. The comedian made plain his willingness to return to his 11:35 p.m. time.

The two sides quietly discussed moving Mr. Leno to a half-hour late night show.Marc Graboff, who oversees NBC's business affairs, and Mr. Leno's attorney, Ken Ziffren, also left open an option for NBC to turn "The Tonight Show" back over to the 59-year-old Mr. Leno.

NBC and Mr. Zucker had for more than five years tried to placate both Messrs. O'Brien and Leno. Now they made one last effort to do so.

On Jan. 7, Mr. Gaspin proposed to Mr. O'Brien and his producer, Jeff Ross, to delay Mr. O'Brien's show to 12:05 a.m. Mr. O'Brien seemed displeased. Mr. Gaspin, according to a person familiar with the matter, said he decided on the late-night shuffle only within the last few days, and he insisted it was his idea and not Mr. Zucker's.

"We really wanted Conan to stay at the network," Mr. Gaspin said in an interview. "We really thought it was a reasonable approach."

But neither show worked. Mr. Leno couldn't draw enough viewers to satisfy local TV stations, and NBC felt Mr. O'Brien didn't do enough to adapt his comedy to "The Tonight Show," which began to lose money, according to a person familiar with the matter.

After Mr. O'Brien on Jan. 12 publicly rejected moving to 12:05 a.m. in a letter addressed to "People of Earth," NBC switched from trying to mollify him to finding the most expeditious way to push him out.

"The Tonight Show' at 12:05 simply isn't 'The Tonight Show," Mr. O'Brien wrote. "I cannot participate in what I honestly believe is its destruction."

The exit deal took days of back-and-forth. In a testy meeting Jan. 12, NBC threatened to prevent Mr. O'Brien from working at another network for 2½ years, the remaining term of his contract, said people familiar with the matter. Mr. Graboff asked if Mr. O'Brien would show up for work if NBC carried out plans to move "The Tonight Show."

Hollywood litigator Patricia Glaser, newly added to Mr. O'Brien's team, replied that he would, but Mr. O'Brien's allies added a threat. "As they say, 'We'll see you in court,'" the comedian's manager lobbed. Mr. O'Brien's representatives marched out of the meeting.

Messrs. Gaspin and Zucker then asked Universal Studios boss Ron Meyer, a former Hollywood agent, to step in as a more neutral negotiator. Working closely with Mr. O'Brien's agent, Rick Rosen, and after hours of shuttle negotiations, the two sides agreed on broad-brush terms for Mr. O'Brien's exit, including a settlement of roughly $40 million, which includes a payout for Mr. O'Brien's staff, and a provision that he can appear on a competing network after less than a year.

As contract talks dragged on, the late-night jokes about the imbroglio turned from playful to hostile. "I just want to say to the kids out there: You can do anything you want in life," Mr. O'Brien told viewers Thursday. "Unless Jay Leno wants to do it, too." Supporters rallied around "Team Coco," the gaggle of Mr. O'Brien's supporters. The "I'm with Coco" Facebook page has more than 310,000 fans.

Some current and former NBC executives said Mr. Zucker appears to have distanced himself from the controversy. Another person said that at least some executives who work for Mr. Gaspin were upset about the decision and wanted him to rethink the decision to dump Mr. O'Brien. Mr. Zucker denied that, and a spokeswoman said he hadn't done many media interviews because the negotiations with Mr. O'Brien were ongoing.

"Jeff Gaspin has responsibility for NBC entertainment. And he has stepped up and taken that responsibility," Mr. Zucker said. "He wanted to make the change at 10 o'clock. He wanted to keep all three folks in late night. I was supportive of that."

[catlover79]

Wow, I heard it was going to be an $80 million buyout. Looks like NBC is getting off cheap!!

[Zoneboy]

[Marvo301]

Originally Posted by catlover79

Wow, I heard it was going to be an $80 million buyout. Looks like NBC is getting off cheap!!

When Conan refused the move to 12:05 he left himself with nowhere to go but out the door and put all the leverage in NBC's hands. Turns out that was about a $40 million dollar decision on his part.

[Marvo301]

Originally Posted by Zoneboy

I hear this is going to be NBC's new marketing campaign!!

[Scoobiedoo30]

WOW 40 Million Dollar's

[Mr. Television]

$40 million to leave NBC...what a deal. I wonder how many others would jump at that?

[catlover79]

Originally Posted by Clint Eastwood Fan

$40 million to leave NBC...what a deal. I wonder how many others would jump at that?

I would!!

[Marvo301]

Originally Posted by catlover79

I would!!

Hey I'd take $40 million to never work for NBC in the first place!