The Hollywood Reporter -- This story first appeared in the April 5 issue of The Hollywood Reporter magazine.
Visitors to West Hollywood's posh Soho House on March 21 could be forgiven for craning their necks. Amid a dining room filled with the usual mix of actors and agents on the 14th floor of the private club, two unlikely dinner companions commanded attention: NBC entertainment chairman Robert Greenblatt and Jay Leno, the Tonight Show host whose status at the network had become a running joke of its own.
Leno's on-air ribbing of NBC and its ratings struggles had drawn the ire of Greenblatt, who had fired off an angry after-midnight email to Leno. The missive, which blind cc'd several NBC executives, led to a terse electronic exchange between Greenblatt and the longtime host. Shortly thereafter, on March 1, The Hollywood Reporter revealed that NBC was planning an exit strategy for Leno, 62. Despite his status as the most-watched late-night host, he would be asked to hand over The Tonight Show to the network's 38-year-old Late Night star Jimmy Fallon, 24 years his junior, around the time Leno's current contract expires in September 2014. apcm:Sources say Leno, when he signed his most recent deal, expected it could be his last at the network. But he is said to have been upset by what he perceived to be an NBC leak to THR and by the prospect of another messy transition that would play out in the press.
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Indeed, news of the NBC plan prompted a media frenzy not seen in late-night TV since, well, the last time NBC attempted to dethrone Leno. That 2009 effort to install Conan O'Brien at Tonight and move Leno to a nightly 10 p.m. show backfired colossally. Within months, Leno reacquired his 11:35 perch and O'Brien left for a lesser-watched TBS gig and a $45 million payout. But while Leno remained mostly silent during the Conan debacle -- even as his rivals and the media pushed a Leno-as-villain narrative -- this time he fueled the flames of speculation. Leno and other hosts always have poked fun at their networks, but after the Greenblatt email conversation became public March 15, Leno launched a week's worth of pointed jabs at his employer, referring to NBC execs as "snakes" and suggesting the network would send its top star on an ill-fated Carnival cruise. For NBC, the timing was terrible because it coincided with an embarrassing fifth-place finish during the February sweep (below Univision) and highly critical media coverage of its Today franchise that revealed a mishandling of the ouster of Ann Curry -- the kind of press NBC seems unable to finesse.
apcm:Sources say Fallon, fearing he could be painted as the guy who put TV's late-night king out to pasture, reached out personally to Leno. And the Greenblatt dinner, which had been rescheduled after the NBC exec canceled an earlier sit-down, was an attempt to mend fences. It is said to have worked. Leno is believed to have left Soho House with at least a temporary confidence that despite the signs of yet another PR disaster at NBC, the Tonight transition will be handled better than it was last time. But the shift will happen, which raises the question: Why is NBC again ousting its No. 1 host from the only time slot it regularly wins?
By almost all broadcast TV metrics, Leno's Tonight is tops, leaving some to question why a forced handoff is even on the table. With inoffensive, meat-and-potatoes humor that resonates in middle America, Tonight regularly bests CBS' Late Show With David Letterman and ABC's Jimmy Kimmel Live!, even in the key 18-to-49 demo, where Leno is averaging an 0.8 rating (about 1 million viewers) for the season.
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But the diminishing economics of late night render a first-place finish less meaningful. Leno turns 63 in April and Kimmel, 45, has made inroads with younger viewers since his January move from 12:05 to 11:35. Fallon, at 38, is seen as able to lure both younger viewers, as O'Brien did, as well as the older crowd Leno is able to court. In fact, Fallon's median viewer age is 53.3, not too far from Leno's 58.1, suggesting the late-night talk format in its current broadcast network form might be aging out of existence no matter who the man in the suit telling jokes.
Network sources say Tonight now generates just $30 million to $40 million a year in profit -- a far cry from the $150 million the storied franchise made during the heyday of broadcast late night. Tonight booked $255 million in ad revenue in 2007 compared to $146 million in 2012, a decline of more than 42 percent in five years, according to Kantar Media. CBS, which has a transition of its own looming with 65-year-old Letterman, has suffered similar ad declines in the space (though CBS Corp. CEO Les Moonves has always said Late Show is Letterman's until he wants to leave). "You can just see what's happening in [late night]," says one source. "The longer you wait, the more it gets fractured and smaller, less relevant."
In fact, data shows NBC and its broadcast rivals are chasing a late-night audience that is more interested in watching DVR-recorded shows or web clips, not to mention Jon Stewart, Stephen Colbert or other late-night upstarts such as Russell Brand on FX or Chelsea Handler on E!. With ratings headed south, many believe it soon might make sense for NBC to consider one of three alternatives: eliminating the 12:35 show and extending Tonight to 90 minutes, running a repeat of Tonight at 12:35 or giving the hour back to affiliates. More likely, when Fallon exits the Late Night slot, it will be filled by another lower-cost comic, possibly Lorne Michaels protege Seth Meyers.
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Fallon, whose CAA agents (led by Richard Lovett) are negotiating a new deal with NBC -- with increased leverage care of the media attention -- is likely to come cheaper than Leno, who, sources say, still is making $15 million a year even after he took a roughly 40 percent pay cut last year. Leno, fiercely loyal to his staff, agreed to the reduction to avoid having to lay off more than the 20 or so employees necessary to bring the show's budget down from around $100 million per year. Tonight also carries an expensive lease at its Burbank studio, which NBC sold to the Worthe Real Estate Group in 2008.
Perhaps ironically, Leno now is averaging smaller ratings than when O'Brien was forced off Tonight with a 1.1 rating among viewers ages 18-to-49. Meanwhile, Stewart is beating Leno (albeit a half-hour earlier) with a 1.1 rating on Comedy Central. And The Daily Show and The Colbert Report dominate the field among viewers 18-to-34, as well as among young men, an elusive demo. At the same time, for the first 10 weeks of the year, Kimmel closed the gap to within 81,000 demo viewers of Tonight and already is out-delivering Letterman among that set.
In addition, Fallon's snark-free demeanor and silly stunts (beer pong with Betty White, "mom dancing" with Michelle Obama) have turned him into the late-night host with the highest Q score, the likability measurement to which network executives pay close attention. With an appeal score of 15, according to Henry Schafer, executive vp of The Q Scores Co., Fallon has surpassed Leno's 2013 Q score of 13. That's a year-over-year drop of five points for Leno, long the most-liked late-night host, and a jump of two points for Fallon compared to 2012. In addition, Fallon, like Kimmel, has a knack for viral videos -- already the next wave in late night, where even if digital CPMs are now pennies on the TV dollar, there is still a flag in the ground that Leno and Letterman have yet to plant.
NBC is building Fallon a new stage at 30 Rockefeller Plaza in New York and is planning to relocate The Tonight Show there -- though sources say the exact timing is not decided because Leno's deal requires NBC to pay a huge penalty if he is taken off the air before his contract expires in September 2014. "Walls are being torn out and offices are being moved," says a person familiar with the plan. The current Late Night studio will be expanded from its 180-audience-member capacity to hold at least 350 and connect three floors at 30 Rock, insiders say.
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The bigger facility would not only accommodate Fallon's Tonight but also film premieres and employee meetings. And because it holds more than 200 people, it would qualify for tax breaks that New York lawmakers are considering. While California politicos have remained mostly silent on the issue of Tonight and its 200 jobs leaving the state (save for the mayor of Burbank, who vowed a hunger strike to keep the show), New Yorkers have welcomed the prospect. Still, some have balked at the use of tax incentives. "Jimmy Fallon does his show here already," Republican Assemblyman Ray Walter told WGRZ in New York. "It seems like a waste of money -- just a gift to these production companies."
In Burbank, where Tonight has taped since Johnny Carson moved the show there in 1972, employees tell THR they hope Leno will take another TV job. Although his options likely won't be as appealing as they once would have been, he will have choices. The most obvious next move would be a late-night show on Fox. In fact, according to Bill Carroll, director of programming at Katz Media Group, it's the "only logical place" in syndication. What's more, Fox affiliate board chairman Steve Pruett recently told The New York Post that if the network were to present "the right business plan, the affiliate board would be interested." Still, Fox weighed the option of luring O'Brien when he lost Tonight and ultimately decided it did not make economic sense. Carroll estimates it would cost $100 million to launch a new Leno show.
Outside of the Fox stations, syndication would prove a challenge. Tribune already has locked up Arsenio Hall for a late-night debut this fall, though some suggest there is a world in which Tribune as well as WGN could become options for Leno. Many of the other independent stations already have made commitments to off-network sitcoms such as 2 Broke Girls or Modern Family for the foreseeable future. And, as one source puts it, benching Leno for a year or so is unlikely because the host, who works 24/7 on TV and in comedy clubs, isn't interested in sitting out. Says that source: "He doesn't need the money, and he doesn't spend the money. Being on the air is much more important to him."
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Cable, too, could present options for Leno. Multiple sources suggest at least two cable networks have expressed interest in him. Other possibilities include a daytime show a la Ellen, a primetime variety show or even a CNN entry reuniting him with former NBCU chief Jeff Zucker, who famously set the last round of late-night wars in motion in 2004 when he promised O'Brien he would inherit The Tonight Show in 2009 if he re-upped on Late Night for five years.
NBC is said to want nothing more than to avoid another Leno circus -- so much so that NBCUniversal CEO Steve Burke has involved himself personally in the Fallon negotiations. The network, along with Leno, declined comment.
apcm:Sources say Leno is willing to exit the network amicably -- if NBC handles its end of the transition in the same manner. After all, he is in his 60s this time around, not his 50s, and he (and the business of late night) are in a much different place than during the 2009 fight for Tonight.
apcm:Sources say no decision has been made about Leno's next steps, nor is one likely in the near term. Greenblatt, for one, told The Wall Street Journal in September he hoped for a smooth transition. "I'm sure there will be a day when these guys -- Letterman and Leno -- wake up and say, 'It's time for us to exit gracefully.' "
Alex Ben Block, Paul Bond, Marisa Guthrie and Lacey Rose contributed to this report.
Related article on THR.com:
Dick Cavett on 'Tonight Show' Host Angst: Johnny Carson 'Only Happy For That Hour of His Day'
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Find more online: THR.com
Who still watches these shows.... The majority of the population in this country... which happen to be over 50... what intelligent person watches all the made up stupid reality shows on TV in this country.. At least the talk show has some reality in them. Give em hell LENO!
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