The Late Shift

by Carter, Bill

  But Wright didn’t see a new plan coming together—and his temperature was going up through the sky. Littlefield and Agoglia assured Wright that they had lined up Dana Carvey, the newest star to emerge from “Saturday Night Live,” as the next Letterman. He’s there, they told Wright. The deal is set. But Wright pressed for details: Can we count on this? Is it finalized? Is it a done deal? Littlefield and Agoglia admitted it wasn’t quite to that point yet.

  It wasn’t that Wright was ready to jettison Leno, however. He listened to Rohrbeck and others pressing for Letterman at any cost, and he decided to check what the cost would really be. In mid-November he pulled Rohrbeck and some other Letterman supporters aside and clued them in: The deal with Leno put NBC on the hook for a full payoff of the remainder of his two-year contract. It would cost NBC between $10 million and $11 million to settle up with Jay, Wright said.

  Rohrbeck was undaunted. He told Wright that sounded like a big figure but it was short money, and it didn’t matter. What mattered was the long term, he said—having the leading man in late night. But NBC was in the middle of a disastrous year for profits, a year when, even in network television, a figure like $10 million started to sound like real money.

  Jay Leno’s campaign to undo the damage of Helen Kushnick’s reign over the “Tonight” show went on for weeks. He not only apologized to almost everyone he ran into, he also began to purge the show of Helenisms. If Helen liked it, Jay didn’t. Except for the people; Jay was generous with everybody on the staff. The “staff member of the month” got a dinner at Spago—on Jay. Stars who called in asking about possible booking conflicts with Arsenio Hall were told anything was cool, just work out the best dates for each appearance. Jay began to apply a standard that Helen had never tolerated: He treated everyone well and let things work out for themselves.

  Helen was not replaced. The show went without a formal executive producer. Jay worked with his two producers, Debbie Vickers and Bill Royce, to put together the show every night. The tension disappeared; Jay thought his own performance improved immediately, and that the performance of the show followed. Jay was managing himself now—“in that fool-for-a-client way, I suppose,” he said—and functioning informally as his own executive producer.

  And yet the pressure had only shifted; it had not been blown out to sea along with Hurricane Helen. Because now, the talk inside NBC was all about Dave. Jay’s West Coast allies—Littlefield, Agoglia, and Rick Ludwin, the head of late-night programming—filled him in on the simmering pro-Dave movement building in New York. Clearly, Jay’s performance in November was looking more and more crucial, because November is one of the three “sweeps” months of the television season, when the ratings for the widest number of television markets are taken and used for the next quarter’s sales. After tailing off in the summer amid the chaos behind the scenes, Jay’s ratings had stabilized in October. And as November began, the numbers started to climb again.

  At the point of his one hundredth edition of the show, Jay made a pledge to his NBC bosses: “If I can’t keep the ratings up on the show, I’ll step aside. Don’t worry about it.” He even gave NBC a possible negotiating position to take to Letterman. “Look,” he said. “I’m here for two years. If you don’t like what I’m doing in two years, give it to David. I’ve got a contract. Live out the contract. If you’re not happy, I can’t stay on past when you want me to stay on.”

  Jay Leno was convinced the show had righted itself, that it was now running smoothly. He felt he could once again put his faith in the numbers.

  The first time CAA narrowed down the bidders, most of the syndicators—Paramount, Warner, Columbia, Chris-Craft—didn’t make the cut. Disney was still in, partly, the Letterman side thought, in deference to Ovitz’s close relationship with Michael Eisner. But they also recognized that, of the syndicators, Disney was clearly the class act. Disney’s money terms were way off, but CAA could put that down to early conservatism and Disney’s well-known tightness with a buck.

  Viacom was still a maybe, through the sheer weight of cold cash. The Viacom terms were dizzying; they seemed to leave little or no room for the company to make money, because Letterman would be making so much. Viacom was guaranteeing Letterman $20 million a year in salary, against up to 70 percent of the profits from the show. Even a modest ratings success could have brought Letterman as much as $50 million a year. One CBS executive who discussed the deal with a top Viacom manager said the company had a grand marketing plan to rebuild itself as a presence in the syndication market, with a Letterman show in late night as the jewel in the crown. Viacom was willing to accept the show as a high-profile loss leader. But Viacom was still a syndication deal; so even at those prices, Viacom was barely a maybe.

  Letterman had left little doubt about his skepticism about syndication. The syndicators could sign checks but they couldn’t supply the answers he needed: Where would his show be placed? Would his promos run in the middle of some tawdry, melodramatic talk show or tabloid magazine? The CAA team knew from the start that Dave was only going to be comfortable with a network Ovitz concluded that Dave wanted to have to listen to just one voice. And so the agency politely closed the books on Viacom. As for Disney, nobody was going to accuse that organization of being sleazy; but even Disney couldn’t guarantee a lineup of stations that would make Letterman truly competitive with the “Tonight” show. It wasn’t a network deal; it wasn’t what David Letterman was used to. But the Disney Company was not going to go gently out of late night.

  Michael Eisner, the Disney chairman, had been especially aggressive in the Letterman chase. On November 11, toward the end of the first negotiation period, during a National Conference of Christians and Jews dinner honoring Rupert Murdoch at the Beverly Hilton Hotel, Stringer spotted Eisner sitting next to CAA’s Lee Gabler. Stringer could hear the Disney chairman loudly denigrating network television as a business about to go under and CBS in particular as a network with nothing but decrepit old viewers. Stringer jumped in immediately and defended the honor of his company, telling Gabler not to listen to that tired, old, antinetwork rant.

  When Disney got the final word—that Mr. Letterman would be going elsewhere—Michael Eisner was upset. He called Ovitz to complain; he wrote Letterman a letter, even called Letterman himself, putting on a Hollywood full-court press to try to turn the decision around. Ovitz tried to appease Eisner while dispatching Gabler to deliver the harsher message: No matter what it tried, Disney wasn’t getting David Letterman.

  The Letterman side was mildly surprised at the fuss: Disney’s offer wasn’t even in the ballpark. It included a guarantee to Letterman of only $6.5 million a year in salary (a fraction of the other offers) and only a $53 million total two-year guarantee for the show’s budget, prime-time specials, and other costs. By contrast, Warner’s Telepictures, which never got to the later rounds, had guaranteed Letterman $8.3 million a year and a $109 million total guarantee for three years.

  CAA was looking for huge guaranteed money in the packages, and for more than the most obvious reasons. It still had to deal with NBC’s right to match any offer, and NBC would not have flinched at putting up $6.5 million to keep Letterman at 12:30.

  The two players left in the game were CBS and Fox—by no coincidence at all, the two network players. Fox had impressed the CAA negotiators. Jamie Kellner, the Fox president, had made a terrific case for Fox, Gabler thought, with his emphasis on how well Letterman would play to the core Fox audience. But CBS was the front-runner and everybody knew it. Ovitz knew Stringer and Tisch had no choice. They had to go all out for this deal. If the network’s offer was intelligently assembled—and potent financially—it was going to win the first round of the Letterman sweepstakes.

  CBS had already invested in some comprehensive research into how Letterman might play at 11:30 on CBS. In November the network’s head of research, David Poltrack, began conducting regular telephone surveys of 2,000 people, some who had watched late-night television recently and others who hadn
’t. CBS offered the viewers four choices—Letterman, Leno, Arsenio Hall, or “Nightline”—and asked what they thought of each. In another custom research study, Poltrack put together 250 people who had not watched David Letterman and asked them to watch his show for one night. Ten different shows were included in the test period. After they’d seen Letterman, CBS asked these viewers whether they would watch him or the other shows.

  In each case Letterman came out a strong winner. In the CBS tests Letterman’s biggest competitor wasn’t Leno but “Nightline.” Poltrack checked back through various months of testing and detected a downward trend in Leno’s popularity. He reported to Stringer that the test results showed Letterman’s popularity was not just strong but broad, and much better with women than anyone had anticipated. More than that, it looked to Poltrack as though Jay Leno might be vulnerable, that his solid ratings might be more attributable to the consistent appeal of the “Tonight” show than to Leno’s intrinsic popularity with viewers. The information wasn’t going to make Stringer’s pursuit of Letterman any more intense, because Stringer was going flat out as it was. But it certainly made him feel that the network had more evidence than his own programming instincts to justify a groundbreaking financial package for the late-night star.

  Stringer spent hours on the phone with Ovitz, talking in more general terms about the values of CBS, and in person with Gabler, who conducted the specific negotiations. But Stringer never felt secure about CBS’s position. He decided it was the most difficult negotiation he had ever been a part of. The variables were incalculable. When Stringer thought of Viacom and all that money, he also thought of things such as how they could try to sell Letterman on the virtues of cross-promotion on their cable channels, including MTV. When Stringer thought of Fox he thought of Rupert Murdoch tossing in movie deals that CBS simply couldn’t match, because it wasn’t part of a movie studio. About all Stringer could take comfort in was that he was negotiating for a person who was a broadcaster down to his loafers. Stringer never felt the deal would turn on money, partly because he could sense that Letterman was simply not the materialistic type, but mostly because this entire orchestration of escape from NBC could not have been about money. It had to be about more than that, Stringer thought. “It had to be about fulfillment and opportunity and a well-earned moment in the spotlight.”

  In the end, the CBS offer was not the biggest in terms of money; it was dwarfed by the Viacom offer, beaten by the Chris-Craft offer, and about the same as what Fox would have put up. Fox offered Letterman a guaranteed salary of $12 million a year, but that could have swelled by more than $3 million a year if he hit certain ratings figures. Fox’s three-year deal included up to $10 million in bonus money for ratings performance. The three-year license fee guarantee from Fox was $84 million, or $28 million a year, with another $7.2 million set aside for prime-time specials.

  When he discussed the merits of the deals, Ovitz emphasized that the CBS offer included “value-added” features, such as the chance to become, in essence, the on-air spokesman for the entire network, and the fact that CBS looked like the network that was starting to put it all together in prime time and elsewhere. Gabler believed CBS was truly hungry, and well on its way to recovering fully from its disaster of the late eighties. Besides that, Gabler concluded, Howard Stringer was a phenomenal executive.

  Letterman had the Ed Murrow image stuck somewhere in the back of his mind, and that didn’t hurt. Certainly at CBS the decision would be the cleanest: He would get his shot on a network at 11:30; it would be direct competition with the “Tonight” show, mano a mano with Jay Leno.

  For some on the Letterman/CAA side, the selection of CBS was a nondecision. Syndication had never been part of the equation; Fox was a step into uncertainty. CBS won the game by default.

  But it was not as though CBS hadn’t put chips on the table. The network’s three-year deal guaranteed Letterman a yearly salary of $12.5 million, with a bonus clause that could take it as high as $14.5 million a year. The bonus was to be calculated on the basis of how well Letterman scored with one specific audience: adults between the ages of eighteen and forty-nine—the main demographic on which advertisers buy television advertising time. If Letterman averaged a 3 rating with that group of viewers, he would get a bonus of $1 million. If he averaged a 3.5 rating, the bonus would be $1.5 million. If he reached a 4 rating with adults eighteen to forty-nine, he would get the full $2 million bonus.

  In addition, CBS agreed to put up a total of $82 million as the budget fee for the show over three years, a fee that would cover all other salaries, costs of production, and the deal for use of the studio. The contract was for forty-six weeks of original programs in the first year, and forty-four weeks a year for the next two years. CBS also promised to pay a $7.2 million licensing fee for prime-time specials. CBS would also grant Letterman’s production company, Worldwide Pants Inc., full ownership of the show, and the company would also get control of the production rights to a future backup show to run from 12:30 to 1:30.

  When the decision was made, an effusive Lee Gabler called Howard Stringer to let him know CBS had won the first round of the David Letterman sweepstakes. Stringer accepted the news with great enthusiasm and thanked Gabler extravagantly for his support. Certainly Howard Stringer felt good, but he was not elated. It was just the first stage, he knew, with the real challenge yet to come.

  Nobody served champagne at CBS, though Stringer did dispatch more trinkets toward the Letterman offices. A Steuben glass eagle for Dave with a note: “If the eagle hasn’t landed, at least it’s in flight.” Lassally and Morton got glass Steuben bulls.

  As Stringer read the situation, CBS was still in a position to be the stalking horse, not the derby winner. For all the work he had put into landing David Letterman, the next stage would hinge on something completely out of his control: what NBC did. Larry Tisch said it plainly to Stringer: NBC is going to match. The mood at CBS was slightly negative about the chances of David Letterman ever turning up as the savior of CBS’s late night.

  Rod Perth, the head of late-night programming for CBS, wanted mightily to be the executive in charge of a late-night lineup headed by David Letterman; but he simply couldn’t believe NBC would be stupid enough to let Dave go. His feeling, and it was shared by everyone from Jeff Sagansky, the head of CBS entertainment programming, to Stringer himself, was that NBC would bite the bullet and buy its way out of Jay Leno’s contract; that Bob Wright and Warren Littlefield would look at Jay’s performance, check their own research (which would surely show the same things CBS’s had), figure in how much of Jay’s strength was the holdover popularity of the “Tonight” show, and conclude that Jay was a long-term problem at 11:30—especially if he ever had to go head-to-head with Letterman.

  Stringer looked at all the publicity about the auction for Letterman—all the frenzied interest in him from top executives inhabiting every corner of the television industry, all of whom had decided this was a seriously undervalued star—and concluded NBC had to do something. It only made sense.

  NBC had thirty business days to match the offer or lose David Letterman to CBS, a schedule that, because of the Christmas holidays, made the deadline January 15. NBC’s public reaction, as articulated by Warren Littlefield, was that CBS had proved to be consistent. “When Jay Leno hosted the ‘Tonight’ show, they went after him. When they couldn’t have him they went after David Letterman. They didn’t nurture, they didn’t grow anything, they went after things that worked as opposed to creating any franchise of their own.”

  For Bob Wright the view of his West Coast executives had proved to be equally consistent: They never fully believed David Letterman would ever leave NBC. “The West Coast view was just about money,” Wright noted. It was self-serving, he said, because they never wanted to lose Letterman and they never thought they would when they picked Jay Leno. It was a way they could have both stars instead of one—as long as Letterman didn’t leave. “It was always hard for them to admit that
the whole scheme didn’t work,” Wright said. “To lose one and have him compete against you. They weren’t into that.”

  Agoglia had strong faith in his matching rights. But CAA had developed an idea of how to counter that as well. On December 7, when Lee Gabler drove the CBS deal over to John Agoglia’s office, accompanied by the head of business affairs for CAA, Steve Lafferty, he wondered how Agoglia was going to react. Lafferty, and other lawyers for CAA and Letterman, had thoroughly vetted a special clause that had been inserted into the CBS offer. It was, in effect, a poison pill designed to thwart NBC if it decided simply to pay the fat salary and match CBS, keeping David Letterman right where he was, right where they intended to continue to hold him: at 12:30.

  The CBS deal stipulated that the network would pay Letterman a penalty fee of an astounding $50 million if he did not get a show in the 11:30 time period. In other words, any deal presented by NBC had to guarantee Letterman the “Tonight” show time period or else pay him an extra $50 million. What CAA was attempting to do was ensure that no NBC deal could truly match the CBS offer if it did not give Dave an 11:30 show.

  When Gabler and Lafferty arrived in Agoglia’s office with the papers, Agoglia greeted them with his thin smile. Gabler was struck by how much Agoglia reminded him of the Cheshire cat. As Agoglia read the details of the CBS deal, he grew more and more dour. When he got to the penalty payment clause, he got downright testy. “Very cute, guys,” he said. “But I’ll tell you, we don’t agree with this.” The CAA lawyers were convinced they could make the penalty payment stick; Agoglia simply didn’t take seriously the idea that time periods could become a contract issue that NBC had to match.