by Carter, Bill
NBC was offering a deal that would give Letterman a “Tonight” show with a budget no more than 5 percent bigger than what Leno currently had—so they knew they would not be doing a very expensive show. Letterman himself would be paid a fee that was described as somewhere between his present salary of about $7 million a year and the $12.5 million base salary in the CBS deal.
Immediately, those in the room familiar with the terms of the contracts knew that NBC was in no way offering to match the CBS deal; they were coming in with an entirely separate offer on their own terms.
NBC was promising a three- to four-year guarantee, which was fine. But then came the truly unexpected twist: The deal would not go into effect until May 1994. It was January 8, 1993, at that moment. NBC was offering David Letterman the “Tonight” show after a seventeen-month waiting period.
The May date, as everyone knew, coincided with the end of Jay Leno’s current contract. So the implication was clear: NBC wanted to avoid paying off Jay. He could stay until the end of his deal, with Letterman sitting on his shoulder waiting to step in, or he could quit and forfeit his $10 million penalty payment.
Ovitz was not simply presenting the NBC offer. He couched all the details in terms of “CBS is offering this, NBC is offering that.” But he did say the magic words: NBC will give Dave the “Tonight” show.
The others in the room could see the flame of excitement ablaze in Letterman’s eyes as Ovitz said the words. But Ovitz went on, following the details of the offer immediately with his analysis—and his recommendations.
With CBS, you have to figure out how they are going to handle the affiliate situation, Ovitz said. CBS could not guarantee anywhere near the full affiliate lineup that NBC could in the first year, but Ovitz pointed out that CBS had momentum in prime time for the first time in six or seven years, and clearly that momentum was almost certain to carry over into better relationships with its affiliates. Next, Ovitz said, there is the downside to the “Tonight” show. Leno had reached about a 4.9 rating, Ovitz said. If Dave were to take over the show and fall below that figure, it would be immediately perceived as real trouble. That was something to consider seriously, Ovitz pointed out. The CBS situation was just the opposite, he said. Its late-night lineup was only doing about a 2.7 rating. If Dave could reach a 3.9 rating on CBS, CAA could go back in and renegotiate his contract, because he would already be a big winner at the network. Another issue was ownership, Ovitz said. With CBS, Dave would own his show; NBC was going to retain ownership of the “Tonight” show. And with CBS, Dave’s company would also control the 12:30 time period. That led to the overall issue of goodwill. CBS had poured it out by the bucketful in pursuing Dave. NBC had never expended much in the way of goodwill on David Letterman. And finally, Ovitz reminded Letterman and the others, you want to beat NBC’s pants off.
For all those reasons the recommendation from CAA was clear: Dave should go with CBS.
Letterman heard him say that, but in truth he had not heard too much after the part about having the “Tonight” show. The dream was alive and there for him to grab.
Peter Lassally had been stopped in his tracks by the bizarre requirement that Dave wait until a year from the next May before he got a shot at the show. He jumped in to make two points: “This gives Jay an extra year and something more to make a hit out of his show,” he said. “And if he is a hit, NBC’s going to weasel out of the deal with us. And even if Jay is not a hit and we take over, you, Dave, will be the villain who threw Jay Leno out of that time slot.”
They discussed how the May date was clearly designed either to force Jay’s hand by making him quit, or to give NBC another seventeen months’ worth of both stars in late night. In either case, Letterman was absorbing all the risk. If Jay felt forced to quit, there was the likelihood of a major public relations fiasco. If Dave held on while Jay did the show as a lame duck, Dave had to face all the possibilities of something unpredictable happening to him or to Jay in that long period of time.
They went over some of the economics. Since Jay’s deal was apparently part of the framework for the offer, they looked at what it would mean. Jay was making over $6 million in salary in the first year of his deal, set to go to $7 million in the second year. The show’s budget was at $23 million in the first year, $24 million in the second year. Figuring that they could go up no more than 5 percent, the show’s budget wasn’t going to reach the $27 million-plus set out by the CBS deal until the last year of a four-year deal.
Everyone tried to guess what NBC was up to with this offer. Was this a sly tactic to save GE a barrel of cash, dreamed up to take Letterman’s temperature for Jack Welch? This was where Dave was vulnerable; he wanted the “Tonight” show so badly. So how far would he go toward taking a lesser deal to get a shot at it? Or was this just NBC’s answer to undoing the tangled late-night knot? Promise Dave the job; let Jay know, and if he chooses to go to CBS, so be it. Why should NBC have to pay both guys a bundle if it was only going to retain one of them? The consensus started to build that this was an offer for the “Tonight” show, yes, but a convoluted, gimmicky one that had very little to recommend it.
But one key vote seemed to be going against that consensus. David Letterman still had that dreamy look in his eyes. He had heard Ovitz recommend strongly that he go to CBS. But that jarred so strongly with the thrill he was feeling at that moment that he couldn’t even begin to say the words: Okay, it’s CBS.
For Letterman the moment was one of pure astonishment. He had heard Peter Lassally telling him for weeks that something was happening at NBC, that there was still a chance the “Tonight” show would come around again. But he never truly believed; he wouldn’t allow himself to believe. It clashed so violently with his assumptions about the General Electric Company and how the guys who ran a conglomerate like that worked. Letterman figured these were guys who chewed up puny decisions like this and spit them out their noses. But now, to see it actually unfolding this way, where the “Tonight” show was truly being offered to him, struck Letterman as some kind of miracle.
“I can’t make this decision,” he told Ovitz. “It’s every race driver’s dream to drive a Ferrari.” No one had to ask which late-night show equated with a Ferrari. “You’re asking me to give that up,” Letterman said.
Ovitz told Dave that they needed to come to a decision. The weekend had started. The offer was out there. They had to respond.
“I appreciate what you’re saying and I understand,” Letterman said. “But I just can’t make this decision. I need to see how my stomach is going to feel for a couple of days.”
“There is one thing I can do now,” Ovitz said, putting the idea together on the spot. “I can buy some time. I’ll get Agoglia in here on Saturday and Sunday and have him start drawing up a contract.”
The idea made Letterman howl. It was just so perfect. He howled with laughter and shouted back to Ovitz on the phone, “Yes, get him in there! Get Agoglia in there! I don’t want to be the only one whose weekend is ruined. Get Agoglia in there.”
Sure, it was an ugly thought, an unpleasant, cruel notion, to have John Agoglia dragging his ass out to CAA on a weekend to negotiate a contract that may not ever come to anything, knowing that as one of Leno’s biggest boosters, he didn’t even want Letterman anyway. But it made David Letterman laugh with naughty glee. It was just such a hoot: Let Agoglia go in there and spend some of his weekend working on a contract, Letterman thought, while I sit at home in hell trying to decide what I’m going to do.
On Saturday morning Lee Gabler arrived first at the CAA offices. While waiting for the others he flipped on the Buffalo-Pittsburgh play-off game, propped his feet up on the desk, and relaxed. He would be leading the CAA negotiation with John Agoglia. This was not a meeting Mike Ovitz was going to take.
About noon Steve Lafferty, the head of business affairs for CAA, showed up with Jim Jackoway, a young lawyer who had first represented Peter Lassally and then had taken over as Letterman’s show business att
orney. The three men had known something had been brewing between Wright and Ovitz for some time, and had been preparing some ideas for the offer they expected to receive from NBC. What they knew from the offer that Ovitz communicated to Letterman the night before was that it was still in the vague stage, certainly nowhere near the point where they would have to call Howard Stringer. What the men on the CAA side concluded was that their client wanted an offer for the “Tonight” show and they were there to get the best offer they could out of NBC.
Shortly after noon John Agoglia arrived. He was accompanied by Leslie Maskin, a senior vice president for business affairs for NBC and also an attorney. Many lawyers who had negotiated with John Agoglia felt he was extremely self-conscious about the fact that he himself was not an attorney and had to deal with attorneys on the other side of negotiations all the time.
The football game was zapped off and the group sat down around a table in Gabler’s office. Agoglia first explained that NBC was not relinquishing any of its positions with regard to matching rights. Then he laid out the terms of the NBC proposal, which were much the same as what David Letterman had heard from Mike Ovitz the night before. NBC was offering Letterman the “Tonight” show to start at a date no later than May 1994. The “no later than” was totally a function of how Jay Leno was going to react, Agoglia explained. NBC was looking to protect itself, he added. The network had to be concerned with losing advertisers: Should Dave move up to 11:30 immediately, NBC wouldn’t have a show to offer at 12:30. This was why they wanted Dave to hang in at 12:30 for awhile. But, of course, if Jay followed up on his threat to quit, Dave would get the show much sooner.
The five participants then speculated on what Jay might do if this deal were accepted, with some of the lawyers suggesting how they would advise Leno were he their client. They all agreed that whomever Jay got to advise him would surely tell him not to quit, because he would be forgoing the huge penalty payment if he did.
The negotiation continued with Agoglia discussing how NBC could offer Letterman’s company, World wide Pants, a production service arrangement in lieu of taking ownership of the show. NBC didn’t want to sign away the rights to the show, but it would grant rights to Worldwide Pants in the production service agreement that would include most of the advantages it would get from outright ownership. What NBC was proposing did not seem unreasonable to anyone on the CAA side. Gabler saw no deal breaker in the ownership issue. Nor was the salary offer for Dave substantially short of the CBS arrangement, he felt.
But the parameters of the deal remained a bit vague. One of the CAA team thought that the promise of hosting the “Tonight” show, as it was presented orally by Agoglia, contained a lot of flexibility. He wondered if the deal would have left it open for NBC to split the job somehow after May of ’94, giving Letterman the job for twenty or twenty-five weeks instead of full-time. That and many other questions needed to be answered.
The two sides broke several times during the three-hour-long meeting so that calls could be made for updates with the main players, Wright and Ovitz. When they got back in the room, the CAA side had more questions. Gabler made the point that CAA would need to see some of this give-and-take over the terms of the offer put down in writing so that questions could be framed better—and for the simple reason that if Letterman was going to reject CBS, he was going to need something written down that he could hold in his hand before he took that step. The CAA side asked Agoglia if he could distill the main terms to writing and fax them the proposal on Sunday. He agreed.
Gabler and the others were somewhat surprised that John Agoglia had been the one to carry the offer, given how they well knew of his strong resistance to making a deal with Letterman from Day One. Gabler thought Agoglia’s demeanor was typical: businesslike but icy cold. He seemed at best halfhearted about the offer. But they knew it was coming from Bob Wright, not John Agoglia, and Wright had the only heart that counted.
The substance of the offer on Saturday had not changed much from what Ovitz had communicated to Letterman the night before. So Dave’s decision was not made easier in the least. At home in Connecticut that weekend, Letterman made and received dozens of calls. He spoke with his longtime director, Hal Gurnee, one of the steadiest veteran hands on the show. He talked to Jude Brennan, a “Late Night” producer, whose counsel he also respected. He spoke most frequently, of course, with Robert Morton and Peter Lassally, his executive producers, who had ridden the whole, long, choppy voyage with him. All these voices were unanimous: The NBC deal was half-baked, inadequate, lousy. How did this prove that NBC really wanted David Letterman? For all sorts of reasons it didn’t match up with what CBS had put on the table.
For Morton, who had a better relationship with the press than anyone else on the show, the outcome of this last-call approach from NBC was fraught with all sorts of danger. He was jumpy because he saw Dave being lured into a situation where he would consider some offer and then NBC would reject him again and the headline would be: “Strike Two, Dave: Letterman Loses Again.” Morton considered leaking the news of the NBC offer to the papers so NBC could never say it didn’t come scratching around Letterman’s door at the last minute, ready to dump Jay Leno. Personally, he thought the NBC offer was his worst nightmare for Dave: a horrible offer that would lead to denunciations of Dave in the press for pushing his old friend Jay in front of a train. He could foresee Jay going around the country giving every interview he could line up and bemoaning the fact that his good friend Dave had taken his job away. When he spoke with Dave that weekend, Morty was completely sympathetic to Dave’s desire to get the “Tonight” show; he had wanted the show almost as much as Dave had. What producer in television wouldn’t want a shot at doing the “Tonight” show? But he couldn’t see taking it on these terms. He told Dave he was voting no.
Peter Lassally was more upset than anyone else by the NBC offer—because he had fought so hard to get it for Dave. But he thought the offer was dreadful, ridiculous, insulting, and embarrassing. It was a bogus offer, Lassally thought, not an offer you give a guy who had made millions for your company. How could they ask Dave to wait until May 1994 to get the job when CBS had a deal ready to go for the summer of 1993? How was this a match of the CBS offer? And yet because he knew Dave so well, he knew how badly Dave wanted to say yes, so that he could have the show he always wanted, even on these third-rate terms. Lassally’s greatest fear was that after all this, after the thrill of having most of the television industry at Dave’s feet begging to win him over, after the elation at the CBS deal, it was going to be another Dave disaster. It was going to be Dave not listening to the people around him again, or them not getting something right for Dave. Only this time Peter knew he himself was part of the picture, and still Dave was about to step into another disaster. The idea was frightening to Lassally.
And so he called Dave at home that Saturday and argued the points with him. There was no upside, he told Dave. “It’s damaged goods,” Lassally said. “You’re not taking over for Johnny Carson. You’re taking over for a show that no longer has any class. That’s not worth anything; that’s not any kind of victory. We can start from scratch at CBS and it will be your victory and it will be your show and not you’re taking over for this damaged show.”
Dave trusted Lassally, so his words could not be dismissed. But all Dave kept saying was “I don’t know, I don’t know.”
When Ovitz called he had many of the same arguments about the absence of an upside at NBC. He also pointed out how unimpressive the NBC offer was. “This is indicative of what your future life will be like there,” Ovitz said. But he emphasized the positive aspects of the CBS deal: the ownership, the opportunity to produce a companion show at 12:30, the chance to build his own franchise, and to be the spokesman for the network. “CBS is like a train coming out of the station,” Ovitz said, suggesting that it was the right time to jump aboard. But he knew that Dave remained terribly conflicted. He urged Dave to keep thinking and wait for the developments th
e following day, when Agoglia had promised to put some details on paper.
That night Dave was telling himself the others were probably right: It had to be CBS. That was what made sense for him. It had to be CBS. But he asked one more opinion, one that obviously counted heavily with him. He asked his girlfriend, Regina Lasko, what she thought he should do.
Regina, who worked at NBC herself and who had been through all the ups and downs of Dave’s interaction with the network as their personal relationship grew through the late 1980s and early 1990s, had witnessed up close the tough days with Dave in June of 1991. When NBC spurned him that first time, when they made Jay Leno the host of the “Tonight” show, Regina watched it break Dave’s heart. She had seen him a wreck for weeks with the sorrow of missing out on the biggest dream of his life. So now she said what she thought he wanted to hear.
“I know what this means to you,” Regina told him, urging him to go for the “Tonight” show. “And I really don’t think anybody has gotten that fond of the guy who’s hosting it now.”
On Sunday, the Letterman representatives went to their respective offices to wait for the details of the NBC offer to be faxed in from John Agoglia. They had prepared some refinements of the positions as they understood them, trying to be sure that in the process of negotiating with NBC, no other previous agreement could be jeopardized. The basic point of the Sunday exchange by fax was to get something concrete in writing for Ovitz and Letterman to look at and to close up some details that the CAA side found too ambiguous in the original proposal. No one knew exactly where the exercise was heading, but it seemed to be heading toward a real attempt at an agreement.
With all the CAA guys waiting for the fax to ring, they decided to hook up by conference call. Nothing was happening yet. So they put in a call to Agoglia, who got on the conference call with Lee Gabler and Steve Lafferty in their CAA offices and Jim Jackoway in his law office. They began by talking about some of the adjustments that Agoglia had made, following up on questions that had been raised the previous afternoon. To the Letterman side, it seemed that, given the parameters of the offer NBC apparently wanted to make, Agoglia had come substantially close to what he’d been asked to deliver. Except for one thing: It wasn’t in writing.