Key Fox executives, including Rupert Murdoch, are on board with the plan and would like to finalize a deal in coming weeks so they can make a splash on May 17 when the network unveils its fall lineup. Several significant issues remain and the Fox talks could fall apart, according to people close to the negotiations who asked anonymity because the discussions were meant to be private.
But people close to O'Brien are cautiously optimistic.
"We'll get there," one of them said Tuesday.
Fox executives have been huddling to figure out how much it will cost to mount a late-night talk show that would be profitable for Fox stations and affiliates. Stations, hammered by the advertising recession, rely on the profits generated by syndicated reruns such as "The Simpsons" and "The Office," and it's unclear how many stations would be willing to substitute those shows for a risky venture -- even one starring a big-name host.
Fox realizes that if it ever wants to get into the late-night game, this is the time.
The network, owned by Murdoch's News Corp., has had its eye on entering the late-night talk show wars for years. Indeed, it was Fox's overtures to O'Brien nine years ago that prompted NBC's Jeff Zucker to promise O'Brien "The Tonight Show" to keep him at the peacock network. Zucker's plan famously unraveled when Jay Leno decided he wasn't ready to retire.
Fox Entertainment President Kevin Reilly and Entertainment Chairman Peter Rice have been leading the campaign to bring O'Brien to Fox, according to knowledgeable people. But their bosses have told them to demonstrate that a late show would be financially viable. A breakthrough came last week when they outlined a late-night scenario that one executive described as "a deal that we could live with."
It hasn't been decided whether the show would launch in the fall or January.
Fox, however, is unwilling to spend the money that NBC had been paying to support "The Tonight Show" with O'Brien. NBC spent close to $90 million a year to produce the show, which included O'Brien's salary of more than $12 million a year. Fox wants to spend less than $60 million a year for the show, said people close to the discussions.
O'Brien's camp is weighing whether it can pull off a high-quality show with the smaller budget -- or if it should shift to cable.
The major hurdle comes from Fox stations, which are obligated to air reruns at specific time periods, in some cases after the 10 p.m. news. That would mean forcing a proposed O'Brien show, at least initially, to air at different time periods: 11 p.m. in some markets, 11:30 -- or later -- in other cities.
"Without a uniform start time, it would be hard to get traction for a show and hard to promote it," said Jason Maltby, a top ad buyer for the firm Mindshare. "Saying, 'Check your local listings' doesn't have the same ring to it as saying, ' "The Tonight Show at 11:35 p.m." ' "
After the expiration of the stations' agreements for sitcoms in late night, the O'Brien show would run at the same time -- likely 11 p.m. The challenge would be getting to the two-year mark by maintaining a large enough audience and enough advertisers to make the show successful.
"Late night is already pretty full -- everyone has carved out their own niche," said Maltby. "It comes down to the available audience and how you slice it."
Fox is the likely outlet for a traditional network late-night show, but it's not O'Brien's only option, said people close to the comedian. Several cable channels have expressed an interest, although Comedy Central -- which would appear to be a natural fit -- is not on the list, these people said.
Comedy Central already has its big stars in late night, Jon Stewart and Stephen Colbert, so the earliest available time period for O'Brien would be at midnight.
That would not be acceptable to O'Brien, who surrendered "The Tonight Show" when NBC said it planned to shift his start time to 12:05 a.m.
O'Brien's team also is working to secure a soundstage for a new show and could use the same facility on the Universal lot that NBC spent nearly $50 million to refurbish for O'Brien to take over "The Tonight Show" in June. The soundstage -- the home of the Jack Benny show -- is large enough to accommodate skits, a band and a studio audience -- and is close to Lankershim Boulevard, making it easy to manage crowds who come to the show.
NBC Universal has said it would lease the space to O'Brien, despite the tensions that exploded when O'Brien refused to accept NBC's shift of the "Tonight Show" to make room for Leno's return to late night. But that isn't the only option. O'Brien's team has been busy scouting other soundstages during the last two weeks.
In addition, O'Brien and his representatives have been organizing a swing through 30 cities, including Los Angeles, for his Legally Prohibited From Being Funny on Television Tour. The tour intends to allow O'Brien to connect with his fans at a time when his breakup pact with NBC prevents him from appearing on television until September.