Conan O’Brien, NBC finalize severance deal

Conan O’Brien, who hosts his last episode of “The Tonight Show” tonight, does not intend, in his words, to become a $200 question on “Jeopardy.”

“He just wants to get back on the air as quickly as possible,” said Gavin Polone, his manager.

A rich severance deal struck Thursday between O’Brien and NBC frees the comedian to join another network as early as Sept. 1. Most observers expect him to first flirt with Fox, which has wooed him in the past.

Wherever O’Brien pops up, however, he will be without his trademark comedy bits, such as the cigar-chomping Triumph the Insult Comic Dog and the Masturbating Bear, which remain the intellectual property of NBC. He’s also muzzled from disparaging his former employer, although network executives expect the occasional lampoon.

A Fox show is far from certain. The News Corp. network might face a hard sell with affiliates. And cable networks, including FX and Comedy Central, might jump at the chance to land the late-night star.

O’Brien’s settlement, signed early Thursday morning, brings an abrupt end to the comedian’s nearly 20-year career with NBC, and his seven months as host of “The Tonight Show.” NBC will pay O’Brien nearly $33 million, a sum that will go down as one of the most eye-popping in the annals of Hollywood.

NBC also will spend $12 million in compensation for the show’s 190 staffers, according to people familiar with the situation.

Nearly 70 people followed O’Brien to Los Angeles from New York last year when he switched coasts. In the end, it will cost the network $45 million to close the book on its late-night drama.

Now the heat is on Jay Leno, who after a brief five months in prime time will reclaim his old “Tonight Show” hosting duties and 11:35 p.m. slot March 1 to again go against his longtime nemesis, CBS’ David Letterman.

NBC’s late-night upheaval thrust the genial Leno into the villain’s role and made him into a punching bag for other comedians. Letterman joked on the air that NBC had a new drama -- “Law & Order: Leno Victims Unit” -- and performed snarky mimics of Leno’s high-pitched voice.

Leno shot back: “You know the best way to get Letterman to ignore you? Marry him.”

NBC executives now must mop up. Jeff Gaspin, NBC Universal’s chairman of television entertainment, said in an interview that the network would come up with a “clever but subtle” promotional campaign that would wink at the costly flip-flop while promoting Leno’s return to “The Tonight Show.” Moving Leno back to his old perch, Gaspin said, was “a pure business decision.”

But it’s a business that is less lucrative than it used to be. “The Tonight Show” had been a stalwart cash cow, earning $50 million in annual profit as recently as two years ago. But after incurring costs in building a new studio, relocating employees and losing audience, the show is on track to lose $20 million for the year, knowledgeable people said.

Ironically, it was NBC’s desire to keep O’Brien at the network that led to the fiasco that pitted the two comedians against each other and galvanized viewers to pick sides.

NBC Universal Chief Executive Jeff Zucker hit upon a strategy nearly six years ago to guarantee O’Brien, who had spent more than a decade as star of “Late Night With Conan O’Brien,” the coveted job of hosting “The Tonight Show.”

Zucker gambled that by 2009, Leno, who then would be approaching 60, would be ready to exit the stage.

But Leno wasn’t ready to retire, so Zucker came up with a quick fix to keep both comedians: give Leno a 10 p.m. show, which would also plug holes in NBC’s prime-time schedule.

The move backfired. NBC miscalculated how much damage Leno’s new show would cause to local stations’ late newscasts.

Within a month of the show’s prime-time launch in September, stations began complaining about poor ratings. Some reported audiences for their late local news plunging as much as 40%, just as stations were already reeling from a steep drop in advertising. NBC urged them to be patient, saying there would be an uptick in ratings when competing networks aired reruns. The lift never came, and stations threatened the nuclear option: preemptions.

“We knew we had a problem at 10 p.m., and we had to deal with it,” Gaspin said. “The concerns got even louder in November, and by December they had reached a crescendo.”

Although the stations were focused on Leno’s performance, NBC had another crisis: O’Brien’s “Tonight Show” wasn’t mustering the ratings the network had expected.

Gaspin’s solution: Move Leno back to 11:35 p.m and slide O’Brien’s show a half-hour to 12:05 a.m. O’Brien’s show, he figured, could benefit from the lead-in of Leno’s broader audience. Despite the shuffling, “we still wanted Conan O’Brien to stay at the network,” Gaspin said.

The first week of the new year, Gaspin explained his plan to Leno, who agreed to return to 11:35 p.m. even if it meant having only a half-hour show. The fix, however, would be costly for NBC because it meant cramming three big-budget shows, including “Late Night With Jimmy Fallon,” into 2 1/2 hours.

“We tried to come up with a scenario that would work,” Gaspin said.

O’Brien, however, refused to sign on. “They underestimated him,” said a person close to O’Brien who asked not to be identified because he wasn’t authorized to speak for the record.

The comedian took his protests public, saying he wouldn’t participate in a scheme that he felt would damage “The Tonight Show.” The next week was filled with on-air barbs hurled at his network bosses, with each night’s jokes growing more caustic and bitter.

Now Leno, whose prime-time show ends Feb. 11, must improve on O’Brien’s performance. And NBC must win back audiences at 10 p.m., where it lost valuable ground.

“It will be easier to repair the damage at 11:35 p.m. than it will be at 10,” said Jason Maltby, a top advertising buyer for the firm Mindshare. Simply moving Leno back to late night “won’t help the affiliates in the short term,” he said.

The late-night drama comes at an awkward time for NBC parent General Electric Co. GE, which is in the process of selling NBC Universal to cable giant Comcast Corp., acknowledged that the network would lose about $200 million on its coverage of the Winter Olympics in Vancouver.

But NBC’s Gaspin said he didn’t regret the network’s decisions.

“Up until the very last second,” he said, the network was willing to squeeze both O’Brien and Leno into its late-night programming. Gaspin also sought to tamp down criticism of NBC and his boss, Zucker.

“You have to be willing to take risks in this business,” Gaspin said. “You can’t be afraid of the public scorn or to be put in the stockade if your decisions don’t work. You always have to be willing to take a chance.”

meg.james@latimes.com

Times staff writer Joe Flint contributed to this report.