NBC facing long road back after Conan O'Brien drama

LOS ANGELES (Reuters) - NBC may have put a public relations nightmare behind it with the departure of “Tonight Show” host Conan O’Brien, but the network faces a long, costly road to revive its sagging fortunes, media analysts said.

Pedestrians walk outside the NBC studios in New York, December 1, 2009. REUTERS/Finbarr O'Reilly

NBC’s $45 million exit deal for O’Brien was seen as a drop in the bucket against NBC Universal’s estimated $3 billion cash flow, and a cheaper solution than paying off Jay Leno after the failure of his new prime-time talk show.

Leno will return in March as the frontman of the “Tonight Show,” which he hosted for 17 years and made the top-rated late night program on U.S. television. But the move leaves the network with a worrying hole in its prime-time line-up.

NBC, which is owned by General Electric Co., will likely have to spend about $300 million to develop new dramas and comedies for the slots left by its cost-cutting experiment with Leno, RBC analyst David Bank said.

The Hollywood Reporter said the $45 million that will go to O’Brien and his staff “could have paid for about eight drama pilots.”

“This has been a nightmare for NBC. It’s not that they can’t turn it around. They are just going to have to be very patient,” said Marc Berman, senior TV writer with Mediaweek.

“Now they have to focus on programing and change their tune, and they have to spend a lot of money. They can’t be cheap about it now,” Berman said.

NBC, under the leadership of NBC Universal president and CEO Jeff Zucker, has trailed the other three big U.S. networks in ratings for most of the last five years after failing to find a replacement for 1990s hits “Seinfeld” and “Friends”.

Zucker said in a PBS interview this week that he was very proud of his work.


Media watchers have welcomed the return of Leno to the “Tonight Show.”

NBC TV entertainment chairman Jeff Gaspin told web site Broadcasting&Cable that, under O’Brien, “The Tonight Show” was on track to lose money in 2010 for the first time in its 56-year franchise because of increased competition and the downturn in advertising revenue.

Leno faces a battle to regain his old audience against late-night rival David Letterman on the CBS network, which is owned by CBS Corp.. But analysts expect Leno to improve on O’Brien’s poor ratings.

NBC is putting Jerry Seinfeld’s new game panel “The Marriage Ref” and the drama series “Parenthood” in two of its empty 10 p.m. slots starting in March.

But it may be unable to reap the expected benefits from the shows because advertising slots were sold last year on the basis of the smaller audiences expected for “The Jay Leno Show.”

“Whatever they put on at 10 p.m. is probably going to out-perform Leno from a ratings perspective. But I don’t think they are able to be going to go back and monetize those ratings,” said RBC’s Bank.

NBC will use its coverage of the Winter Olympics in February to promote the new offerings, though it has said it will lose money on the games in Vancouver. It paid $2.2 billion in 2003, when television markets were healthier, for the U.S. broadcasting rights to the 2010 winter and 2012 summer Games.

Looking to the 2010-11 season, NBC has ordered pilots for six new scripted dramas and two new comedies, including shows by Emmy-winners Jerry Bruckheimer and David E. Kelley.

But that level of talent does not come cheap and is no guarantee of success.

Besides, said Bank, “just having a hit show is not the goal. The goal is to create a hit show that you can sell into syndication, into home video and sell internationally.”

NBC’s troubles with Leno and O’Brien erupted after cable operator Comcast Corp struck a deal in December to take a 51 percent stake in NBC Universal, subject to federal approval.

Christopher Marangi, a media analyst with Gabelli & Co., said Comcast could provide a welcome shot in the arm for NBC.

“I think under the ownership of Comcast, they’ll have more flexibility to further invest in content and grow the network again,” he said. “If they can get NBC’s ratings back to just an average level, it is worth several hundred million dollars to the entity.”

Editing by Paul Simao