Though "The Tonight Show with Jay Leno" does not make anywhere near the profit it did in its heyday, the show still generates significant dollars for NBC parent company Comcast (NASDAQ:CMCS.A).
"Tonight" -- and its status as the late-night leader -- is also valuable in ways that are not directly measured in dollars to a network that has faltered in primetime and seen its morning leader, "The Today Show" drop into second place. If "Tonight" falls, NBC loses its identity and becomes that place with "The Voice."
The big handoff
All eyes are on "Tonight" this month as Jay Leno steps aside tonight and Jimmy Fallon, who hosts "Late Nate with Jimmy Fallon" at 12:35 p.m., ascends to the chair Feb. 17. Of course, we've seen this storyline already as Leno was forced out for a younger "Late Night" host once before. That move was a disaster on the level of New Coke as Conan O'Brien's June 2009 through January 2010 hosting gig went so poorly that NBC paid him a reported $30 million to leave in order to reinstall Leno.
O'Brien, who now works for TBS hosting an 11 p.m. show, saw his "Tonight Show" slip behind "Late Show with David Letterman" on CBS (NYSE:CBS). When Leno was brought back, "Tonight" reclaimed the number one spot.
How much money is at stake?
NBC does not break out "Tonight Show" profits specifically, but Matt Belloni, executive editor of The Hollywood Reporter told NPR in January that the show "used to generate about $150 million in profits. And that's down to about $30 million to $40 million a year in profits. So it's not as lucrative as it once was, but it's just something people talk about."
The swap from Leno to Fallon looks an awful lot like the one between Leno and O'Brien. Leno was pushed out of the chair both times, but now, the late night landscape is different. Not only is there increased competition with Jimmy Kimmel Live airing at 11:30 p.m. on ABC, owned by Walt Disney (NYSE:DIS), and "Conan" airing at 11 on Time Warner's (NYSE: TWC) TBS, but digital media and non-TV viewers have become an important part of the equation.
Fallon is "the guy they envisioned being able to do this job for 20 years. So that's what's really fueling this…. Leno may be No. 1 now, but they see the direction that this is going, and they see an opportunity to put Jimmy Fallon into that chair now," Belloni said.
How big a hill must Fallon climb?
At the time of his departure, Leno averages about 3.7 million viewers a night, about 800,000 more than Letterman and 1.1 million more than Kimmel, according to Neilsen data as reported by Hollywood Reporter.
Some of the profit decline comes because of the splintering TV universe. In addition to the aforementioned shows, the 11 p.m. hours also has Viacom's (NASDAQ:VIA) Comedy Central's "Daily Show" and "Colbert Report," while E! (an NBC network) has Chelsea Handler.
Even a successful Fallon is not likely to equal Leno's ratings, but he might be able to equal his revenues by reaching more of the 18-34-year-olds advertisers will pay more to reach. He should also bring in money through online videos and social media -- areas Leno himself has said he does not understand.
So while Fallon may not be the undisputed late-night king like Leno and Johnny Carson before him, hiring him might allow NBC to protect its bottom line.