Can CoCo and TBS Make the Economics Work?

Conan O’Brien’s arrival at Turner’s comedy channel, TBS, has the TV business trying to figure out how the economics are going to work out. The former Tonight Show host’s jump to basic cable will inevitably deliver a halo affect for the entire TBS schedule. But the Turner ad sales team will have their work cut out given that cable has a much lower CPM than broadcast. (Click here for complete upfront coverage.)
While few people are privy to the actual deal made between the parties, Miller Tabak & Co. analyst David Joyce took a crack at the economics in an investor note April 13. Joyce has O’Brien earning a new salary of around $12.5 million and Turner shouldering production costs of between $20 million and $30 million for the show, which is owned by O’Brien.

He also estimates that TBS’ Lopez Tonight, which will vacate its current 11 p.m. slot and move to midnight when O’Brien debuts, makes around $21.8 million a year in ad revenue, given its 1.2 million average viewers.

Conan O’Brien earned NBC an estimated $175.9 million annually, with 2.92 million average viewers since September 2009, according to Joyce’s projections. There is still a great CPM disparity that a strong new show could help mitigate, writes Joyce, who thinks the move could give the Time Warner network a boost in operating income.

On the other hand, ad buyers are suggesting that the late-night landscape is looking ever more competitive by the day. Conan’s arrival coupled with the move of Lopez to midnight potentially splits available ad dollars for the day part. One TV buyer notes that off-net runs of HBO’s Curb Your Enthusiasm and Entourage (on TV Guide, starting in June, and Spike, respectively) are yet more interesting late-night options for young male viewers.

Separately, Kantar Media data shows that even while Conan’s Tonight Show may have lagged Jay Leno’s in ratings, their comparable ad revenue picture was not so far apart. Between June 2009 and January 2010, in the midst of a recession, NBC took in ad revenue of $99 million from Conan’s Tonight Show. Meanwhile, Leno’s Tonight Show during the same period a year earlier (June 2008 through January 2010) brought in $121.8 million.