Conan's Smart Deal

The comedian gave TBS a discount—a salary below $15 million—to join the network, insiders tell Peter Lauria, in exchange for something he now values more: ownership of his own show.

The national thumping that Conan O'Brien took at the hands of former corporate overlord NBC apparently taught the comedian one very valuable lesson: Ownership is everything. Not wanting be under anyone's thumb ever again, sources familiar with O'Brien's thinking say he was willing to take less money upfront—his salary, these insiders say, will fall between $10 million and $15 million—from new television home TBS in exchange for complete ownership of his as-yet untitled late-night program, which will air Monday-Thursday at 11 p.m. beginning in November.

"This deal isn't about money," says a source involved in late-night television. "This is about Conan not wanting what happened to him at NBC happening again."

“This is about Conan not wanting what happened to him at NBC happening again.”

While sources confirm that Fox's entangled affiliate contracts made doing a deal with O'Brien difficult, an overlooked but even bigger factor in the comedian's surprise decision to sign with TBS was that Fox wasn't willing to give him ownership. "[Fox] is really stingy about that stuff," says a source who has negotiated television deals with Fox.

A Fox representative declined comment, beyond a statement wishing O'Brien well.

Kim Masters: Inside Conan’s Deal Watch: Conan’s Basement Talk Show O'Brien, who kicked off his "Legally Prohibited to be Funny on TV" comedy tour in Eugene, Oregon, last night, could justify taking the discounted salary from TBS because of his $45 million payout from NBC—a windfall that allowed him to effectively buy creative control over his work.

When networks produce shows via their studios, they make creative decisions on everything from set design to skit approval to music. But a network has much less control over those aspects of a show—as well as things like scheduling, time off, and the like—when only paying a licensing fee, as will be the case for O'Brien's new show.

In securing ownership, O'Brien joins an elite group of talk-show hosts such as Oprah Winfrey, Dr. Phil, and his idols Johnny Carson and David Letterman. Such prestige, however, vastly exceeds his financial upside. A late-night show is nowhere near as lucrative as from a sitcom or drama series. Beyond "Best Of" collections, there's limited DVD sales opportunities, and while O'Brien does have a following in Canada, England, and Germany, selling a late-night talk show to international markets has limited appeal as well.

Online distribution does present an opportunity, however, and a source involved in the negotiations says Team Coco also made of point of securing ownership of digital rights—another lesson learned from the Tonight Show debacle.

"At NBC, we couldn't be on YouTube or this site or that site," says this source. "We had to go through or and basically adhere to their digital strategy, which was just corporate promotion."

While the money to be made from digital content is still miniscule, at least O'Brien will be able to see some of it if a skit goes viral the way the "Bugatti Veyron Mouse" did.

There's also a benevolent aspect to O'Brien's insistence on ownership. It's widely known that the comedian, who like Letterman paid his staff out of his own pocket during the 2007-2008 writer's strike, was angered at the severance packages NBC offered his team, who moved their entire families across the country. That won't be a concern anymore, as O'Brien will now be financially responsible for his team, paying their salaries from the licensing fees TBS ponies up for the show.

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"He doesn't want them living and dying by NBC or any other network," says a source who has spoken with O'Brien.

Nor will they have to. Perhaps the biggest benefit to owning his own program is that if O'Brien is unhappy at TBS, once his contract is expired, he becomes a free agent all over again—this time with his show under his arm.

Plus: Check out more of the latest entertainment, fashion, and culture coverage on Sexy Beast—photos, videos, features, and Tweets.

Peter Lauria is senior correspondent covering business, media, and entertainment for The Daily Beast. He previously covered music, movies, television, cable, radio, and corporate media as a business reporter for The New York Post. His work has also appeared in Avenue, Blender, Black Men, and Media Magazine, and he's appeared on CNBC, Bloomberg, BBC Radio, and Reuters TV.