Why Moonves Didn't Lose Letterman

The CBS chief's ratings streak is what sealed the deal

Leslie Moonves, CEO of CBS, knows good schtick when he hears it--even if it hits home. So what if David Letterman makes nightly sport of the network and its brass? (A Top Ten List complaint from al Qaeda prisoners at Guantanamo Bay: "There's only one channel here, and it's CBS." Or last year's "Things You're Likely to Hear in a Meeting with Les Moonves." No. 8: "If it's not an idea for a Tony Danza show, I don't want to hear it.")

True, Moonves has grumbled that some of the ribbing goes on longer than necessary. But when ABC offered $30 million a year in late February to lure Letterman away, Moonves quickly countered with a $31.5 million offer a week later. The acerbic comic accepted on Mar. 11, soon after returning from a vacation in St. Bart's. He and Moonves talked that morning after CBS' research director sent Letterman's people the latest ratings data showing ABC's falling numbers--and CBS' rising ones. "Dave is Dave," says the 52-year-old Moonves. "He's a funny guy, and we want him to be a part of CBS."

Keeping Letterman from defecting is just the latest victory for Moonves, who joined the network in 1995 when it was in third place. Heading into the final two months of this season's ratings battle, CBS is neck-and-neck with NBC among regularly scheduled programs, excluding the big boost NBC got from its Olympics coverage. Even more impressive, CBS, once derided as "the Depends network" for its aging viewership, is the only one of the largest four networks whose regular series ratings among 18- to 49-year-olds, the viewers most coveted by advertisers, are up this season. Boosted by its crime drama CSI and sitcom Everybody Loves Raymond, "[CBS] is a network on the rise," says Jack Myers, editor of advertising newsletter the Jack Myers Report.

The Letterman flap certainly shined a bright light on the problems Walt Disney Co. faces in turning around ABC. But while ABC can't seem to come up with a hit show, Moonves has quietly been building CBS into the hottest property on TV. The onetime actor, who played the heavy on shows such as The Six Million Dollar Man in the 1970s, has even been mentioned as a possible candidate to succeed Mel Karmazin, president of CBS parent Viacom Inc. Past infighting between Karmazin and Viacom Chairman Sumner M. Redstone had fueled speculation that Karmazin would be forced out. Still, even though Moonves sits on the Viacom board, insiders say the CBS chief could face stiff competition from a Redstone favorite, MTV Networks CEO Tom Freston, if Karmazin were ever to leave.

Things look good for Moonves today, but in the volatile TV business, no one expects to stay on top for long. And CBS has its trouble spots. Dan Rather's evening news is a distant third in the ratings behind ABC and NBC. And The Early Show, hosted by Bryant Gumbel and Jane Clayson, is also a ratings laggard. To generate more revenues from the unit, the news division is making shows for Viacom's Black Entertainment Television cable channel, and it may do the same for MTV and VH1. Just holding on to its newly won youthful audience is a struggle. Moonves is planning a CSI spin-off in September and another show from its producer, Jerry Bruckheimer, about an FBI unit that tracks missing persons. But a revived Friends on NBC still makes the Peacock Network the first buy for many advertisers. "Les can say he's getting younger all he wants," says outgoing NBC President Scott Sassa, "but the proof is what we're selling, and that's a lot of 18-to-49 ads."

Since arriving at CBS, Moonves has ascended quickly, now overseeing operations that account for nearly a third of Viacom's $23 billion in annual revenue. Beyond the prime-time lineup, he oversees CBS news and sports as well as the stations group. And earlier this year, he won control of seven-year-old UPN, Viacom's other network.

But Moonves, a longtime Warner Bros. Inc. executive who helped create such shows as ER and Friends, is still a programmer at heart, with a Hollywood Rolodex to die for. Most recently, he beat out competitors for the highly rated 9/11 documentary that was shown on CBS on Mar. 10 because of his friendship with Vanity Fair editor Graydon Carter, who produced the project. And two years ago, he snatched up CSI after ABC turned it down. CBS hit the mother lode with the Dutch import Survivor, which Moonves cleverly ran in the summer when younger viewers were channel-surfing through reruns. "Les is the kind of guy you love," says CSI producer Bruckheimer. "He knows what he likes and makes decisions very quickly--no fooling around."

Now that Letterman has said he'll stay onboard--after Moonves offered to pump up promotions of his show on youth-oriented UPN, MTV, and VH1--Moonves can refocus on keeping CBS rolling. And as a network executive famous for knowing what sells, he'll no doubt be bracing himself for a new barrage of insults from his new best friend.

By Ronald Grover in Los Angeles

Before it's here, it's on the Bloomberg Terminal.