Jimmy Fallon will inherit real estate that has lost a lot of value

By Joe Flint

March 21, 2013 12 AM PT

Being the king of late-night TV isn’t as valuable as it once was.

If Jimmy Fallon takes over for Jay Leno as host of NBC’s “The Tonight Show” (when it comes to Leno and succession, it’s always better to use “if” and not “when”), he will be taking over real estate that has seen its value drop tremendously over the last several years.

Advertising for NBC’s “The Tonight Show with Jay Leno” has fallen by more than 40% since 2007, according to Kanter Media, an industry consulting firm. In 2007, “The Tonight Show” took in $255.9 million. Last year, that figure was $146.1 million.

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Leno’s not the only one who took a hit. Advertising on CBS’s “Late Show with David Letterman” dropped 31% from $208.4 million in 2007 to $143.5 million in 2012. Overall, advertisers spend close to $6 billion in all late-night television.

To be sure, a bad economy has played a big part in the shrinking ad dollars for Leno and Letterman. But there are also a lot more mouths to feed in late night and that is cutting into Leno’s and Letterman’s take. The quaint old days of one or two late-night shows are long gone. Now late night includes Jimmy Kimmel, Jon Stewart, Stephen Colbert, Conan O’Brien and Chelsea Handler. If that’s not enough, this fall Arsenio Hall returns as well.

“It’s becoming more fragmented,” said Jon Swallen, chief research officer at Kantar Media. “Leno and Letterman in particular have seen significant ratings erosion in the last six years.”

While Leno and Letterman remain profitable, there has been some belt-tightening going on to reflect the new realities of late night.

Last summer, in an acknowledgement of how much the landscape has changed, Leno took a pay cut and had his staff reduced. CBS restructured its financial arrangement with Letterman’s production company Worldwide Pants a few years ago as well.

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One reason being cited for NBC’s decision to move Fallon in for Leno next year is the inroads ABC’s Jimmy Kimmel is making among viewers 18-49. While Kimmel is getting sampled in his new time slot opposite Leno, according to Swallen, this is still a sampling period for viewers.

“I’m not reading too much into the ratings he’s getting right now,” Swallen said.

For Fallon to succeed in replacing Leno, he’ll need to win over the heartland. Leno’s largest audience is from the Midwest and Rocky Mountain region. There, his show airs at 10:30 p.m., not 11:30 p.m., which means there are more viewers.

When Conan O’Brien briefly took over for Leno a few years ago, he struggled to adjust his East Coast-centric show to that audience. That may be less of an issue for Fallon, though, as he brings a teenage enthusiasm to his show rather than the too-smart-for-the-room approach that O’Brien often favored.

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Follow Joe Flint on Twitter @JBFlint.