Letterman Spurns ABC Offer, Vows to Remain Faithful to CBS

David Letterman told his audience Monday that he would “like to finish my career� at CBS, agreeing to a new contract with his current network and leaving jilted suitor ABC measuring the damage that its bid might have done to ABC News and “Nightline,� the venerable program Letterman would have displaced.

After weighing the two offers, the 54-year-old host returned from a vacation on the Caribbean island of St. Bart’s and signed a new three-year agreement with CBS, with an option for two additional years.

ABC quickly announced in the wake of Letterman’s decision that “Nightline� will remain in its current time slot, opposite Letterman’s program and “The Tonight Show With Jay Leno� on NBC. Letterman detailed his decision in a monologue during his show’s taping in New York Monday afternoon.

While the deal appears to reinforce late-night television’s status quo, the reality is that ABC’s unsuccessful grab for Letterman seems likely to have long-term repercussions for all of the principal players while jump-starting what promises to be an ongoing debate about the future of network news.

Letterman’s deal will reportedly pay him about $31.5 million annually, up from the $30 million he had made in the last year of his previous pact. But the key provision involved written guarantees that CBS’ parent company, Viacom, will bring its vast resources to bear in promoting his late-night program, which continues to trail “The Tonight Show With Jay Leno� in the ratings, a source of frustration to the mercurial host.

ABC’s attempt to land Letterman leaked out 11 days ago and fueled a spate of stories about the diminished commitment to news by companies that control the major television networks, foremost among them the Walt Disney Co., which owns ABC.

Responding to that criticism, ABC defended its interest in Letterman in a statement issued Monday. “In today’s competitive environment, it is incumbent upon us to explore all programming options, and ‘The Late Show With David Letterman’ was an opportunity that ABC felt compelled to pursue,� the network said.

A spokesman for the Walt Disney Co. said Chairman Michael Eisner and President Robert Iger were unavailable for comment. Iger and Eisner reportedly spearheaded the pursuit of Letterman.

“Nightline� anchor Ted Koppel, who had limited his public comments to an opinion piece for the New York Times, issued a pointed statement Monday in which he and his producers chided Disney, saying that “intentionally or not, collateral damage has been done� to ABC News and that it would be unreasonable to expect the show’s staff to continue “in a climate of ongoing uncertainty. There must be a great many talented comedians who would welcome the opportunity to take over the ‘Nightline’ time slot. Our hope is that Disney will send a clear and unmistakable signal . . . that ‘Nightline’ can count on serious corporate backing.�

Christopher Dixon, an analyst with UBS Warburg, echoed Koppel’s point, observing that while Disney’s strategy to bring Letterman to ABC had “an enormous amount of merit, the issue was how it was executed. . . . Iger and Eisner did not manage the process well.�

Now, Dixon said, Iger and company must “rebuild credibility with the senior news correspondents� at ABC.

As it stands, high-profile ABC News personnel--including Barbara Walters and Sam Donaldson--have publicly expressed outrage over what they saw as an obvious slight to “Nightline� and its anchor, Koppel, who has hosted the prestigious news program for more than 22 years.

Letterman’s decision to remain at CBS is only the latest in a series of setbacks at ABC.

The network’s prime-time ratings have dropped dramatically this season, as viewing of the quiz-show franchise “Who Wants to Be a Millionaire� sank faster than officials anticipated.

In addition, Letterman’s courtship represents only the latest public relations mess involving a perceived snub of key talent.

In the fall, network officials angered “Millionaire� host Regis Philbin by suggesting they might cancel the fading quiz show without informing him. The network also irked Walters by temporarily yanking her news program, “20/20,� from the Friday time period it had occupied for more than a decade.

The fact that ABC News President David Westin was blindsided by the Letterman negotiations has also fueled a sense that news is not a priority for Disney as it seeks to revive the network.

Insiders at CBS say they had been generally optimistic Letterman would stay, despite what are perceived to have been frayed relations between the host and CBS Television President Leslie Moonves.

“It was a matter of, ‘If I’m not appreciated, I should make a move,’ � said Lee Gabler, co-chairman of Creative Artists Agency, which represents Letterman. “He wanted to be with a network that cared about his show as much as he did. . . . CBS stepped up.�

Letterman considered ABC’s overture only after CBS balked at meeting certain demands during an exclusive negotiating period, among them the right to control the hour he currently occupies for 10 years after he quits the program.

While that concession was not met, CBS did agree contractually to promote “Late Show� using Viacom’s far-flung assets, which include MTV, VH1, an outdoor advertising company and more than 180 radio stations in major cities across the United States--all outlets that offer the means to reach the young-adult audience most advertisers crave.

If nothing else, the publicity has drawn attention to his program--something Letterman no doubt contributed to by making his announcement on the air Monday.

On NBC, meanwhile, Leno offered his own joke about Letterman’s new deal, saying that Disney pursued Letterman before the studio “realized they already had a guy working there named ‘Grumpy.’ �

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Times staff writers Paul Brownfield, Elizabeth Jensen and Claudia Eller contributed to this story.