Deflation hits Letterman show, CBS gets more for less

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CBS is finishing up a deal to renew ‘The Late Show With David Letterman’ for two more seasons at a reduced rate.

According a person close to the situation, the network and Letterman’s production company Worldwide Pants are putting the finishing touches on a two-year contract extension to run the series in the 2010-11 and 2011-12 television seasons. The current deal was set to expire next spring.

The extension includes a somewhat lower licensing fee, as CBS and other networks have been demanding of many shows amid the ongoing recession, which has put the squeeze on advertising revenues. However, that doesn’t mean Letterman will make less than his current salary, reported to be about $30 million per year. He negotiates his payment with Worldwide Pants out of the show’s overall fee. It’s possible the company could squeeze other costs instead.

CBS is no doubt keen on keeping Letterman in part to take advantage of the recent changeover from Jay Leno to Conan O’Brien on ‘The Tonight Show,’ its NBC competitor in the 11:35 p.m. time slot. Though O’Brien’s ratings were higher than Letterman’s last week in his debut on ‘Tonight,’ the difference between the two narrowed each night.

The news was first reported in the Hollywood Reporter today.

-- Ben Fritz