LOS ANGELES (REUTERS) - David Letterman's surprise retirement announcement gives CBS a much-needed chance to lure younger viewers to his late-night television time slot, matching the recent elevation of Jimmy Fallon that re-energised rival NBC's Tonight Show franchise, according to media executives.
Since the 39-year old Fallon succeeded Jay Leno as star of The Tonight Show, NBC's ratings for the 11.35pm hour have jumped both in overall audience numbers and among the key demographic of viewers aged 18 to 49 that advertisers most desire.
The surge comes as a larger number of young viewers are tuning in to Fallon, a veteran of Saturday Night Live, as he masquerades in elaborate skits as rock stars and politicians, or plays Egg Russian Roulette with celebrity guests willing to risk having raw eggs smashed over their heads on national television.
In the most recent Nielsen ratings, The Tonight Show Starring Jimmy Fallon averaged 5.2 million viewers, up 41 per cent from Leno's numbers before his February departure from NBC.
Ratings for both Letterman and Jimmy Kimmel Live! on the Walt Disney Co owned ABC network trail with slightly less than three million viewers apiece.
Letterman's announcement on Thursday during the taping of Late Show With David Letterman in New York that he plans to retire sometime in 2015, when his contract expires, represents the latest upheaval in a changing of the US television's late-night guard.
The three shows together generated more than US$400 million (S$503.5 million) in advertising sales in 2012, according to the latest numbers available from ad tracking firm Kantar Media.
And the three shows all remain large, though shrinking, profit centres because the networks cram in more commercials per hour late at night than they do in prime time, said Mr Brad Adgate, research director at media and advertising firm Horizon Media.
Production costs are held down, with guests being paid at union scale rates, he said.
CBS has not said who might succeed Letterman, but the network needs to find someone who can siphon away some of Fallon's younger viewers, media executives said.
Fallon has also developed a huge social network following, an increasingly important marketing avenue for networks to promote their shows.
YouTube registered more than four million views of Fallon's parody of Bruce Springsteen's hit song Born to Run, in which he and Springsteen lampooned New Jersey Governor Chris Christie's bridge-closing scandal.
Craig Ferguson, star of CBS's The Late Late Show With Craig Ferguson at 12.35am was reportedly promised Letterman's slot in 2012 when CBS renewed the contracts for the two men.
Both shows are produced by Letterman's Worldwide Pants company.
But ratings for the 51-year old Ferguson's show are well behind those of Late Night With Seth Meyers, which occupies the 12.35am slot on Comcast's NBC network.
Jon Stewart, host of Comedy Central's The Daily Show, is considered a possibility to succeed Letterman on CBS. So is the Viacom owned cable channel's Stephen Colbert, host of The Colbert Report. Both have sizeable followings among younger viewers.
Whoever gets the Late Show host chair has a larger role to play at CBS beyond opening monologues and chatting with guests.
The late-night host creates a brand for the entire network, said Mr Jeff Gaspin, former chairman of NBC Universal Television Entertainment.
"The host of late night represents the network on a daily basis and in most cases for decades," said Mr Gaspin. "Along with news and sports talent, they are the only entertainment personalities to do so."