EXCLUSIVE UPDATE 6:30 PM: We’ve just learned the backstory of how Ellen DeGeneres bowed out of American Idol and who will be the new judge taking her place. It’s Jennifer Lopez, JENNIFER LOPEZ 2whose singing and acting career has been on the skids after her recent movie failed at the box office in the spring and she was dropped by her record company Sony Music Epic Records this past winter. We hear her manager Benny Medina (whom she once fired) orchestrated the meeting with the American Idol producers a month ago, and negotiations have been ongoing ever since. We’ve learned a deal was closed earlier this week under the utmost secrecy. Today’s news came shortly after Nigel Lythgoe returned to Idol as an executive producer. He has vowed to shake up the show’s team of judges in the wake of the departure of Simon Cowell, publicly stating that he always thought a panel of three and not 4 made the most sense.

Still to be decided is who will replace Simon Cowell. Everyone associated with the show wants Elton John, but we hear he’s asking for too much money and has too many touring commitments he can’t get out of. (Denials That Justin Or Elton Judging ‘Idol’) 2ND UPDATE: Tonight, unconfirmed reports say Idol has offered Cowell’s judge seat to Steven Tyler. 3RD UPDATE: And another unconfirmed report claimed judge Kara DioGuardi has been fired to bring the panel count down to just 3, not 4.

As for Ellen Degeneres, we’re told she wanted off the show two months ago and complained that Idol producers “couldn’t control Cowell”, one insider tells us. Least of all Cecile Frot-Coutaz, the CEO of FremantleMedia North America. “Cecile is doing X Factor with Simon, so she’s in his back pocket.” DeGeneres and her reps went in to to see Fox Broadcasting’s Entertainment Chairman Peter Rice and Alternative TV President Mike Darnell and asked to be let out of the year left on her contract. “She’s not comfortable. She’s not happy. It’s not been fun,” Fox was told.  But Rice and Darnell responded that, with Cowell leaving, “We can’t let you out now because it would be bad for our franchise. Give us a chance to figure out who we could get.” In the end, all the show’s producers — Fox, Fremantle, and 19 Entertainment — worked it out. “Peter Rice was awesome,” an insider tells us. “Ellen is thrilled and relieved.” We’ve learned that serious conversations took place between Idol and Jessica Simpson to replace Ellen. But once Jennifer Lopez was locked in this week, the DeGeneres announcement went out.

The affable daytime talk show host never seemed comfortable at the Idol judging table and was never quite accepted by the show’s fans because of her lack of a music background.  As Deadline first reported, her first day taping the judges’ Hollywood segment was rocky — and frankly never really improved. Simon Cowell showed up an hour and a half late for the taping. And Ellen stewed while she waited for him. She had reason: to accommodate both her talk show hosting duties and her American Idol judging duties, she had moved up her schedule so that she shot the talk show earlier in the day and then jumped in the car to go to Idol. She was on time, and Cowell was not. “Here it was the first day of taping of the Hollywood shows, and Ellen was there waiting for Simon to show up. Ellen’s new to the gig and she’s very organized and she made a commitment to take this on, and now she’s asking herself, ‘What did I get myself into?’ She called Simon Cowell a prima donna. So right from the start, the chemistry isn’t great,” an insider told Deadline  at the time. Ellen after the taping requested that Darnell “hurry up and pick” Simon’s successor. Later, she publicly vetoed Howard Stern as Cowell’s replacement.

As the season progressed, it wasn’t uncommon for the other judges to sneer at or ignore whatever DeGeneres said, or for Ellen to look forlorn and left out. During the first weeks of the show, the former standup comedienne delivered her adulation or criticism of the contestants off the cuff. But as time went on, sources told us she began practicing in advance what she would say in order to make her remarks more funny or more music-oriented. It was in the middle of this past Idol season that chatter first surfaced that DeGeneres would only stay on the show as a judge for one season because she was so unhappy.

Her replacement JLo badly needs this high-profile boost to her flagging career. The actress had many hits with Sony Music Epic Records, so it was a shock within the recording industry when her longtime label dumped her. The contract period had ended, and Lopez had fulfilled it with her last two singles. But in February Sony then cancelled her 7th studio album titled “Love?”, which was supposed to come out in April and featured production from Danja, Jim Jonsin, Darkchild, Chris n Teeb from Dropzone, and The Neptunes among others. That never-released album delayed the release of her CBS Film, The Back-Up Plan, which bombed badly at the box office, as did her performance at the American Music Awards. Deadline was told at the time Sony Music execs weren’t sure who her audience is anymore. Where once she had little girls, she’s been supplanted by Beyonce, Gaga, and Rhianna. There were also reports of fighting going on between Medina (who managed Madonna) and the label.

Current CEO Rob Stringer (younger brother to Sony parent company CEO Howard Stringer) had a meeting at the Four Seasons Hotel in Los Angeles with JLo during Grammy week to formalize the separation. Sony may be releasing her “Greatest Hits” album this fall. There’ve been rumors she’s talked with Island Def Jam’s bigwig L.A. Reid to come to his label. But this is a tough time for music artists, especially those like Lopez who were once big in the biz and now are battling not only the changed economics and rampant piracy but also the moving target of today’s music fans.

4:45PM: In a move that is not unexpected, Ellen DeGeneres won’t be returning as an American Idol judge next season. DeGeneres originally signed a 2-year deal when she joined the show last summer but will be making an exit after only one.

UPDATE: Here is Fox’s official release:

Ellen DeGeneres has decided to bow out from her role as a judge on AMERICAN IDOL next season.  DeGeneres served as a judge during the ninth season of IDOL, the No. 1 hit series on television.

“A couple months ago, I let FOX and the AMERICAN IDOL producers know that this didn’t feel like the right fit for me,” said DeGeneres. “I told them I wouldn’t leave them in a bind and that I would hold off on doing anything until they were able to figure out where they wanted to take the panel next.  It was a difficult decision to make, but my work schedule became more than I bargained for.   I also realized this season that while I love discovering, supporting and nurturing young talent, it was hard for me to judge people and sometimes hurt their feelings. I loved the experience working on IDOL and I am very grateful for the year I had.  I am a huge fan of the show and will continue to be.”

“We love Ellen and understand and support her decision to bow out of IDOL,” said Peter Rice, Chairman of Entertainment, Fox Networks Group.  “We were fortunate to receive the humor, energy and love for talent that she brought to the show.”

“It was a joy to work with Ellen,” added Mike Darnell, President of Alternative Entertainment, Fox Broadcasting Company. “She brought an incredible spirit to IDOL and was a great new addition to the team.  While we’re saddened by her decision, we are very appreciative that she gave us ample notice so that we could work through it together.”

“I loved Ellen’s passion for the artists and her nurturing skills,” said IDOL creator and executive producer Simon Fuller.  “She brought honesty and optimism to our judging panel and I will miss her greatly.”

“We will miss Ellen, she has been the consummate professional throughout her time on the show, and she’ll always be part of the AMERICAN IDOL family,” added Cecile Frot-Coutaz, IDOL executive producer.

AMERICAN IDOL is created and executive-produced by Simon Fuller, founder of 19 Entertainment; and executive-produced by Cecile Frot-Coutaz, CEO, FremantleMedia North America, Inc. and Ken Warwick, Executive Producer, FremantleMedia North America, Inc.