Secret Diary of an Entrepreneur / CEO-2018

"You have to withstand the pressure if you believe in something"

Secret Diary of Ronnie Screwvala — Part 3

Published 5 years ago on Nov 03, 2018 11 minutes Read
Soumik Kar

Our broadcasting foray in 1998 incidentally happened when at a board meeting I expressed my plan of converting UTV into a B2C player. At that point, we had Dalip Pathak and Rajesh Khanna from Warburg Pincus on our board. Pathak said, “I just had breakfast with Vijay Mallya and he’s got this channel in the south called Vijay TV, a Tamil channel, and he wants to sell it. So, why don’t we go and meet him?” I remember arriving at 11 p.m. at his house, Mallya came in at 1 o’clock. Two hours, we were entertained and we had this conversation at 3 a.m., and we settled the deal. I didn’t understand the language but we understood the market since we were doing a lot of Tamil shows for Sun TV. Importantly, Mallya was willing to accept deferred payments over 36 months. For an entrepreneur at that stage, that really helped. The deferred payment meant I could get into the business the very next day and pay as I earned. So it was like buying a house on EMI. Vijay TV was the first business I bought.

However, there was also a déjà vu moment. Kalanithi Maran called and said, “You bought Vijay TV. You are our biggest competitor. How can I work with you on shows for Sun TV?” But, I have to say, to his full credit, we had a good 20-minute conversation. After that, he said, “Just tell me you will have complete Chinese walls and separate teams for both.” I said, “You have my word.” He said, “That is good enough, no problem.” We carried on and UTV had a phenomenal relationship with Sun even as we were competing with them.

A lot of hassled mums across the country must be wondering, “Who’s the chap that got Shin Chan and Doraemon into the country?” While the Japanese toons may have got on the nerves of parents, it was while doing Shaka Laka Boom Boom, a show for kids, that we realised there was still a gap that the likes of Cartoon Network, Pogo and Nickelodeon Disney, with their 10,000 hours of programming and deep pockets, had not filled. We realised that kids were watching Zee horror shows or Tom & Jerry. It sounded like an interesting opportunity because we were literally dubbing for every single of the six kids’ channels on air, and producing two kids’ shows. It just made a lot a sense because we understood that market. Though the kids’ channel was a disaster in the first year, it became successful in the second year when we got two important shows — Doraemon and Shin Chan. By end of the second year, Hungama had become the number one kids’ channel. 

The success of the kids’ channel also got Disney talking to us. As we were building Hungama in India and its Malaysian version ‘Ceria’, the Malaysian broadcaster expressed its desire to invest 26% in the channel. When the news broke of an impending deal in the media, I was in Los Angeles (LA) to meet Fox for details of our co-production movie, The Namesake. I got a call from Andy Bird saying that he had heard about the deal to sell, and instead offered to buy out the entire channel besides investing 14% in the parent. My first reaction was, “We are just looking for an investor and nothing more.”

Andy persisted, saying he was flying out of LA, and would want me to come over and talk. When he realised I was in LA, he wanted me to meet Kevin Mayer, his head of strategy. “Just talk to him and see, no strings attached,” he said. The meeting went well, with Mayer sanctioning me 15 days to pull together a proposal. Post the meeting, I informed my to-be Malaysian partner of the development. Though they were a bit disappointed, they realised what the deal would do for UTV — a strategic partner, resources from the sale of a channel, fresh equity in the company and opportunities to scale up our business.

But, the deal was far from done. After agreeing on a valuation, over four weeks of financial and legal diligence, talks fell through in a conference call while brushing out the final details. I felt that some of the concerns that were being raised were not relevant to the deal. I pulled the plug on the call, saying that I was not in for a re-negotiation, in keeping with the spirit of our earlier discussion. Ronald my CFO, and Amit, my head of business development and strategy, felt that I was impulsive in my reaction and went to drown their disappointment over some drinks. That night, I went to sleep thinking it was all over. The next noon, I called up Kevin, who had travelled to London overnight, to thank him for his work and patience. Though at peace with my decision, I did not want to end our relationship as abruptly as our call, and as it turned out, the conversation ended with the deal being revived.

Even as Disney entered as a strategic partner, our alliance with Star was going through a rollercoaster. While we were not getting headway on programming with Star TV, they wanted to have a presence in the South. I offered to bring them in as an equal joint venture partner in Vijay TV and launch Tamil, Telugu, Kannada and Malayalam channels. However, on the last day of signing, they said, “We want to run the channel.” About three weeks later, Star’s business development guys came up with a spreadsheet, including a minimum guarantee clause. Arrogance and absurdity is what I saw in that sheet — it was like telling a foot soldier, who is in the thick of the action, that over the next 20 miles, there will be air support, tanks will come in, and the stretch of land will be won. I knew that even in my wildest dreams, I won’t be able to meet the projections for the next 10 years. I told the folks that they were right — they would run it better, and we signed the deal. In 2001, 51% of Vijay TV was sold to Star India.

A year later, the projections made were not being met, and now they had to issue a cheque based on the minimum guarantee. Star realised that it was turning out to be a very complicated affair, where at the same time they were a shareholder, a joint venture partner and a customer. At the end of the second year, they stated that they could not continue paying for a joint venture and wanted to buy us out. News Corp thought that I was the villain, as they were issuing payments to me, an allegedly smart guy, who first got equity and then brought the situation to this. James Murdoch, who was running Star from Hong Kong at that time, told me, albeit in a friendly manner, “You screwed us.” I said, “Excuse me, you were the ones who wanted to invest in my company and chose not to buy any content from us. I offered to run the southern venture, but you chose to drive it.” His perception of me persisted even as UTV exited the Vijay TV joint venture, and sold the four-channel joint venture back to Star, by 2004. Eventually, the chapter with Star came to a close when I bought News Corp’s stake in UTV. To part-fund the buyout, I had to sell off my toothbrush business.

Even as UTV was proving itself in the broadcast space, making films was a steep learning curve. Our first five movies were complete disasters, and the first one was an absolute disaster. The economics is definitely different in movies compared with television, where Friday night is not always a do-or-die moment because the business can always be turned around on Saturday. It was a situation where after the first or second movie, most people would have just packed up and got out. Even large industrial houses such as the Tatas and the Birlas have burned their hands and walked away. But, I did not have a choice because I could not go back to operating on a B2B model, and if I had to stick to the B2C model, I had to be in the business of movies. We were clear that we would look at next generation directors, and the only reason why our earlier movies did not work was because, unlike Shanti, where we knew how each episode evolved, it was the opposite in films: the story would evolve on the floor. At that stage, we did not have complete scripts, and it was this learning that led to me reading the 1st, 7th and 14th drafts of a script, before green-lighting it.

To me, Swades appeared to be an offbeat but powerful story, and one where we were banking too much on a star. Yet, it is one of my favourite movies after Rang De Basanti (RDB), which really gave a boost to our movie business. If Swades got us recognition, RDB gave us serious credibility within the industry. Until then, it was a tough period — I remember my CFO telling me at that stage, “I think we should just call it a day here.” I could sense during meetings that other departmental heads saw movies as a drag on their respective division. The general consensus was that we should get out of movies. But then, you have to withstand the pressure if you believe in something. That’s when a leader has to encash the trust in his leadership. That trust level does not always have to be at its peak, but it cannot go down to zero. My people believed that I would eventually figure things out. 

My eventual exit from UTV was not planned. Disney, with whom we were in a partnership for the past six years, had gone up from being a minority to majority stakeholder, by increasing holding from 14% to 50%. At one of the board meetings, I said, “We need funding for our broadcasting and movie businesses, so I’m going to go out and raise money.” Mayer and Bird, both members of the board at Disney, said, “We’ll fund you the next time around.” 

As a first generation entrepreneur, the more I took money at the parent level, the more I got diluted. So, from my point of view, I thought that if I float the subsidiaries, I’ll be able to do it in a different manner. In retrospect, if I had done that, I would’ve been wrong. I have seen many media groups do that and struggle. It was not my vision or uncanny business sense, I was just blessed that it happened that way.

It was just one of those moments when Disney felt it made sense to consolidate and own 100% of the company. It did make sense — and a few things happened at that stage. First, I did not think I was going to exit the media and entertainment industry since they were quite happy for me to continue for at least five years, if not more. I was not sure about that since it would have needed me to be working for somebody else. I felt that the timing made a fair amount of sense from all perspectives, and that marked my exit from UTV.

When the buyout finally happened, nothing had changed and I carried on with the company as usual. Zarina, my wife, had a conversation with me regarding scaling up our not-for-profit foundation, now that we had the financial resources for it. That, though, had to wait — I had more than a full-time job the next day, to consolidate Disney and UTV India. It struck me that I am never good at implementing somebody else’s vision. However fantastic Disney is as a company, at the end of the day, in a consolidated entity, I was implementing somebody else’s vision. I felt that I am not the best guy for this job, and it took me another full year to complete the consolidation and move out. 

Very early in my career, I had started an NGO called Society to Heal, Aid, Restore and Educate (Share), which got 10% of the money we made every year. Once we listed UTV, we ensured Share was separated, and it became my personal engagement. Post the sale to Disney, my wife and I spent a year researching Share’s future. We met NGOs across India and Bangladesh to understand operations, because we were very clear that we wanted to scale it up.

My vision for Share was to work with a million people every six to seven years, and aid them out of poverty. It took us a year to scale up and build a team, rope in a COO and get in touch with 400 people. From 80-90 villages, we expanded to 2,000 villages. Incidentally, a group of six students from Columbia University had come for a four-day visit. When we met them for a conversation, we came to realise that the work we are doing is a Swades moment — one where Shahrukh Khan quits NASA to generate electricity in rural India. That got us really excited, and eventually led to our venture being called Swades Foundation.

Some people see me as a smart cookie who built and exited the businesses of toothbrushes, cable television, Vijay TV, Hungama, UTV and everything in between. While that sounds pre-meditated, none of these situations were. For me, staying the course has been my biggest learning experience, because you cannot time success and failure. 

This is the third of a three-part series. You can read Part 1 here and Part 2 here