Business Today

'Scale has always intrigued me. We were looking at scale'

In his first media interaction since The Walt Disney Company took over UTV, Ronnie Screwvala, now turned employee, tells Chaitanya Kalbag and Ajita Shashidhar how he intends to take the company to greater heights.
Chaitanya Kalbag and twitter-logoAjita Shashidhar         Print Edition: Aug 18, 2013

In his first media interaction since The Walt Disney Company took over UTV, Ronnie Screwvala, now turned employee, tells Chaitanya Kalbag and Ajita Shashidhar how he intends to take the company to greater heights.

Q. How has life changed? How easy or difficult was it to transition from a successful entrepreneur driven company to being a part of a large global company?
A.
UTV was a listed company for the last six or seven years before it got acquired.  Fifty per cent of its board of directors was independent.  Disney already had close to 50 per cent shareholding for many years. As a public company, we were under constant scrutiny and accountability - to shareholders, to the board, analysts, team members and of course, our consumers and audience.

"Entrepreneurial" is in the DNA of an organisation and not in an individual. I would say that was part of our culture and the reason for the success of the erstwhile UTV. Candidly, not much has changed. In fact, we can now focus better on the mid-and-long-term without quarter on quarter pressures.

Q. How and when did Disney decide to buy out UTV completely?
A.
The association goes back five to six years. It started when I was in Los Angeles on some other business and I got a call from Andy Bird asking if we were interested in selling our 18-month-old kids channel, Hungama, which had that week beaten all the other six kids' channels to be the No.1 kids channel in India, to The Walt Disney Company. We had met on common forums before and so knew about each other. What followed was a quick series of meetings and due diligence and in less than three months we had naturally agreed to sell Hungama, but also to have The Walt Disney Co (TWDC) as a 14 per cent shareholder in UTV, to contribute and share in its future growth story.

A year-and-half later, when we were looking to expand our broadcasting network, as also foray into games and mobile, we went looking for independent joint venture partners and investors. Andy and the Board (of TWDC) said: "The whole is better than the sum of the parts," - staying as one consolidated company was more value creative. At that stage, TWDC made its second investment in UTV.

In mid 2011, TWDC was debating its long-term strategy for India and around the same time, UTV was exploring its next level of growth. Early discussions took place on "What if" scenarios. The business compulsions seemed more and more logical and compelling from both sides as discussions progressed. But it was complicated for myriad reasons and I can safely say that right up to the actual date of closing, there was absolutely no certainty of the transaction being completed.

Q. How big is Disney-UTV in Disney's global scheme of things?
A.
In the global scheme of things, it won't be a needle mover, because The Walt Disney Company is $42 billion in terms of revenue.

India is the world's second most populous country with a huge young population and Disney has always had a family entertainment kind of approach. For Disney not to have made much greater impact in India means something has obviously not clicked.

You can look at a cup and call it either half full or half empty. I think if you are looking at global media companies across the world, you need to see where the needle has moved for many of them. Many of them have been around since the 1990s. It took 10 years for them to see growth, with a tremendous amount of investment in those first 10 years. I would say that the Walt Disney Company, from that perspective has not had those kinds of losses.

 It looked for an acquisition and that's how it acquired UTV. Now the blueprint for the next five years is how to bring scale to all our verticals. If we benchmark the Walt Disney Company to other Indian media companies or global giants here - the focus is really on broadcasting for most of the others. There is nothing wrong with that. But that's not the philosophy of The Walt Disney Company. At the end of the day we are all about franchises, characters, experiential entertainment and consumer products.

Q. So what is the grand plan from here on?
A.
When Disney acquired UTV one-and-half-years ago, there were a couple of trigger points and that kind of spells out what the future holds. One, media (in India) is still evolving and needs consistent investment. In that context, scale has been something that has always intrigued me personally and from a UTV perspective also we were looking at scale. From a Walt Disney perspective, it had an office here and it was looking at scale. So the coming together actually meant that we could do a couple of things. We could come out of the listed space and not look at quarter to quarter earnings and therefore we could look at the business from a five year or 10-year point of view. The question of then making deep investments in all the verticals was the exciting part to me.

Q. Hasn't TV content creation taken a back-seat in the last one-and-half years?
A
. I don't understand how the content part has come down. On the contrary it has gone up three times. Our focus now is much wider. The Walt Disney Company is about creating and building intellectual properties and franchises.  To me the diversified model, the scalability and the ability to take the long-term view of the media business is the really interesting part.

Q. What about the movies? How lucrative has that business been?
A.
We are not here to do haat ke (off beat) movies. That's not our mission. I think we are working with a great set of young directors. We know who our target audience is. The strong part of The Walt Disney India Co now is we have in-depth knowledge of our consumer. Everything starts from understanding the audience. The cross-pollination that comes from having run four Disney channels, a Bindass youth channel, and doing our movies...is a massive asset for us to scale up to what we want to do. Do other media companies have this asset? No, because they are mostly platforms. They more or less acquire content and run it successfully. That is our differentiating factor.

Q. You have nine channels now, but there is a feeling that there is a gap in your bouquet because you don't have a general entertainment channel (GEC). Are you content with that?
A.
I don't understand 'gap'. A gap is when you are competing in a broadcast space and you want to be the No.1 broadcaster in the country. That's not what we want to be at Walt Disney.

Q. So, you are happy occupying a niche?
A.
I won't call myself niche. I'm a strong No. 5 without a GEC. So, if you subtract the GEC from the other four and then do the ranking, you will redefine the word niche. If you take out the GEC ratings and look at the rankings, we won't be fifth. We will be No.2. 

Q. Advertisers are constantly looking for the whole spectrum of channels…
A.
No. They are looking for demographics and they are much more demographic specific today. I don't have a gap. Yes, there is a lowest common denominator that one would go for, and after that everything else is across the board.

To us beauty is in the eye of the beholder. As far as I am concerned, I'm the beauty and I'm the beholder. I don't have a gap. For me, the broadcasting channels we are into are very epic to the content that we create, the franchises we create. We are interested in the four years to 40 years category and the 15 years to 24 years. Why, because the four to 40 audience, or the family, embellishes the Disney brand, and the 15 to 24 audience is what UTV has carved out.

A lot that is happening at Disney-UTV now is because of what you have done in the past 30 years. This seems to be rather shaky ground, since it is dependent on you. How is that going to change? I also understand that you are bit of a controlling person. You look at most areas of the business yourself.

The Walt Disney Company has not acquired a company based on one individual. Would Walt Disney have acquired completely out of the blue? No. For the last five years, we have had more than a courtship. It was a strong embedded understanding. The board had full exposure to all our team members. If we look at each of these spaces individually, they are completely and totally capable. They are building their respective businesses completely on their own, creatively and business-wise. That's the team. It's a core overall team Walt Disney has acquired.

Q. I heard you work insane hours? What's your work-life balance like?
A
. It's pretty good, I'm happy…. If you ask me if I am completely emotionally submerged in my work, I'm not. It's important to keep that balance. If you are going to be completely emotionally submerged, you will not be able to meet that objective.

Q. We hear you are focusing quite a bit on your venture capital fund as well as philanthropy now...
A.
My focus on private equity is really not there to that level. Right now I'm completely into media. But I do have a family office which is independently run. As for the philanthrophy... we are an execution foundation. Philanthrophy is where you cut a cheque and give it to NGOs. We are not cutting a cheque. That is completely being handled by Zarine, my wife...So, does one have a strong inclination for philanthropy, sure. Is that going to be a full-time occupation, no.

Q. So, where do you see yourself for the next five to 10 years?
A.
I think there is a lot to be done.

Q. So you are here for the long-term?
A.
I am here and I am having this conversation with you. (Smiles).

Q. Do you think there is going to be any kind of catalytic shift or shake-up of some sort in the industry?
A.
From the business perspective the fact that subscribers and viewers will start wanting to pay for the content they consume, there will be a catalytic shift. The whole eco-system is right now only based on advertising ....with that will come more channels, more content. The whole eco-system goes through the roof. Will it happen just because digitisation has been announced? No, it will take two to three years.

Q. You have been talking about creating season-based content on TV, the way it is done in global markets. You have also said you would want to own the intellectual property rights of the content that you have created.
A
. We have a shortage of creative writing talent. When you have that, you need to pause. I think the psychology behind making daily soap-operas is that when you get something right, the last thing you want to do is take it off the air and replace with something new. You tend to carry on. The exhaustion level then sets in. If you give it a break of three months and start again…that's the difference between short term and long-term thinking.  In the short-term, if it is working, I'm not going to take it off the air. To do so, requires a bolder, visionary view.

Q. What about theme parks? Andy Bird has said theme parks will not happen soon in this country?
A.
It's amazing how quickly and easily this question keeps coming up. The answer is, Disneyland is a lot more than just a theme park as we know it. Firstly, there is a minimum scale at which the park is conceived and built, and now visitors across the globe expect no less from any of the Disneyland parks and resorts. So it needs that scale and depth in every country where it is set up. The scale is also important from the consumer insight that there is so much to do that you can spend days - maybe a week - in there and still have a lot to do, and nothing seems repetitive even if you visit the parks again and again. The basic infrastructure is also the key - and not just inside the theme park but all avenues leading to it from airports to railways lines to roads and public and private transport access for it. So no there are no plans for this presently.

Q. What about animation? We have always associated Disney with very good animation. We saw your animation film Arjun. It seemed too sophisticated for a juvenile audience or a young adult audience. Do you plan to do more of such films?
A
. You have hit the nail on the head. The main point here is that India doesn't have an animation market because everyone thinks that animation is for a juvenile audience. Disney doesn't make animation for kids, it makes such films for the family. When you go to see Finding Nemo or Toy Story, you are not going there because you are accompanying your daughter or your grandchild, you are going there because you want to see the film as well and you are also taking them along. You are going to Disneyland because you want to give someone a treat and also give yourself a treat. That's the difference. A part of Arjun's experimentation was to start to age-up animation.

Q. Did that happen?
A.
No. It's going to be a slow process. In India, nobody grew up on animation. In the West, people have grown up watching animation. Cartoon Network is a 10-year phenomenon. Had it been a 40-year phenomenon, you would have had a different view on animation.  We have to evolve our storylines. The animation will not change. There is no such thing as a kids' animation or adult animation, because a fish is going to be a fish and a shark is going to be a shark. The dialogue, the characterisation is the key and that has to relate to you as well as your son and your grandson. Therefore animation will be a slow step-by-step approach.

It has taken a fair amount of time in the TV category to get a Chhota Bheem, but it is on TV. Chhota Bheem, the movie, had no traction, because, it is only for kids. On TV, you don't mind watching, because it is free. Your core audience in a theatre today is the 15 to 24 year group. These people won't come to see Chota Bheem. Arjun was an entry point for that audience, a good experiment for us. Animation as a genre for movies is at least 10 years away.
 
Q. What about the skills you need for your work? Are they easy to find in India?
A.
Most evolving sectors will always have a skills problem. We may not have skill sets better than the mature market, but do we have better skill sets that most of the South Asia and South East Asian and South American countries. 

Q. Do you bring in people and train them? 
A.
Yes. We have a robust advertising industry here, which does well. If you see the creative instincts within people, they are strong, but we don't have 100 years of fiction writing in this country. If you look at that, where does the seed come from?  We don't have a story-telling industry in India, outside of the Amar Chitra Kathas, Jataka Tales. Then Chetan Bhagat comes out and writes a few books. If you look at the cluster it is so small.

Q. When you co-produce films, do you co-produce from the scratch? The perception is that you acquire content and only produce and market it.
A.
We co-produce from scratch. The team here reads about 50 scripts a month. I personally read about 10 a month. The film gets co-produced at the script stage. There is a perception problem. Take for instance, Chennai Express which we have co-produced with Red Chillies. Rohit Shetty is the director we have signed, he narrated the script to us, and then he went to Shah Rukh Khan. The moment it goes to Shah Rukh, it becomes a co-production. If you have a big star, he wants to be involved and it becomes a co-production.

You can't do 12 to 15 movies all on your own, year-on-year. There is no studio which does that. So, if we are doing six to seven on our own, that is more than any other individual company, including people who are creating movies. If Karan Johar does three movies a year, we are doing 12. Six is what we are doing completely on our own and six are co-productions. Six is already double of the three that anybody else is doing. Also, there is no such thing as limited rights. When you are looking at revenue, everyone mistakes the fact that I own the rights. Actually, what are 'rights'? If you have the revenue generating rights in perpetuity, there is no such thing as IP. If you own the revenue generating rights in perpetuity then you own the IP. Because 'rights' are the right to earn, otherwise, it is only the material inanimate objects sitting in a cupboard.

Q. But that could happen if there was more control of IP ownership?
A.
In India, we are spacing innovation fatigue in the creative process in television because we are a daily-programming oriented culture and now it's set into the whole system. The other problem is that we are a very advertising dependent industry. Tomorrow when subscription becomes 60% of your revenue from 20% of your revenue, then you will take your seasons break as the pressure of ad revenue being the sole source of revenue is not going to be there. That's when creativity will evolve to the next level. 

If you look at an evolved market it's about seasons. The total number of episodes of Friends produced is 180, when you think that it is the longest running series (10 years). That's the thinking of the Walt Disney Company - less for more. If that is something for the next 50 years is going to bring me annuity, that's where the focus should be. The reason we have stepped out of TV content is because, firstly, it is a b2b model and I am supplying to the broadcaster. I would rather own my own IP. I think the origination of moving from TV content to broadcasting happened with that compulsion. This is a b2b job and doesn't make any sense. If we want to do it, let's do it on our own.  As a creator and as a platform my ability is that I can own my own destiny and create my own destiny.

Q. What about merchandising?
A.
As I said, if you look at the top five textile or jean companies, if you look at the stacking order, with Rs 1,200 crore of retail branded play, we are among the top 10 in India. That's lesser known right now. The challenge for the Walt Disney Company, is your reaction of saying, kids equal to juvenile and juvenile equal to 'cartoons'. Anywhere else in the world, it's not cartoon, its animation.   So that's the one myth we need to break and that will come from the Disney channel. And then, the entire concept would be one of family. Some of the products that we sell, actually the 16 or 17-year-old boy or girl is as proud to wear, because it is funky. Now we need to age that up and that's part of the process we are driving at.

Q. But you need to get to a point where you have big stores selling just Disney products?
A.
Personally my belief is that in India to own stores in India is not the best strategy. That's more because in India, stores are a real estate business. Our real estate prices compared to the rest of the world is obnoxiously high. So when you are in a retail business where real estate as a cost is disproportionately high, then you shouldn't be doing stores, as your biggest variable would be rent. Secondly, our culture still on wear and tear in retail is very high. When it is great, it is novel, people rush to try out and the wear and tear is 10x. It is similar to the theatre business here where in every two years you have to change much more than you actually need to. My recommendation to Disney from the beginning was that let's not get into the retail business immediately.

But we need to have a presence. So, there are 2,200 organised retail doors, which is slated to go up to 9,000. For us to participate in that story is a much better story that owning our own stores. The question is whether I should be in 9,000 doors or have nine retail stores. Rather be in 9,000 doors where I get special positioning as they are not in competition with my own store. Large retail stores are happy to give you a branded outlet, which is Disney-branded, Marvel branded and now Star Wars branded. If we put all that to together is a large specific array.

Q. Why has nobody got the licensing and merchandising business right in India?
A.
I don't think anyone has got into the licensing business in this country other than the Walt Disney Company.

Q. Media companies such as Turner and Viacom are also into licensing and merchandise…
A
. They have not done it anywhere else in the world, as that needs deep franchise thinking and staying the cause through and through and then creating content that tops it up. You can't do one Krrish and expect people to buy the same product even after 10 years. You need to replenish that thought process. So, if you look at licensing and franchise here in India, one, is nobody has done it with the core that this is it and it is going to stay here for the next 25-30 years. Second, it's only in the last three-four years is that the consumer is willing to pay that premium. We are a free consumption country in many ways. We have been used to consuming 400 channels for Rs 75, and that according to me is free. If we tell somebody to pay Rs 75 on TataSky and watch a movie, they will say my cable operator will give to me for Rs 35, why should I pay so much.  Why is that biggest brands of the world like Louis Vuitton and so on have just started coming to India and they are still a blip? That is because if you want to buy a handbag, you don't want to pay 3X for a wheeler bag which is from a VIP for Rs 700.…that psychology is not there. Its not the spending power, it's the psychology for paying for an established brand. Again, to give you an example, on my I-Pad, I will pay Rs 100 for a channel but with my cable operator I will refuse to pay Rs 6 from Rs 5. So, we are playing the India consumption story. In content, the game for The Walt Disney Company would be to be very participatory in the India consumption story, in entertainment, in live entertainment in everything that is experiential entertainment and consumer products. That's the crux.

To look back and say we are a late entrant, sure we are a late entrant. Have we lost too much of the thought process? Actually, not so much. The only part where there may be a situation back to is broadcaster equal to GEC. If you take that one part we are not in, the India consumption story is just about starting.

We could have easily spent a $1 billion before going out there and the learnings would have been very high. We could have set up 40 stores thinking that India is the next consumption story and that could have easily been the case. We would have talked about opening 40 stores in 2007 and shutting down 20 in 2008. To that extent, we have done it in a manner which is much more meticulous. 

Q. Aren't you concerned that at some point it could lead to dispensability?
A.
Why should I be bothered about that? (laughs)

Q. You are an entrepreneurial person not an organisation man?
A.
Which is why I volunteered the other side of it! (Smiles)To be honest, Disney is an entrepreneurial organisation. Marvel, completely entrepreneurial, and they are giving them their biggest movie hits right now. Star Wars, Pixar, they are all entrepreneur. In FMCG, it is process driven, while in media and entertainment individuals and relationships matter. My role is much more of a catalyst. If I look at scale, I can't be a control-freak, the two don't go together. You can't be a control freak and be fascinated with scale. A creative process is one where you need to be in multiple places and look at it from a multiple perspective. So, that is not control, it is participation. If you have got that experience and you are working together with a team, that's much more collaborative. As compared to here's your annual plan and you are going to sell seven million cases of toothpaste. Now, after that time other than seeing a marketing campaign and seeing that the sales guys are not overstocked, there's not much you can do in terms of control. But in a creative process participation can be misconstrued as control. You will meet team members and they have been around for a long period of time, they are very independent in their thinking.  We are very team-oriented and strongly so.

Q. What I mean is that you made a fairly large chunk of money by selling UTV. Most people start thinking about what they can do with that money.
A.
One has in that context. We have a family office very independently run.

Q. How much of your time goes into that?
A.
It depends on your version of gap and the beauty lies in the eyes of the beholder question. It depends on what time you have and what time goes. If I say 15 hours, for a lot of people 15 hours would mean a lot, but if I say a 90-hour week, then 15 hours is not so much.

Q. What about mobile?
A.
The next catalytic shift overall, would be bandwidth. I won't even call it mobile, I will just call it bandwidth. The bandwidth will enable you to do several things on a portable device, be it mobile or tablet. Bandwidth will be a very liberating thought process. I think mobile became a liberating process for a lot of people in India. The youth today, if they didn't have a mobile, wouldn't be as liberated.

Q.Youth are also watching movies on their mobile device? Do you think we are going the right way in terms of bandwidth?
A.
Yes. I think we have got two-three big players who are making serious investments. I definitely believe Reliance is making deep investments. To me, the whole industry's catalytic shift is bandwidth. I think the business shift and the economic shift is going to be subscription.      

Q. There has to be a whole new way of delivering short-form content on the mobile, isn't it?
A.
Yes, we are already doing that. We do a 1,000 one-minute original content every month.

Q. It has to get a point where people actually pay for that content.
A.
That convergence will happen faster. Because there is no precedence, in fact, my worry today is that we better get down to subscription models on YouTube and mobile sooner. Right now I would rather our team members take six months of a loss, but not get advertising. Because, the minute you do that, you spoil the consumer. Then to convert to a free-to-air channel to a pay channel is a gone. You will never want to pay for a Doordarshan.

Q. Had digitisation not come through, wouldn't you have missed not having a GEC?
A.
Absolutely not, and for two reasons. In the UTV avatar, we were looking at being a diversified content company and not a broadcaster. We don't believe that the holy grail in India is the GEC, under no circumstances. As the Walt Disney company, the question doesn't arise. To us, creating IPs and franchises is much more valuable. Mickey Mouse is a $5 billion revenue item for the Walt Disney Company. So, for us that's not really the place we want to be in. I know today most media companies get down to GEC. Of course, it is a scalable business opportunity. But what do we do with that? It wouldn't be branded retail; it wouldn't be able to feed into our multiple verticals. As a business per se, the return of capital employed is horrible. Channels who have been around for 20 years have not got their capital employed back. So, what's the excitement on a ROC basis, none. But as a media company, had we not been focusing on IPs and franchises, there would have been no option, but go for a GEC. 

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