How Politics Destroyed India’s Biggest Ever Science Project

The hills of southern Tamil Nadu will soon shelter India’s biggest basic-science hub. Unless canards bury it first.

neutrino

Artist’s impression of India’s largest science lab – the Neutrino Observatory coming up near Madurai. Illustration by Nilanjan Das, based on actual site photograph.

THENI is one of those spots in Tamil Nadu that come comfortingly suffused with temples and lush scenery and the lingering echo of the Western Ghats. “Spicy green ornaments” is how the local administration’s website describes its key attractions. But the lyricism is under threat as the district, which is home to some 12 lakh people and has Madurai (100-odd km away) as its nearest urban callout, is put through seismic churn: It has been chosen as the site of a contentious Rs 1,500 crore neutrino observatory, which will come up under 1,200 metres of rock cover in the Bodi West Hills region.

Neutrinos, one of the most abundant and least interactive particles present in nature (the sun produces over 200 trillion trillion trillion of them every second), are often described as ghost particles for their elusive quality. Mumbai-based Tata Institute of Fundamental Research (TIFR), which is hosting the project, explains that the background of cosmic rays and natural radioactivity make it almost impossible to detect neutrinos on the surface of the earth. Though not nearly as fabled as the God Particle chased by physicists at Geneva-based CERN, the world’s preeminent science lab, TIFR says neutrinos hold the key to several fundamental questions on the origin of the universe, energy production in stars, and the structure of the earth. But that’s hardly the point. The observatory, unmatched in its scale, is a muscular statement of India’s arrival in the comity of Big Science, dominated by the West and feverishly courted by China.

For all that, it has raised the hackles of Vaiko, general secretary of Tamil political party MDMK. Claiming that the observatory will spell disaster for the people and environment at Theni and the neighbouring district of Idukki in Kerala, Vaiko moved the Madurai bench of the Madras High Court, prompting it to issue notices to the central and state governments. At the time of going to press, government lawyers were busy formulating their response.

“When we proposed to build the laboratory (the Cabinet signed off on the funding in January), local people were fearful as they did not know anything about neutrinos and why we need a big underground [setup],” says Naba Kumar Mondal, professor at TIFR and spokesperson for the project. “On top of that, some people, for whatever reason, started a campaign to mislead the locals by saying neutrinos are dangerous for human beings.” There were canards that the underground site will be used for dumping nuclear waste (fact: there will be no such thing), that agriculture will suffer because of the heat from the project (no heat will escape), and that the facility’s 2 km access tunnel will damage a dam which Mondal says is at least 50 km from the site. And then there were questions bordering on the ridiculous. Sample this from the project’s website: “If you are building a world-class lab, all the world’s eyes will be on it. What if an atom bomb is dropped on us?”

The project team enlisted a group of scientists to quell these fears. Locals were also told about the jobs the project would create and the benefits that students in the region could expect from the observatory’s outreach activities. But none of that has been enough to convince Vaiko, who is now persuading the people of Kerala to join his tirade. The day Fortune India visited the site, the road leading up to it was being laid. Initial orders for material have also been issued to Saint-Gobain (for the glass to be used in detectors) and Essar Steel, but the litigation has thrown a huge spanner in the works.

THE IMPASSE DISMAYS people like Mondal all the more because this project was seen as a salve after India lost out to relative minnow Pakistan in the race to become Associate Member at CERN (in December)—thanks to inordinate indecision on the part of the previous government. With it went the opportunity for Indian companies to access CERN’s annual Rs 2,000 crore component-order ecosystem, to speak nothing of the priceless learning that comes along (see ‘Business and the Big Bang’ in Fortune India’s January 2014 issue).

“Science cannot wait for government policy to fall in place,” says Bikash Sinha, former director of Kolkata’s Saha Institute of Nuclear Physics. Beyond its esoteric goals, particle physics is big business, with multibillion-dollar applications in everything from archaeology to nuclear medicine. Missing the CERN seat could well have set Indian science and allied industry back by at least a decade. India can hardly afford an encore.

Few know that neutrino research in this country has already traversed a circuitous path. The first underground laboratory to study the particles was set up at Karnataka’s Kolar Gold Fields (KGF) in the 1960s. The lab carried out several pioneering experiments in the area of cosmic rays and particle physics. In fact, atmospheric neutrino was first detected at KGF way back in 1965. The facility was shuttered in 1992, and serious discussion and preliminary work to identify a new location started in 2001.

In 2006, scientists submitted a detailed report to the funding agencies (Department of Atomic Energy and Department of Science and Technology) about an alternate location. “By 2009, we were almost ready with a site and received environmental and forest clearance,” Mondal says. “However, the government later declared that site as a tiger reserve, and the clearance was withdrawn. We were asked to look for a new site.” The team zeroed in on Theni in 2011 and received all the statutory clearances that same year. From then, it took four years to complete the process of funding approval. Apart from the funding agencies, the process involved a set of international referees, the Scientific Advisory Council of the Prime Minister, and the (recently scrapped) Planning Commission.

Meanwhile, China is galloping ahead with its own neutrino programme. Work started last year on the Jiangmen Underground Neutrino Observatory, located 700 metres underground in the Guangdong province, and reportedly costing $300 million (Rs 2,084.6 crore). The project has attracted 30 international partners and a fair amount of gung-ho press. When we last checked, there was no talk of armageddon.

(First published in the February 2015 issue of Fortune India.)

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Lessons in Crisis Management: Keep Calm and Tell Your Story


Interview with Manu Jain, head, Xiaomi India, on how he managed the crisis after the Ericsson IP lawsuit that led to a temporary ban on Xiaomi’s sales in India.


manu

“Do the right thing. Believe in your story.”

Age
33
Job Experience
An IIT Delhi, IIM Calcutta, and ESCP Europe
alumnus, Jain co-founded e-commerce portal
Jabong.com and co-created DINK Couple,
an urban-lifestyle cartoon series. He has also
worked at McKinsey and Company.

Xiaomi’s Beijing-based bosses trusted Jain with running the show singlehandedly in the world’s third-largest smartphone market, when the little-known company came here in July 2014. He has since grown the team, built the brand, and delivered spectacular results: In December Xiaomi India’s sales crossed a million devices, contributing handsomely to the $45 billion (Rs 2.8 lakh crore) valuation that makes Xiaomi the world’s most-valued startup—taking the sting off potentially damning speculation that the company’s Chinese servers were leaking sensitive user data. Jain was also central to the launch of an India-specific, sub-Rs 10,000 4G device, in association with Airtel. In 2015, he will look to expand the product line beyond phones, beef up aftersales service and R&D, and build a local data centre to allay cyber-security fears. More critically, the bosses will lean on him to overcome tricky hurdles that threaten to derail the company’s dream run—chiefly the patent-infringement lawsuit by chipmaker Ericsson that forced temporary suspension of Xiaomi’s sales in India.

“The Delhi High Court’s ex-parte injunction [prohibiting Xiaomi from importing and selling its devices in India, following allegations of patent breach lodged by Ericsson] came on December 8. It was a Monday. We had just come to our office in Bangalore, and Tuesday being our sale day, things were a lot crazy. A lawyer friend of mine came to know of the order from some of his colleagues at the court, and he immediately called to tell me about it.

At first, I was frankly taken aback; I never thought something like this could happen to us, neither had I faced a similar situation in my career before. After that initial feeling blew over, all I wanted to do was to find out more about the case rather than send out an emotional reaction. I wanted to know exactly what had gone wrong, and what its implications were for our operations.

It took us till Friday to get a copy of the court order. Till then we were a bit blindsided, although various people, including the media, were filling us in on the details.

After going through the order, we set our own response in motion in consultation with our legal team. I had, of course, spoken with the headquarters in Beijing and with Hugo [Barra, Xiaomi’s international business head], in order to understand if there was any history in the company of dealing with such a case. To my knowledge, there’s no precedent. But at no point was there any kind of anxiety or unnecessary pressure on us from the founders or the senior management. We were only worried that till we were able to seek legal recourse, the ban would disappoint the huge number of Xiaomi fans in India. We wanted to address their concerns in whatever way we could, without doing anything that might lead to contempt of court.

One of the first things I did was to gather my team and tell them that we are very confident about restarting sales soon. With our call centre agents, things were a bit trickier since worried customers had started calling them with all sorts of questions: “Will Xiaomi continue in India? What will happen to service now?” and the like.

We tackled information flow to the call centre in three phases: Till we got the court order, we instructed all our agents to be honest with customers and tell them that we didn’t have all the answers just yet, but were doing everything possible to get more clarity. Then, towards the end of the week, we published a Facebook post informing all our fans about the temporary suspension of sales and told the call centre to communicate likewise with customers. We told our agents to let customers know that the December 16 sale for Redmi Note [Xiaomi’s latest model in India] wouldn’t happen. Finally, when on the 16th afternoon we were allowed to resume sales [for our Qualcomm chipset-based products] after an appeal hearing, we conveyed the development to the call centre pronto.

The episode had two big lessons for me: First, during a crisis, it is critical that the leader keep everybody aligned through crystal-clear communication. It is particularly important to empower the front-facing people—the call centre, the social media crew, and the service centres—because those are the guys the customers come to when they are apprehensive.

Second, all the channels should then send out consistent messages to the customers. These two lessons were underpinned by my belief that when the chips are down, a leader must resist the urge to react impulsively. You must first collect all the information needed to form an educated response, and take everyone on board.

Another key lesson was the organisation’s belief in doing the right thing. All through, I was consistently told, “We believe we are on the right path, and we should transparently tell our own story to the court.” We got only three days to present our case before the court the first time. We were able to demonstrate that we already have some of the licences, and the interim relief has been a great confidence builder. Now that we have had more time we are confident of putting together a stronger argument. We have also said from day one that we are open to out-of-court discussions.

Meanwhile, we are working towards putting together a risk-mitigation plan so that such issues don’t take us by surprise in the future. Hugo and I have also been thinking about helping the government and regulators better understand us and our business model.

The support that we have received from our fans has redoubled our resolve to be a long-term player in India, and proved that we have made the right choices. Within hours of a Facebook post announcing that we were resuming sales, we got 2,500 likes, 500 cheery comments, and 400 shares. Our registration numbers didn’t get hit either. In four days after the pro-tem order, we got about 2,200 registrations for the next sale.

Our time and energy are now fully dedicated to our 2015 plans. Any consumer tech company today faces the spectre of commoditisation, and the only way to survive is through rapid innovation and high-quality service. In line with that, we will bring many more products—notably the Mi Band, and my personal favourite the Mi TV—to India much faster after their launch in China; scale up our exclusive service centres; develop R&D; help build the mobile services startup ecosystem; and establish our own e-commerce platform. Avoiding litigation will be a concern, but we have much bigger things to worry about.”

Photo courtesy: Reuben Singh; first published in Fortune India January 2015 issue

Prize Catch: The world’s most powerful teenager just won the world’s biggest prize. Here’s why an ex-techie from Bangalore is kicked about it.

Malala Lead

With looks like Hagrid the gamekeeper from Potterverse, 31-year-old D.N. Guruprasad is of a piece with the heaving shelves at Aakruti Books in Bangalore’s Rajajinagar area. He started the basement store in 2010 after dumping a career in software engineering, and soon turned a passionate publisher of Kannada books. Aakruti has brought out 17 of them till date. But passion aside, Guruprasad says this is a cruel business. “We struggle to sell even a thousand copies of a book.” Of late though, Guruprasad has found fresh reason to be excited: Partnering with Malayalam,Tamil, and Marathi publishers, he has acquired the rights to produce a local edition of Little, Brown and Company’s global phenomenon I Am Malala.

“The news of Malala’s Nobel Peace Prize has created a lot of buzz around an already terrific product,” he tells me, as he hands out invites to the launch scheduled for the following weekend. (The Kannada translation by journalist Jayprakash Narayan is the first of the four editions to be published.) “I am expecting to do at least 5,000 copies in a year.”

In my one hour at the store, several customers walk in enquiring about Naanu Malala. A few days later, Guru messages me: “The launch was a blast. Close to 400 copies sold in a couple of days!”

malala 2

D.N. Guruprasad with Naanu Malala at Aakruti Books, Bangalore.

Every year, the announcement of major international awards triggers frenzied commentary on the windfall for publishers. The Guardian, for instance, says Indian author Aravind Adiga’s The White Tiger—published by Atlantic Books in Britain and HarperCollins in India—sold over 1,600% more after winning the 2008 Booker Prize (pre-award week sales: 463; prize week sales: 8,033), citing data from industry monitor Nielsen Bookscan. Last year’s literature Nobel for Canadian author Alice Munro delivered similar returns, with sales of her titles reportedly spiking by anything between 4,424% (for English versions in Canada) to 4,213% (Italian translations). But such analysis is rare in India—despite boasting the world’s largest English publishing industry after the U.S. and Britain, and darlings of the award circuit like Adiga, Arundhati Roy (Booker, 1997), Jhumpa Lahiri (Pulitzer, 1999), Kiran Desai (Booker, 2006), and Siddhartha Mukherjee (Pulitzer, 2011). Nielsen Bookscan is present in India too, but it did not respond to my questions.

Thomas Abraham, managing director of the Indian arm of Hachette Book Group, which owns Little, Brown, attributes the lack of interest to the fact that publishing is not often viewed as a business in India. “The truth also is that awards, with certain set exceptions, affect sales very little.” No major Indian award for works in English—the Crossword Book Award, the Hindu Fiction Prize, or the DSC Prize for South Asian Literature—has any significant impact on sales. Among international prizes too, only the Booker really matters. “It can take sales from zero to 20,000 to 25,000 levels,” says Abraham. “If there’s an Indian connection, you’re talking about sales hitting 200,000-plus. The Nobel and Pulitzer matter only if there’s a strong Indian subcontinent connect, or if the author were a big brand anyway.”

Malala ticks both boxes, even though she hasn’t won the Nobel for her writing. Abraham expects sales of I Am Malala to double post the prize, reaching the 100,000 league. (In contrast, he says the obscure French author Jean Patrick Modiano, who won the literature Nobel this year, wouldn’t find much love.) The book has led the HT-Nielsen Bookscan bestsellers list in India the past few weeks, and Abraham says there are plans for a children’s edition “which we’ll push hard to schools. We’re hoping she’ll come over, but that depends on her school schedule.”

Malala’s unsung contribution could be putting people like Guru on the map. V.C. Thomas, publishing director at Thiruvananthapuram-based Olive T—which specialises in Malayalam translations of foreign titles—played a key role in bringing together the four regional publishers. He says, “Even the names of some of our languages are alien to foreign publishers and agents.” That was the main hurdle, since at $500 to $600 (Rs 30,000 to Rs 36,000) for an initial print run of 2,000 copies, the rights didn’t cost the earth (they were negotiated before the Nobel). Luckily, Thomas managed a recommendation from an editor at Little, Brown’s U.S. office, who had attended the Frankfurt Book Fair Fellowship with him. The group then discussed price-sensitiveness, typical to the vernacular markets: The translations will be priced at about
Rs 250, compared to Rs 399 for the original. “Finally, Little, Brown was happy to deal with four language territories at one go,” says Thomas.

Thomas believes that success for the translations will attract global attention to India’s regional publishing scene. At the same time, he says the hype around the Nobel is fanning demand for spurious versions of the book, at least one of which is already doing roaring business in Kerala.

Guru meanwhile is grappling with a more philosophical question: Translating a hit may be good business, but it takes away from the focus on promoting homegrown talent. For the moment though, he has made peace. “People have rejected Kannada books because they aren’t happy with what’s generally sold,” he says. “We need strong content [like Malala] to bring them back.

Rebirth of the Native

India’s multibillion-dollar vernacular press is flirting with the new digital world. Can it cut out the distractions and take the next step online?

VINAYAK PARAB remembers the angry letters from readers in the mid-1990s, when his employer, the Marathi daily Loksatta launched in 1948 by the Indian Express Group, started writing about computers. “No other Marathi paper would touch the subject,” Parab, one of Maharashtra’s best-known technology writers, who’s now executive editor of the Marathi magazine Lokprabha published by the same group, tells me on phone from Mumbai. “They were scared that it would repel the aam aadmi who was their core market.” But Parab hunkered down and took out a 90-part series demystifying cathode ray tubes and suchlike. After the initial resistance, he says, circulation shot up on days the column was published.

Parab claims Loksatta’s success triggered a flirtation with technology in Marathi newsrooms—but getting the vocabulary right was a struggle. “I had to constantly adopt words, like pranali for operating system. Happily, readers kept pushing me. Even reporters from rival newspapers started approaching me for tutoring,” he says, a little wistfully. “These days, I hear books teaching Facebook tricks in Marathi are all the rage, even in the small towns of Latur, Satara, or Sangli.”

It’s a well-worn parable on legacy publishers in the digital age, which has three well-known subplots. To wit: Venerable mastheads—think the New York Times—embracing digital but stumbling at monetisation; the rise of digital-only—Huffington Post or Quartz; and finally; social upstarts—Buzzfeed, Twitter, or Facebook—upending all things media. Even in India, one of the world’s last few growing print markets, this story has played out ad nauseam. Except, as with the examples above, it has been shaped almost exclusively by the English media, neglecting Parab and his ilk.

Jayanta Ghosal, editor (Delhi) at the largest-circulated Bengali daily Anandabazar Patrika (owned by the ABP Group, which also publishes Fortune India), sees in it the English media’s arrogance. “It has assumed the “national” title, although its footprint is a fraction of the regional languages.” He finds support in Sanjay Pugalia, who worked with the Hindi daily Nav Bharat Times (owned by Bennett, Coleman and Company) among others, before taking over as editor of the Hindi business channel CNBC Awaaz (Network18). But, Pugalia adds, “many regional players were themselves lethargic and did not engage with digital holistically.” While some were convinced that it wasn’t relevant for them, others clung on to the familiar logic that pushing digital would cannibalise print. Those who did act seldom went beyond building websites.

Generalisations about India’s gigantic vernacular press (see graphic) can be risky. But the nuance in Pugalia’s rebuke—the lack of a holistic approach—is valid. Consider that the editors of the biggest vernacular newspapers are virtually nonexistent on social media. Contrast that with their peers from the English-language press who produce a glut of analyses on digital platforms, evangelising their papers’ brands on, say Twitter, almost as a matter of hygiene. Pugalia puts the difference down to the feeling in the regional press that such spaces are “elitist fads”.

For long, that stand was justified by the absence of an Indian-language setup on the web. But advancing technology, and vernacular readers developing digital habits, are blowing holes in that argument. Vernacular media is on the cusp of disruption and gainsaying that is perilous.

Regional papers graphic

Exhibit A: the meteoric rise of the vernacular news aggregation app Newshunt. Launched in 2007, it presents content from 100 publishers in 11 Indian languages (plus English) and has become India’s most successful news app, with 55 million downloads and over a billion page views a month. It also has the fifth-highest monthly user base among all web-based services in India, according to research cited by financial services firm Avendus Capital. (Predictably, the top four are e-retailers.) The company says 70% of its readers are bilingual, but they read Indian-language content eight to nine times asfrequently as English content. Days before we went to press, Verse Innovation, its parent company, closed a Rs 100 croreunding round, valuing the company at a reported Rs 900 crore. Virendra Gupta, Verse’s CEO, says it’s barely scraping the surface; the plan is to scale up to 1,000 publishers. (For more on such startups, see ‘The Media Net’ in Fortune India’s August 2014 issue.)

Then there’s the buzz around vernacular-enabled mobile devices—led by Google’s Android One, which supports seven Indian languages and was launched at a globally watched event in Delhi last month. Google India head Rajan Anandan predicts that the next 300 million Internet users in India will access it in the vernaculars—the lion’s share of them on mobile. Google Trends shows that searches using the keywords ‘news in Hindi’ have jumped 350% in the past five years, with even bigger returns for Bengali, Marathi, or Malayalam.

Despite such strong currents of change, there’s a sweeping perception of the vernacular industry’s immunity from digital—like in this comment from a report by consultancy KPMG and advocacy body Federation of Indian Chambers of Commerce and Industry (FICCI): “[English publishers] will likely face a greater threat from digital platforms, [because] the English market is … most likely to adapt high-speed mobile devices and change reading behaviour.” (Aptly, the section on the Indian print industry in the report is titled ‘Regional to the Rescue’.)

The report backs this up with compelling numbers: Between 2012 and 2017, the market for vernaculars including Hindi—which already account for 62% of the print industry’s revenues and cater to 89% of its readership—will likely expand at a compound annual rate of almost 11%, from nearly Rs 14,000 crore to Rs 23,000 crore. The growth in English: less than 5%. Little wonder that heavyweights Bennett, Coleman and Company, and Kasturi & Sons (which publishes The Hindu) have launched papers in Bengali and Tamil, respectively, in the past few years.

Dainik Bhaskar Group—a listed company with a market cap of over Rs 6,000 crore—which publishes 58 editions of the eponymous Hindi daily across 13 states (highest circulation in Hindi as per the Audit Bureau of Circulation)—along with papers in Marathi and Gujarati, is among the top non-English players with a digital thrust. Its website ranks among India’s top 100, according to analytics portal Alexa. But over the course of my interactions with them, they stress that talk of digital must not undermine the regional print story, which will remain extremely strong for the next 10 to 15 years.

That’s at odds with the fact that more than half the literate population in as many as eight Indian states already don’t read newspapers. Digital may not have caused that, but it will almost certainly accelerate the trend. To their credit, many publishers understand the need to do more, but are hobbled by short-termism and poor advertiser support. “I dare say we don’t invest as much as we’d like to [in Loksatta’s digital presence], because the ad revenues in Marathi are very low,” admits Anant Goenka, the 27-year-old head of new media and wholetime director at The Indian Express Group. “As market leaders, we should ideally be investing in convincing national advertisers [to advertise digitally in Marathi], but our focus is on growing the more lucrative print advertising.” (The KPMG-FICCI report says the difference between vernacular and English print advertising has narrowed to a two to three times premium for the latter, from 10 times five years ago.)

“Advertisers haven’t incentivised digital thinking in non-English media,” concurs Manisha Pandey, features editor at India Today (Hindi). The perception, again, is that it’s irrelevant to their core market—traditionally, “offline” rural and mofussil India. “[But] in an increasingly connected world, rural vs. urban is irrelevant,” argues Jessie Paul, CEO of marketing think tank Paul Writer. “Success doesn’t depend on language—only on your imagination.” Industry lifers across languages claim that barring a small set of outliers, most publishers imagine digital in oppositional terms—as a distant “threat”. They add that there’s little personal motivation for them to challenge that view. “Fancy talk about digital is all very nice,” a Hindi editor at a bilingual (English and Hindi) media house with almost 10 years of experience tells me on condition of anonymity. “But when you are paid less than a trainee reporter in English—it’s difficult to get excited.”

Pugalia says Indian languages, led by Hindi, are headed for a perfect storm: Prime Minister Narendra Modi, a huge digital acolyte, has already made Hindi cool by choosing it over English in his widely followed speeches. But he cautions that in the absence of long-term thinking and sustained investments, “Google, Twitter, and Facebook will cash in on this mood way more than mainstream media. We will just be followers.”

THE CHANGE in mindset starts with unravelling vernacular’s “core market”. The Internet and Mobile Association of India (IMAI) and market research firm IMRB International say 60% of urban Internet users access content in Hindi (followed by Tamil and Marathi). In rural India, on the other hand, Hindi’s share is 27% (followed by Marathi and Tamil). Over 70% of Newshunt’s users come from urban areas. Even with Dainik Bhaskar’s 50 lakh circulation, more than half comes from big cities. B.G. Mahesh, founder of vernacular news portal OneIndia, confirms that it’s “wrong to assume only [smaller centres] consume Indian languages”. OneIndia creates original content in seven Indian languages (as well as English) and gets 25 million unique views a month. “We have seen impressive growth even in tier 1 cities,” claims Mahesh. OneIndia has reported profits for 16 straight months, and has revenues of Rs 20 crore.

BG Mahesh

BG Mahesh, founder, OneIndia, says it’s wrong to assume only the small-town Indian consumes Indian languages.

Top Hindi publishers are on the trail. Dainik Bhaskar Group’s digital business grew 54% year on year to Rs 16 crore as of fiscal ending March 2014. (That compares with Rs 76 crore for HT Media, which owns the English dailies Hindustan Times and Mint, and the Hindi daily Hindustan, plus miscellaneous job search, education, and entertainment portals.) Jagran Prakashan—the parent company of Bhaskar’s rival Dainik Jagran (whose portal is also among Alexa’s top 100)—also reported “steep growth” of 150% in digital advertising revenues, “albeit on a smaller base”. Apart from the main news portal, Jagran runs a clutch of education and classifieds portals, and in July launched a site where advertisers can compose, book, and pay for print classifieds.

Slowly, the playing field is expanding beyond websites. “Loksatta was the first Marathi paper to launch Android and iOS apps,” says Goenka of The Indian Express Group. “We were shocked to see 10,000 downloads on Android in the first week.” The group’s next big bet is localised video. Goenka says Loksatta was the first Marathi paper to sign a partnership with YouTube for a dedicated channel with exclusive content. “We have shot, in our own boardroom, more than 200, 20-minute Marathi lessons for SSC students. This year, like last, we did a live broadcast from some of Mumbai’s most famous Ganapati pandals. These crossed 500,000 views on YouTube.”

But advertisers are cold. Goenka says there’s some support from Marathi clients who patronise the newspaper, but digital is so far down their list that even with the biggest of them, Loksatta’s own team has had to help convert creatives to suit digital formats. “Revenue in regional languages is all about investing in creating a marketplace, which is far too nascent right now,” says Goenka. “We have been distracted with print. Maybe we’re better off waiting for Google to invest in getting that local sari shop in Thane to create a digital ad.” He adds that Google has advertised in Loksatta print—in Marathi copy— asking small and medium business owners to put up websites.

Anant Goenka

Anant Goenka, head – new media, The Indian Express Group, says the regional digital marketplace is far too nascent.

Advertisers like Dabur, which have equal emphasis on metro and non-metro markets, indicate a chicken-or-egg problem. The vernacular industry hasn’t proven return on  investment in digital yet,” says K.K. Chutani, executive director-marketing, Dabur India. He contrasts that with the success of Indian-language entertainment channels, which are a key part of every national advertiser’s budget. Brands like Uninor, known for their regional focus, are also waiting for things to mature. Till then, presence on vernacular digital platforms “is a good-to-have, not a must-have”, says Rajeev Sethi, Uninor’s chief marketing officer.

The Malayalam industry is an exception. “Unlike other languages, digital ads in Malayalam actually fetch a premium over print, including English,” says Santhosh George Jacob, head of content at Manorama Online, the digital arm of Kottayam-based Malayala Manorama Group, whose eponymous daily has the largest circulation among non-English and non-Hindi publications. “That’s because 70% of our readers are affluent expats from the Middle-east, the U.S., and Western Europe.”

MUCH BIGGER upheavals are under way on the social side. Think of the blokes buying Marathi guides to spruce up their Facebook profiles. “This is the newly learned class,” says Pandey of India Today (Hindi). “Earlier, the newspaper at home was the ultimate statement of moving up in life for them. Now, that role is played by Facebook on the latest smartphone.” That changes everything—starting with their lifestyle aspirations, and ultimately, their perception as consumers. Recognising this, e-commerce player Snapdeal recently announced services in Hindi and Tamil.

The trend transcends urban pockets. Sandeep Mertia, a fellow at Delhi-based Center for the Study of Developing Societies, has been researching social media use in the villages of Rajasthan. He writes that Facebook is at the centre of a growing chatter: “Frequent references to social media on television have perhaps led to a new kind of technological convergence, wherein Facebook, instead of being a platform for gossip, is more of a subject of gossip.”

A Facebook India spokesperson confirms that the company is aligned with the expanding conversation: “Our user base of 108 million equals the readership of four or five newspapers. The 10 Indian languages we support [9 of them on the Press Information Bureau’s list of languages with the highest number of newspapers] are a significant part of our growth.”

Dainik Jagran and Dainik Bhaskar again have a headstart here, with approximately 46 lakh and 40 lakh likes for their Facebook pages, respectively. Apart from the page for the main brand, Jagran has pages for its Meerut and Muzaffarpur editions. Leaders in other languages include Kozhikode-based Malayalam daily Mathrubhumi (13 lakh likes), Loksatta (5 lakh), and Anandabazar Patrika (3 lakh).

Kalpesh Yagnik, group editor at Dainik Bhaskar also talks of newsrooms integrating social tools: “When the Indian Oil plant at Hazira caught fire, our print reporters reported real time for our websites, and the updates were put up on our app and on social media.” More significantly, he says social media has itself become an important genre of news in print. “During the Lok Sabha elections, we dedicated a full page to social-media content for a whole month. We also covered the Instagram buyout in the front page.” Though the coverage may not be as in-depth as in English, Yagnik says stories on social media companies are becoming popular because people like Zuckerberg “don’t look like tycoons” and inspire young people.

However, the picture is different on Twitter—the first port of call for both creators and consumers of content, especially news. Here, individual editors constantly interacting with readers are often more impactful than institutional handles spewing links. But vernacular editors/writers tweeting in their own language, even using English script, are hard to find—barring a handful like Loksatta’s Girish Kuber (over 5,000 followers), or Jagran’s Bollywood writer Ajay Brahmatmaj (over 10,000 followers). It’s difficult to say whether this is because of official policies or poor motivation.

 

A standard argument has been Twitter’s lack of vernacular input. But for the past three years, the site has been available in Hindi. More recently, it added Bengali, and says it’s looking at other languages. Yagnik claims “readers don’t go to social media for news, but for jokes or other personal content”. But Raheel Khursheed, Twitter’s head of news for India, says the media would do well to remember the case of the yellow pages, which thought users wouldn’t go anywhere else to  search—until one day, they got hooked to JustDial.

THERE’S BROAD AGREEMENT that the vernacular digital play revolves around very different issues (literacy, class) from those in English (survival of print, monetisation)—but the industry is yet to free itself from comparisons with English. “The emphasis is on ‘we are not like English,’ rather than ‘this is what we want to be,’” says a former ad executive who worked on the revamp project of a leading Hindi daily.

That kind of muddled thinking shows up in strange contradictions. See, for instance, Jagran’s 2013-14 annual report, which gloats over the growth of the digital business, but hastens to make room for “necessary caution”. Tellingly, the word “threat” appears four times in the report in the context of digital, if only to deny it is one. (The company didn’t respond to my queries;
however, in its August 2014 earnings conference call, chief financial officer R.K. Agarwal said, “[while] speed is of utmost essence in this domain, one cannot achieve the desired result and progress only by making huge investments”.)

Compare that with digital’s own language. “Don’t look at us as disruption,” says Newshunt’s Gupta. “We are a conduit in creating the vernacular web.” The Facebook spokesperson adds that rather than worry about revenues, the focus in these early days should be on reaching the last person. “Think of us as the media’s operating system,” Twitter India’s Khursheed tells me. “Our job is to enable, not undercut.”

(Published in the October 2014 issue of Fortune India; artworks by Nilanjan Das. Some facts have been corrected here.)

The Third Space: Business and the Culture of Coffee in India

India may not have a Silicon Valley equivalent just yet, but something’s been brewing amid the hum in its coffee shops.

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Harpreet Grover, 30, says half the techies his company employs have permanently shifted base to cafés. “In the office, people bug them with random questions,” the CEO and cofounder of Gurgaon-based assessment and campus hiring startup CoCubes (backed by Infosys cofounder N.S. Raghavan’s Ojas Partners) tells us. “They concentrate better in a café.” He adds that in some of CoCubes’ other locations, like Pune, there are no offices at all. “Instead, we give people a Rs 2,000 monthly café allowance. They can work from anywhere, so long as it’s somewhere inexpensive—mostly a CCD [Café Coffee Day]!”

Till 2012, Grover’s tribe would have fitted the stereotype of startup junkies allergic to formal workspaces. But research published that year by Ravi Mehta, who teaches business administration at the University of Illinois at Urbana-Champaign, hints that their café love reflects something more universal. “We found that ambient noise”—like in a coffee shop—“induces distraction, and a moderate amount of distraction helps you move away from very focussed thinking, which in turn enhances creativity,” says Mehta. “Previous research has argued positive correlation between creativity and risk-taking. That speaks well with innovation and entrepreneurship, which involve the willingness to take risks.”

Risk is a word Grover and his co-founder Vibhore Goyal understand well: Both are IIT-Bombay grads who left promising jobs at consultancy Inductis and Microsoft Research Centre, respectively, to start CoCubes,which has been adjudged one of India’s ‘Top 10 Emerging Companies’ by Nasscom. Many in their 40-member team (average age: 27) are of the same mould.

MEHTA’S RESEARCH finds prominent mention in online chatter around the mushrooming of portals which recreate the café hum for those who need their fix on the go. Coffitivity, one such portal, even made it to Time magazine’s best 50 in 2013. While Mehta studied predominantly North American individuals, he says the creativity-boosting effect of the sound is a “human phenomenon” that should be just as valid in the Indian context. But the marginal status of the creative type—innovators and entrepreneurs—in India meant no one here had time for such trivia.

The attitude is now changing, with the rush of big money and media attention sparking unprecedented interest in the anatomy of the entrepreneur, a la Silicon Valley. And, intuitively, cafés are emerging as a key symbol. It’s not just about eccentric geniuses though. “Cafés are a blessing for sales guys, who need to park themselves somewhere between meetings,” says Grover.

“I conduct most of my meetings in coffee shops—including with investors and clients,” says Arpit Gupta, the twentysomething cofounder of Piquor, a startup based in Gurgaon that helps companies connect with their target audience through branded selfies. “They are accessible, comfortable, and no one bothers you if you sit for long hours. Importantly, they are cheap.” That last point resonates loud and clear within the entrepreneurial community. “That’s why we love CCD. Startups can’t afford Starbucks,” says Grover.

The accent on affordability is a departure from the origins of the coffee culture in India. “It was triggered during the late 1990s and early 2000s, when India’s upwardly mobile middle-class was thriving on the IT boom,” says Ankur Bisen, senior vice president (retail) at consultancy Technopak. But for patrons like Grover and Gupta, it’s all about the idea of coffee rather than an indulgent drink.

“IN THE GLOBAL NORTH, people still go to a café to drink coffee first,” says Ravi Murugesan, former vice president at Mumbai-based language services startup Cactus Communications and consultant with an HR startup in Wisconsin, who now works in the development sector and shuffles between Africa and India. Murugesan says in India—where per capita coffee consumption is a measly 90 gm compared to 4.2 kg in the U.S.—it’s the third space between work and home, a space occupied by pubs in the West. “The few places in India that have a homegrown coffee culture, like my hometown Chennai, don’t have the same buzz around cafés. Everywhere else, the label on the mug matters less than familiarity and vibe.”

The café’s informal vibe is finding use in traditional businesses too. Vipin Clement, senior talent development executive at the Bangalore office of British risk management, reinsurance, and human resources solutions provider Aon, talks of “no-obligation meetings” which are increasingly popular at mature organisations. “As part of succession planning, more and more organisations today encourage business heads to meet prospective talent at cafés. Both parties know there’s no immediate intent to hire; such interactions just won’t work in a typical office.”

(Published in the October 2014 issue of Fortune India, with inputs from Anjali Kapoor. Artwork by Nilanjan Das.)

Tech’s Trust Imperative: why Evernote Hates Talk of Owning Users

It’s Silicon Valley lore that one night during the 2008 financial crisis, Phil Libin, CEO of Redwood City, California-based Evernote, discovered that his company had barely enough cash to last two weeks. But at 3 a.m., as Libin resigned himself to breaking the news of impending bankruptcy to his employees, a mail arrived from an Evernote user in Sweden, thanking the productivity suite for changing his life by helping him get more organised. He was so impressed, he offered to invest in the company. Two weeks later, the user—who goes by just that moniker in the story—wired half-a-million dollars to Libin with minimum fuss, effectively saving what is now one of the world’s hottest startups. Six years on, Ken Gullicksen, COO, and Troy Malone, general manager-Asia Pacific, were in India, Evernote’s third-fastest growing market. Among other things, they spoke to Fortune India about trust—the ephemeral asset that gave Evernote a second chance, a global user base of over 100 million, and a billion-dollar valuation. Edited excerpts:

How is Evernote different from all the other apps out there?

Gullicksen: We want you to think of Evernote as a company that makes you smarter and more productive. A big part of that is the core Evernote app, though we also sell physical products like notebooks and scanners in some countries. The app itself is not just a storage locker for your data or another note-taking tool, but a workspace where you get things done—whether it’s an article you have to write for your magazine, or a paper that you want to submit in school.

Malone: In the era of knowledge working, there are countless ways in which information enters our lives: web links, photos, e-mails. Evernote helps you organise all that and do something productive with it. Our CEO Phil Libin calls Evernote a 100-year startup; we fully expect our users to stay with us for the rest of their lives. That’s the vision and that’s the opportunity. If you look at popular productivity suites, Microsoft Office is 26 years old. There’s a lot of demand for [a new kind of] space where you can spend your day—whether it’s on your mobile phone or laptop or whatever else—having meaningful conversations about the information in your life with your colleagues, your wife, your friends.

How do you make money? Give us a sense of your markets.

Malone: We have three service levels—free, premium, and business. We don’t release our conversion rates, but we desire to keep it at a level where the free product is good enough for people to use for a long, long time. We also sell physical goods through our e-commerce store; we have sold over $10 million (Rs 61 crore) worth since we launched the store eight months ago. We don’t release revenues from the app, but globally, 2.5 million to 3 million new Evernote accounts are created every month. About 75% of our market is outside the U.S. and Canada; the average age group of our users is between 19 years and 45 years. Most come through word of mouth.

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Where does India stand?

Gullicksen: India is our third-largest growth market globally, behind only the U.S. and China. India’s ascent is fairly recent—it has got here in the past few months. We have more than 25 lakh users in India right now and are adding about 150,000-plus each month. That’s an average 5,000 to 6,000 new users a day. The conversion from free to paid subscriptions in India is lower than more mature markets, but this is principally because you can only pay for Evernote in India with an international credit card. We do plan to introduce more comfortable payment methods in India soon.

While apps like Evernote claim to simplify life, their very existence depends on life necessarily getting more complex…

Gullicksen: It is a fact of modern life that things are getting more and more complex. We are aware of this, so we try not to add more complications to our users’ lives. Most products that have come in this space over the past few decades demanded a lot of you to make them work for you. Evernote on the other hand has a very unstructured approach. You just put everything in there, and then it’s the software’s job to take over from there. If you are someone who really likes organising things [manually], we give you the tools to do that, but we don’t force it on you.

You talked about people staying hooked to Evernote for their whole lives. Is there a limit to which a company can stretch this aura of indispensability before users start sensing arrogance? Think of Facebook forcing users to download its messenger as a separate app, and the backlash from users.

Gullicksen: A company’s job first and foremost is to fulfill a need. Whenever you begin to get away from that, you get into trouble. Thinking in monopolistic terms, in terms of owning the user—that’s a crazy idea! What we do in this respect is actually counterintuitive. We make it extremely easy for our users to export all their information out of Evernote with one click. It’s not our job to control your information. It’s our job to earn your trust, so that you wouldn’t want to take your information elsewhere.

Malone: Evernote becomes you as you enter your thoughts, ideas, research, conversations in it. It is intensely personal, so we thought about data privacy and security very deeply right at the start. We don’t have an incentive to drive page views. We don’t do big data on our users to serve ads or juice out every user. We do small data on each user that helps them become more productive. Our business model revolves around that, and we love it.

In June, you suffered a pretty serious attack, which blocked users from their accounts. How do you regain trust after such scares?

Malone: We restored access quickly, thanks to network-level technologies that are used to mitigate such attacks. No accounts were compromised and no data was lost. Over and above our security systems, Phil has personally penned Evernote’s three fundamental laws of data protection: Your data is yours. Your data is protected. Your data is portable.

Coming back to India, has the growth here kept pace with your expectations?

Gullicksen: Particularly in the past two years, the evolution has been extremely rapid. For us, the biggest enabler has been the explosion in smartphones and the general air of business optimism.

Malone: A distinct nuance in the India growth story is the way the quality of local smartphone brands has improved, not just the adoption. Micromax, one of our key partners here, is a great example. The quality of experience with Evernote and the app’s penetration have also risen because of that. We spoke to business students at Amity a few years ago, and only one guy said he had heard of Evernote. We were back there last night, and this time a good 25% to 30% of the hands went up. In two years, that’s an amazing transformation.

Do you see Indians as natural users of Evernote?

Malone: Absolutely, because work plays such a big role in daily life here. The DNA of people in India is not to sit back and relax after putting in the mandatory number of hours. They are ambitious. They want to be more productive. They will probably not work less, but we can help them get more done in the same amount of time.

How do you deal with the famous Indian penchant for customisation?

Gullicksen: We hear that word a lot when talking to partners, but I must say there are several countries around the world—Japan, China, Korea—which are similar. When we entered some of those markets, we were advised to roll out all sorts of customisations. We resisted, and ended up being quite successful. Fortunately, we are not a gaming or media company, where the pressure would have been more acute. Of course, it’s different when you talk of marketing—that has greater room for localisation, especially language localisation. Also, all our eight offices across the world with 350-plus employees stress on hiring locals.

Malone: There’s one more thing: Wherever I travel, I try to experience Evernote like our local users do. Last time I was in India, I used a Micromax Canvas phone with a local SIM. It’s difficult to make decisions for a region as diverse as this sitting in Silicon Valley.

Is there a plan to set up base in India?

Malone: We are looking at options. Right now, we have only one contractor who works on marketing and business development. Obviously, one guy is not nearly enough in such a large country.

Anand Mahindra tweeted after the $19 billion WhatsApp acquisition that young people may no longer have any incentive to build anything “real”. Do you feel that there is still more virtue associated with building physical things, rather than something nebulous like software?

Gullicksen: The idea of attributing value to software is something that people have to just face. Different societies are at different points in the curve, but they are all moving there.

Malone: To your point of building real things, I know of architects in Korea who use Evernote to
master intricate, traditional Korean architecture, which is a thousand-year-old art form. Evernote is not something that replaces “real” things—it’s very much an additive. We have close to 15,000 businesses that use Evernote to create very real, utilitarian objects. I even used it to build a skateboard ramp with my son.

Who or what is your biggest inspiration?

Gullicksen: This may be a cliché, but we look up to Apple. Before Apple, the idea of beauty was alien to technology. It was all about functionality. Thanks to them, companies now don’t start with market research but with user experience design.

The Wall Street Journal named Evernote among 30 startups worldwide with a billion-dollar valuation. When’s the big IPO?

Gullicksen: We don’t spend a lot of time thinking of the IPO, it will happen when it does. IPOs don’t create value. Serving people’s needs does.

(Published in the October 2014 issue of Fortune India.)

Follywood?

Opening image

THE MURKY NEXUS OF POLITICS AND PONZI SCHEMES
IN THE BENGALI FILM INDUSTRY

“WE ARE A  BIG HAPPY FAMILY!” declares Saiful Alam, after he has waved away my apologies for turning up at his office unannounced. “This place had nothing, just barren land,” he says, pointing through his window at Duki, a village of 200 households near the sal forests of Goaltore and Arabari in West Bengal’s tribal-dominated Paschim Medinipur district—where a third of the population lives below the poverty line. “We gave the people jobs. We put up water pumps. We send our ambulance for the sick. We feed the hungry,” he reels off, even before I can ask him a question.

The eager, middle-aged man could pass off as a missionary in this wilderness—buffeted by a war against Maoist insurgents that killed nearly 700 people from 2005 to 2012, according to conflict watchdog South Asia Terrorism Portal. Except Alam is the general manager of a film city—at 2,700 acres, “the world’s largest”—owned by the financial services-to-fly ash conglomerate Prayag Group.

Designed by Bollywood art director Nitish Roy—and with Shah Rukh Khan as its mascot—the film city’s first phase cost Rs 1,000 crore. Two more phases are on the drawing board, requiring another Rs 2,000 crore. (Fortune India could not independently verify those numbers.) Apart from Duki’s welfare, the money pays for 50 custom-designed sets, eight landscaped gardens and artificial water bodies, postproduction studios, a helipad, a dummy railway station with a train, luxury hotels, museums on Indian dynasties, life-sized models of famous Indian temples, and, for good measure, 110 miniatures of landmarks from across the world.

The opulence sticks out, and not just because of its immediate milieu. The economy of Bengal went all but bankrupt in 2012, the year when Khan unveiled the film city in a high-voltage function featuring a bevy of stars from Bollywood and Tollywood—the Bengali film industry, named after capital Kolkata’s Tollygunge studio neighbourhood. Stillborn projects saw investments crash to a 10-year low of Rs 312 crore, from over Rs 2,000 crore and Rs 15,000 crore in the previous two years.

The flight of capital has in fact been the biggest bugbear for chief minister Mamata Banerjee, who came to power in 2011 promising development after three decades of chronic deindustrialisation
under the Left Front. But since then, marquee developments across sectors—from the state’s
largest ever private investment by JSW Steel to an Infosys campus—have failed to take off.

Though the government claims a long list of “proposed investments”, there are widespread
reports that investors are spooked by Banerjee’s strictures against land acquisition, which famously forced Tata Motors out of the state in 2008. The dereliction of the state’s few existing bellwethers—notably, the recently shuttered Ambassador and Shalimar Paints factories—hasn’t helped. Add to that the debt—the Economic and Political Weekly puts it at 37.5% of the domestic product, twice the average of all Indian states—and it’s difficult to overstate the crisis.

But, as the film city’s sprawling grounds testify, things were very different in the movies. Data on the largely unorganised sector remains notoriously scant. But a report by consultancy firm Deloitte and advocacy body Federation of Indian Chambers of Commerce and Industry (FICCI) says budgets of Tollywood’s biggest films topped Rs 6 crore in 2011, soaring nearly 300% over the previous year. Total investments touched Rs 150 crore—a 20% spike y-o-y. The industry produced 122 certified films—10% more than the previous year and nearly three times the number four years ago.

In 2012, Tollywood delivered its biggest ever hit, Shree Venkatesh Films’ (SVF) Awara—a remake of a Telugu action film—starring superstar Jeet, which reportedly grossed Rs 8.5 crore in theatrical collections. (SVF says it broke that record the very next year, when its adventure flick Chander Pahar, headlining reigning heartthrob and Paschim Medinipur lad Dev, grossed Rs 20 crore. With a budget of Rs 15 crore, it’s also Tollywood’s costliest film ever.) Bengali films also attracted plum satellite rights, opening up a new revenue stream, though those numbers are impossible to get. The windfall was played up all across the media—even nationally—as a miracle in the state’s industrial wasteland.

In business terms, Tollywood was still negligible compared to the south: Attarintiki Daredi, 2013’s biggest Telugu hit, for instance, alone cost Rs 55 crore and raked in Rs 187 crore. (Apart from the fact that remakes of Telugu movies are a staple here, the comparison with the Telugu industry [which also calls itself Tollywood] is pertinent, because both languages are spoken by about 8 crore people in India.) But given the gloom in other sectors, the industry’s real value went way beyond just numbers.

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“Good-looking heroes and heroines, who spoke Bengali and romanced in posh locations in Turkey, Greece, or Italy, gave new dreams to the youth in Bengal’s villages,” says Himanshu Dhanuka, a 28-year-old mechanical engineer from National Institute of Technology, Kurukshetra, who runs Eskay Movies, a leading production house.Critics found the trend crude—Subhajit Chattopadhyay, who teaches film studies at Kolkata’s Jadavpur University, says Tollywood reduced “the reality of the youth to malls and coffee shops”—but the embattled chief minister sensed the chance to fashion a brand-new image for the state.

During her land agitation days, Banerjee had developed a strong support base among Bengal’s traditional opinion-shapers: its artists and intellectuals. Her party, the Trinamool Congress, had three MPs from Tollywood in the previous Lok Sabha. Now, she started cultivating an unprecedented spate of heavyweight celebs, notably Dev—who won the 2014 Lok Sabha polls on a Trinamool ticket—and National Award-winning actor Mithun Chakraborty, whom Banerjee nominated to the Rajya Sabha. Several others were installed at assorted high offices: sheriff of Kolkata, working president of the Trinamool Youth Congress, members of the state women’s commission, even president of the State Council for Vocational Education and Training.

The plan wasn’t restricted to Tollywood: Even before Prayag signed him, Banerjee appointed megastar Khan the state’s brand ambassador, building on the popularity of his IPL franchise Kolkata Knight Riders. But while her proximity with stars generated intense commentary—a lot of it derisive, and involving predictable comparisons with South India’s cinema-politics nexus—a much wider gambit barely managed mention: She pitchforked cinema as Bengal’s flagship industry at the high table of economic diplomacy.

That happened in a May 2012 meeting in Kolkata with U.S. secretary of state Hillary Clinton, where Banerjee threw her weight behind “cooperation between Hollywood, Bollywood, and Tollywood” to build showbiz infrastructure. Backing from Khan—who called the chief minister “sweet, loving, and feisty” in an e-mail to me—impressed Clinton, and she promised to seriously consider the proposal.

Buoyed by the signals, Banerjee declared in November that the entertainment industry was ready to shape a new era in West Bengal. The following month, in a symbolic coup, the government announced that Hollywood had expressed interest in partnering two upcoming, state-endorsed film cities.

That’s when reality caught up. Exhibit A: the world’s largest film city. Soon after its gala inauguration, its Facebook page and Twitter handle went dead. (Khan did not answer my question on the project). There’s no website, no contacts. Prayag’s corporate site lists a number, but no one responds.

I visit its office at Kolkata’s busy India Exchange Place, and find it locked from the inside. A few suspicious guards tell me to look up a hotel owned by the group on the outskirts. No, they don’t have a number. I find one online, but no one answers there either. That explains why I had to sneak up on Alam; I had no idea the man even existed.

And yet, none of the obscurity is an accident: Prayag is one of the companies named in Bengal’s multibillion-dollar chit fund scam, which broke with an RBI red alert soon after the chief minister’s “new era” speech, and exposed in its wake Tollywood’s sordid underbelly. Estimates sugggest chit funds produced a whopping 60% of the films in the industry’s go-go years. Others say they pumped in Rs 400 crore to Rs 500 crore. Everybody wanted a piece—till one day, as spectacularly as it had started, the party was over.

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National Award-winning director Goutam Ghose, whose 2010 film Moner Manush was produced by one such company, Rose Valley, calls the boom a gigantic lie. “It was all media hype. Our revenue is a pittance. Theatres are closing down … things are actually a mess.”

CINEMA IN BENGAL dates back to the 1890s, coinciding with its beginnings in India. Ghose points out that in undivided India, Bengali culture, including cinema, extended to Allahabad, Banaras, even Lahore. “The primacy of Kolkata (then Calcutta) in the Raj meant even Hong Kong and Singapore were  considered its outposts.” But later political developments (shifting of the capital, Independence, and the birth of Bangladesh) changed it all.

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Most histories of Bengali cinema concentrate on a golden era from the ’50s to the ’80s, when globally feted directors Satyajit Ray, Mrinal Sen, and Ritwik Ghatak, and legendary actor Uttam Kumar brought cinema to the centre of Bengali identity. But a shortage of sellable icons after them—with the exception of a lone star, Prosenjit, who kept the industry afloat with his prolific, albeit formulaic output—meant Tollywood became culturally and financially stultified.

Most films at this time could only muster shoestring budgets of about Rs 60 lakh. That helped producers stay in the black, but “production values were embarrassing—there weren’t even proper cameras”, says Mahendra Soni, co-founder of SVF.

“Lack of government support during the communist era also hurt the industry,” adds Shrikant Mohta, its other co-founder. “Only a certain kind of cinema shown at Nandan [a government-run cultural centre in Kolkata equated with the city’s famed intellectual elitism] was considered important. Those with any talent fled to Bollywood.”

Exhibitors—the invisible faces of the industry—were the hardest hit. “Theatres barely charged six or eight rupees for a ticket,” says Soni. “They were in such bad shape that women found them unsafe.” Hundreds of theatres shut or switched trades (see graphic); Dhanuka estimates only 300 to 400 screens remain, from nearly 1,500 not so long ago.

Maternal cousins Mohta and Soni—who stepped up from film distribution to production to gain creative ownership—saw opportunity in this chaos. Consensus has it that they triggered the turnaround with their 2002 hit Sathi (reported budget: Rs 1.50 crore, collections: Rs 6 crore), which introduced Jeet after a long drought of fresh faces.

Soni and Mohta

“We took on one problem at a time,” says Soni. “First, we decided not to be stingy—you cannot shoot an adventure film in Alipore Zoo! We invested in digitisation, so that films could be simultaneously released across the state, and distributors and exhibitors wouldn’t lose money. We acquired theatres. We started a Tollywood music channel. We even chased the media to start covering Bengali films again,” en route to building a company with an “annual turnover of Rs 125 crore, growing 15% to 20% year on year”.

Jeet, whose own production house Grassroots Entertainment makes films in collaboration with Reliance Entertainment, says these efforts made Tollywood a viable investment destination. “Earlier, we couldn’t think of releasing a film at more than 30 or 35 centres. Today we see a 200-centre release, so producers can recover money much faster.

National multiplex chains, such as the Rs 1,543 crore Inox Group, played a vital role in the expansion by creating space for a new, urban genre. With that, CEO Alok Tandon says Tollywood became “a balanced market with equal contribution from across regions”.

Apart from Reliance, other national banners such as Mahindra’s Mumbai Mantra Media and Viacom 18 gravitated towards the rising industry, assisted by a slew of local moneybags—education groups (JIS), even kitchenware manufacturers (Bajoria Group). But the biggest cheer was reserved for Bengal’s mushrooming chit funds—perhaps the only other sector that was ‘booming’ in the state.

ESTIMATES OF THE PEAK SIZE of Bengal’s chit fund industry vary wildly, from Rs 10,000 crore to Rs 40,000 crore. The association of such funds with the film business isn’t unique to the state: Ramoji Rao—the founder of Hyderabad’s Ramoji Film City, which Guinness still calls the world’s largest—started one, way back in the ’60s. But in hindsight, their unchecked growth in Tollywood—which rolled out the red carpet hastily—always had the makings of a disaster.

Their rise was riveting while it lasted. It helped that most of them, with all the paraphernalia of giant conglomerates, were run by Bengali entrepreneurs, challenging the dominance of Marwaris
who own virtually all big businesses in the state. (Soni, Mohta, and Dhanuka are Marwari too.) Several of them—including scam lynchpin Saradha Group—managed to build staggering connections in the film and media business, as well as a section of the ruling party, adding sheen to their brands. Rose Valley in particular emerged as a pillar of Tollywood, producing 20-odd films through a dedicated public limited company, including multiple National Award winners.

The crackdown after the scam—which has spread to Assam, Odisha, and Jharkhand—gutted dozens of projects, including several by first-time filmmakers. More worryingly, it brought back the spectre of ignominy. As I write this, the Enforcement Directorate is grilling noted actor-director Aparna Sen about her role as editor of a Saradha-owned magazine. A state minister and a Trinamool Rajya Sabha member who edited a couple of newspapers published by Saradha are also being questioned. A Mint report says the government did not act even as Prayag Film City encroached on government land, but Alam denies the allegation.

Arijit Dutta, part time actor, and director of Priya Entertainments, which owns one of Kolkata’s oldest theatres, concedes that most of the chit funds were “fooling around”. He doesn’t blame the industry for being reckless though. “We are not bothered about the source of money. We only want to make more films and generate more jobs.”

Soni says the reversal may not be such a bad thing. “The lure of quick bucks attracted fly-by-night operators who thought films were like gambling. That’s over now.”

BUT GOUTAM GHOSE FEARS the gold rush has set in motion a toxic cycle of greed and oneupmanship. “Our main market is the Bengali middle class. They simply cannot spend so much on movies,” he says. “And yet, hundreds are being churned out every year. Many producers tell me that they can’t even recover the cost of publicity, but feudal egos stop them from admitting it in public.” Industry reports confirm that only two movies—Chander Pahar and Mishawr Rawhosyo, both from SVF—out of about a hundred recovered money in 2013.

Indira etc

Hackneyed remakes of southern films—seen as the only counter to the lavish scale of Bollywood, which is well entrenched in Bengal—have copped much of the blame for the flop show, but Mohta says the real issue is talent. “Everyone thinks they can make movies, but there are only seven or eight good directors. At most they can make 20 movies a year. The other 80 are bound to be trash.”

SVF itself has been accused of pressuring theatres to block other producers, even tearing their posters, using their clout. But Soni laughs it off. “I think of films like the stock market. If the market grows, it helps everyone.”

Everybody I speak to points out that opening up Bangladesh is the only way to stop scrambling over the small market, “but we haven’t shown collective will at the political or industry level”, laments Ghose. That suits Bangladeshi pirates, who are the heaviest uploaders of Tollywood films on the Net—often “sponsored” by Dhaka-based companies.

Mohta and Soni say they have tried to release films in other states—even abroad, à la the southern industry—but those investments have bombed due to poor turnout, despite the two crore-strong Bengali diaspora. “They are still not willing to pay for anything other than Ray or Uttam Kumar.” Bengali films also regularly tour the festival circuit, but the focus is on prizes rather than monetisation. “We have now started selling films on iTunes and Google Play,” says Soni.

In the domestic market, the shrinking share of theatres has led to over-reliance on satellite rights, sold primarily to one channel—Jalsha Movies, owned by STAR. But this year, the channel has cut funding, straining already frayed nerves. “We have great friends in the industry,” Sumanta Bose, the channel’s senior vice president-marketing, tells me, “but the industry’s entire business model cannot depend on satellite.”

There are other things beyond the industry’s control. “Tollywood is not responsible for the state’s poor development,” asserts actor-director Shiboprosad Mukhopadhyay, who also produces his own films. “We depend on Kolkata for 80% of our business. Many talented people want to work here, but we can’t give them the right setup.”

Brand ambassador Khan remains hopeful. “Bengal is an extremely romantic place. Businesses which enhance that romance have a huge opportunity.” Jeet too is categorical it’s just a bad phase. “It’ll take one successful film to stop the noise.” That said, he presses the need for corporate investors, who will professionalise the industry. There’s been some VC and PE talk after the chit bust-up, but things are nascent yet.

THE STATE’S HOLLYWOOD-BACKED film cities haven’t flown. Repeated e-mails and phone calls to the office of the cultural affairs secretary, government of West Bengal, went unanswered. (The chief minister herself oversees the culture ministry.) Meanwhile, Tollywood continues to figure prominently in the chief minister’s master plan to woo investors. Dev and Mohta were part of her maiden foreign delegation last month to Singapore, which also included captains of Bengal industry such as Sanjiv Goenka, chairman, RP-Sanjiv Goenka Group, and Harsh Neotia, chairman, Ambuja Neotia Group.

The chief minister puts her affinity for the industry down to her belief that it is not inferior to, say, cement or steel. (Fittingly, the Bengali word shilpo stands for both “art” and “industry”.) But not everyone is convinced. “We are a very secular industry,” says Ghose. “Why divide ourselves along party lines?”

Actor-singer Babul Supriyo, who beat the Trinamool candidate from Asansol in the latest polls on a BJP ticket, suspects forced collusion. “These are all my friends, so scepticism is my natural reaction. Take Dev, who is at the peak of his career. Why join politics?” Dev didn’t respond to my interview request.

Others like Dola Mitra, author of the recent book Decoding Didi: Making Sense of Mamata Banerjee, feel Banerjee’s detractors are too harsh. “Her most likely motive for being close to celebrities is the need to be supremely culturally conscientious.”

Mohta confirms what I already know: Notwithstanding the struggling economy, “things have been the reverse for our industry. Didi never says no. In fact she just revamped Kolkata’s historic Technician Studio, which had collapsed during the communist regime. What can the government do beyond creating the right environment?”

But there are signs that Bengal’s culture of mixing politics with business has left the industry vulnerable. In 2012, producer Namit Bajoria (who owns the Kutchina kitchenware brand) was reportedly fined Rs 1.25 lakh by the Technicians’ Guild, a union of professionals, for not carrying enough local crew to Iceland, where his film Hanuman Dot Com was shot. Gaurav Pandey, its director, dubbed the union “a money-extracting machine” in an interview to The Times of India.

BACK IN DUKI, Alam says things are great. “Odiya and Bhojpuri folks are coming here too,” he tells me. “Ramoji is 18 years old. Give us just two.”

His confidence rings true, as his assistant gives me a guided tour of the railway station, the helipad, and the impressive gold-and-crimson colonnades of a China Town. But there are obvious signs of disrepair. “Money has dried up,” the assistant says. Then, just as we pass by a bunch of village boys bathing in a pool, his mobile rings. He says it’s Avik Bagchi, Prayag Group’s CEO, for me.

“How did you raise the Rs 1,000 crore for the first phase?” I ask the man who has been impossible
to reach thus far. “I will have to check my books,” he says. “And what about the next two phases?”
“We are looking at a number of options, including FDI,” Bagchi replies confidently. Nothing then of a September 2013 Sebi order which all but grounded his company. Can I have his number for future correspondence? No, but I can leave mine with Alam.

A week later, I get in touch with Alam one last time to ask whether it’s tough to make movies given his employer’s travails. “There’s no problem because we are an independent entity,” he assures me with characteristic sanguineness. “Dev is shooting here right now. Mithun Da’s next!”

(First published in Fortune India September 2014 issue; photos by Bandeep Singh.)