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The Bhopal Gas Tragedy: Introduction

In the early morning hours of December 3, 1984, a poisonous grey cloud (forty tons of toxic
gases) from Union Carbide India Limited (UCIL's)1 pesticide plant at Bhopal spread throughout
the city. Water carrying catalytic material had entered Methyl Isocyanate (MIC) storage tank No.
610. What followed was a nightmare.

The killer gas spread through the city, sending residents scurrying through the dark streets. No
alarm ever sounded a warning and no evacuation plan was prepared. When victims arrived at
hospitals breathless and blind, doctors did not know how to treat them, as UCIL had not provided
emergency information.

It was only when the sun rose the next morning that the magnitude of the devastation was clear.
Dead bodies of humans and animals blocked the streets, leaves turned black, the smell of burning
chilli peppers lingered in the air. Estimates suggested that as many as 10,000 may have died
immediately and 30,000 to 50,000 were too ill to ever return to their jobs.

The catastrophe raised some serious ethical issues. The pesticide factory was built in the midst of
densely populated settlements. UCIL chose to store and produce MIC, one of the most deadly
chemicals (permitted exposure levels in USA and Britain are 0.02 parts per million), in an area
where nearly 120,000 people lived. The MIC plant was not designed to handle a runaway
reaction. When the uncontrolled reaction started, MIC was flowing through the scrubber (meant
to neutralize MIC emissions) at more than 200 times its designed capacity.

MIC in the tank was filled to 87% of its capacity while the maximum permissible was 50%. MIC
was not stored at zero degree centigrade as prescribed and the refrigeration and cooling systems
had been shut down five months before the disaster, as part of UCC's global economy drive.
Vital gauges and indicators in the MIC tank were defective. The flare tower meant to burn off
MIC emissions was under repair at the time of the disaster and the scrubber contained no caustic
soda.

As part of UCC's drive to cut costs, the work force in the Bhopal factory was brought down by
half from 1980 to 1984. This had serious consequences on safety and maintenance. The size of
the work crew for the MIC plant was cut in half from twelve to six workers. The maintenance
supervisor position had been eliminated and there was no maintenance supervisor. The period of
safety-training to workers in the MIC plant was brought down from 6 months to 15 days.

In addition to causing the Bhopal disaster, UCC was also guilty of prolonging the misery and
suffering of the survivors. By withholding medical information on the chemicals, it deprived
victims of proper medical care. By denying interim relief, as directed by two Indian courts, it
caused a lot hardship to the survivors. In February 1989, the Supreme Court of India ruled that
UCC should pay US$470 million as compensation in full and final settlement. UCC said it would
accept the ruling provided Government of India (GoI) did not pursue any further legal
proceedings against the company and its officials. GoI accepted the offer without consulting with
the victims.

The Journey from Virginia to Bhopal

In the beginning of the 20th century, UCC was born of a merger of four US companies
producing batteries and arc lamps for street lighting and headlamps for cars. By the second half
of the 20th century, UCC had 130 subsidiaries in 40 countries, approximately 500 production
sites and 120,000 employees. UCC manufactured industrial gases, such as nitrogen, oxygen,
methane, ethylene and propane, used in petroleum industry as well as chemical substances like
ammonia and urea used in the manufacture of fertilizers.

It also produced sophisticated metallurgical specialities based on alloys of cobalt, chrome and
tungsten, used in airplane turbines. In addition to all these, it produced a whole range of plastic
goods for general use. In the 1950s, parasites were creating havoc in the United States, as well as
Mexico, Central America and several South American countries, destroying fodder crop, and
plantations.

These parasites also found in Malaysia, Japan, and southern Europe attacked potato crops as well
as fruit trees and vegetables. The red vine spider was another threat to food crops. The chemical
industry had to come up with something to eradicate this. A number of companies went into
action. One of them was UCC.

In 1954, UCC embarked on a mission of devising a product to exterminate a wide range of

parasites, while at the same time respecting the prevailing standards for the protection and safety
of human beings and their environment. Thus was born the 'Experimental Insecticide Seven
Seven' which soon came to be known as 'Sevin.' To manufacture Sevin phosgene2 gas was made
to react with another gas called monomethylamine.

The reaction of these two gases produced a new molecule, MIC. MIC was one of the most
dangerous compounds ever invented in the chemical history. UCC's toxicologists had tested it on
rats and the results had been so terrifying that the company banned publication of their work.
Other experiments had shown that animals exposed to MIC vapours would face instantaneous
death. MIC was so volatile that as soon as it came into contact with a few drops of water or a few
ounces of metal dust, it got off an uncontrollably violent reaction.

No safety system, no matter how sophisticated, would then be able to stop it emitting a fatal
cloud into the atmosphere. To prevent explosion, MIC had to be kept permanently at a
temperature near zero. Therefore, provision had to be made for the refrigeration of any drums or
tanks that were to hold it.
UCC's operations in India started in the beginning of the twentieth century. In 1924, an assembly
plant for batteries was opened in Kolkata. By 1983 UCC had 14 plants in India manufacturing
chemicals pesticides, batteries and other products. UCC held a 50.9 % stake in the Indian
subsidiary. The balance of 49.1% was owned by various Indian investors. Normally foreign
investors were limited to 40% ownership of equity in Indian companies, but GoI waived this
requirement in the case of UCC because of the sophistication of its technology and the
company's potential for export.

In 1966, an agreement was signed between GoI and UCIL. Under the agreement, UCIL would
import 1,200 tons of Sevin from the parent company in the United States. UCC would build a
factory in India to produce Sevin within five years.

The location of the factory would be Kali Grounds in Bhopal (Madhya Pradesh) (Refer Exhibit
I). In 1969, UCC set up its pesticide unit in Bhopal. The GoI granted a license to UCIL to
manufacture 5,000 tons of Sevin a year. UCIL would produce Sevin and all the chemical
ingredients required in India itself. Eduardo Munoz, the Argentinean agronomic engineer, who
was with UCC, was entrusted the responsibility of making the project a success.

Eduardo Munoz felt that manufacturing 5,000 tons of Sevin would require considerable
quantities of MIC to be manufactured and stored. He was not in favour of storing huge quantity
of MIC and suggested an alternative like batch production of MIC to meet production line
requirements as they rose. This would eliminate the need to store large quantity of MIC on site.

However, this production philosophy was against the American industrial culture and UCC
officials turned down the suggestion saying, "You have absolutely no need to worry, dear
Eduardo Munoz. Your Bhopal plant will be as inoffensive as a chocolate factory."3 Eduardo
Munoz was also against the proposed site of the factory as it was too close to areas where people
lived, such as the slums in Oriya Bustee, Jayprakash Nagar and Chola (Refer Exhibit I).

However, UCC officials thought Kali Grounds was the right place to build the plant. These
officials submitted their request for a sixty hectare plot of land on Kali Grounds. According to
municipal planning regulations, no industry likely to give off toxic emissions could be set up on
a site where the prevailing wind might carry effluents into densely populated areas.

At the Kali Grounds the wind usually blew from north to south, toward the slums, the railway
station and finally toward the overpopulated parts of the old town. Under such circumstances, the
application should have been rejected. But the UCC officials did not mention that their proposed
factory would be making pesticides out of the most toxic gases available in the chemical
industry.

At the beginning of the summer of 1972, UCC dispatched to UCIL all the plans for the factory's
construction and development. In 1979, the Bhopal plant was inaugurated and work started.
Initially, when the factory was not ready to make the MIC needed to produce Sevin, the UCIL
management decided to import several hundred barrels from the parent company's factory in the
United States. In May 1980, the chemical reactors of the Bhopal plant produced their first
gallons of MIC and dispatched them into three huge tanks. The new CEO of UCC, Warren
Anderson, came over specially from the United States for the event.

All's Not Well With The Bhopal Plant

Since 1980, the Bhopal plant had caused death and injury to many. In December 1981, plant
operator Mohammed Ashraf was killed by a phosgene gas leak. Two other workers were injured.
In May 1982, three American engineers from the chemical products and household plastics
division of UCC came to Bhopal. Their task was to appraise the running of the plant and confirm
that everything was functioning according to the standards laid down by UCC.

The report presented to the UCC officials revealed that all was not well with the Bhopal plant.
The report described the surroundings of the site as being 'strewn with oily old drums, used
piping, pools of used oil and chemical waste likely to cause fire.'

It condemned the shoddy workmanship on certain connections, the warping of equipment, the
corrosion of several circuits, the absence of automatic sprinklers in the MIC and phosgene
production zones, and the risk of explosion in the gas evacuation flares.

It also reported leaks of phosgene, MIC and chloroform, ruptures in pipework and sealed joints,
absence of any earth wire on one of the three MIC tanks and poor adjustment of certain devises
where excessive pressure could lead to water entering the circuits.

At the same time, the report expressed concern at the inadequately trained staff, unsatisfactory
instruction methods and sloppy maintenance reports.

Local newspapers in Bhopal published articles criticizing the poor management of the Bhopal
plant. One newspaper said, "The day is not far off when Bhopal will be a dead city, when only
scattered stones and debris will bear witness to its tragic end."4 In October 1982, MIC escaped
from a broken valve, seriously affecting four workers and causing eye irritation and
breathlessness among people in the nearby communities. This incident was a clear indication of
the potential risk to public life.

In the early 1980s, UCC appointed Warren Woomer as the managing director of its pesticide
plant in Bhopal. Analysts felt that this signaled the degree of control UCC wanted to exercise
over UCIL. In 1982, Woomer retired and Jagannathan Mukund (Mukund) became the managing
director. In 1983, under pressure from the parent company, Mukund devoted all his energies to
cost cutting. Two hundred skilled workers and technicians were asked to resign.

In the MIC unit alone, the manpower in each shift was cut by half. In the control room, only one
man was left to oversee some seventy dials, counters and gauges, which relayed, among other
things, the temperature and pressure of the three tanks containing the MIC.
The issue of the danger posed by the pesticide plant to Bhopal was raised in the Madhya Pradesh
Assembly in December 1982. However, T S Viyogi, labour minister in the Arjun Singh5
government allayed all fears saying, "A sum of Rs. 250 million has been invested in this unit.
The factory is not a small stone, which can be shifted elsewhere. There is no danger to Bhopal,
nor will there ever be." Equally confident was Mukund: "The gas leak just can't be from my
plant. The plant is shut down.6 Our technology just can't go wrong, we just can't have such
leaks," he said.

In the autumn of 1983, Mukund ordered the shutting down of the principal safety systems in the
plant. He felt that because the factory was no longer active, these systems were no longer
needed. According to analysts Mukund did not pay heed to the fact that sixty tons of MIC were
stored in the tanks. Interrupting the refrigeration of these tanks might possibly save a few
hundred rupees worth of electricity a day, but it violated a fundamental rule laid down by UCC's
chemists, which stipulated that MIC must in all circumstances be kept at a temperature close to
zero degree celsius.

In order to save coal, the flames which burnt off any toxic gases emitted into the atmosphere in
the event of an accident that burned day and night at the top of the flare, was also extinguished.
Other essential equipment, such as the scrubber cylinder used to decontaminate any gas leaks,
were subsequently deactivated. All this served as a signal for many well-trained and experienced
engineers and operators to leave the Bhopal factory in search of more secure and satisfactory
employment.

Between one-half and two-thirds of the skilled engineers who had worked with the plant right
from the project stage had left the plant by 1983. Analysts felt that the top officials at UCC were
neglecting the Bhopal plant because they were no longer interested in it.

The Bhopal plant was licensed to manufacture 5,000 tons of MIC based pesticides per year.
However, peak production was only 2704 tons in 1981, which fell to 1657 tons in 1983. Thus the
quantity of pesticides manufactured in 1983 was only 33.14% of its licensed capacity.

In the first ten months of 1984, UCIL's losses amounted to Rs. 50 million. UCC planned to close
the plant and put it up for sale. When no buyer came forward in India, plans were made to
dismantle the factory and ship it to another country. Negotiations to this end were completed by
the end of November 1984. Financial losses and plans to dismantle the plant exacerbated UCIL's
already negligent management practices.

The Tragedy

On the night of December 2, 1984, during routine maintenance operations at the MIC plant, at
about 9.30 p.m., a large quantity of water entered storage tank no. 610 containing over 40 tons of
MIC. This triggered off a reaction, resulting in a tremendous increase of temperature and
pressure in the tank. 40 tonnes of MIC, along with Hydrogen Cyanide and other reaction
products burst past the ruptured disc into the night air of Bhopal at around 12.30 a.m. Safety
systems were grossly under-designed and inoperative. Senior factory officials knew of the lethal
build-up in the tank at least one hour before the leakage, yet the siren to warn neighbourhood
communities was sounded more than one hour after the leak started.

By then, the poisonous gases had covered an area of 40 sq.kms. killing thousands of people.
Over 500 thousand experienced acute breathlessness, pain in the eyes, and vomiting as they
inhaled the deadly vapours. They ran in panic to get away from the poisonous cloud that hung
close to the ground for more than four hours.

When people poured into hospitals by thousands, their eyes and lungs in burning, choking agony,
the doctors called up the plant medical officer to find out what they ought to do. Dr Loya,
UCIL's official doctor in Bhopal replied, "It is not a deadly gas, just irritating, a sort of tear gas."

Unofficial estimates put the death toll at over 16,000. A study carried out by a Non
Governmental Organization in March, 1985 showed that between 50% - 70% of the non-
hospitalised population in exposed areas of Bhopal had one or more symptoms of MIC
poisoning.

According to an epidemiological study sponsored by Jawaharlal Nehru University, New Delhi, in

October 1989, 70% to 80% of the people in the severely affected communities and 40% to 50%
in the mildly affected communities continued to suffer from MIC exposure related illnesses five
years after the disaster. A house to house symptom survey in one community, conducted as part
of a doctoral dissertation in Delhi University in early 1993, showed 65.7% people suffering from
respiratory symptoms, 68.4% with neurological problems and 49% with ophthalmic symptoms.
Among the women in the reproductive age, 43.2% suffered from reproductive disorders.

Union Carbide Takes the Offensive

Following the accident, the GoI filed a compensation lawsuit against the UCC for an estimated
US$3 billion. However, UCC felt that the GoI was to blame for the disaster. In December 1986,
UCC filed a countersuit against the GoI and the State of Madhya Pradesh. The company charged
the governments with "contributory" responsibility for the leak of poisonous gases, saying both
governments knew of the toxicity of MIC but failed to take adequate precautions to prevent a
disaster.

Under the two sections "First Steps At Control" and "Contingency Planning and Experience
Help," UCC listed all the things that it did immediately following the first call it got about the
tragedy. The document said that vital decisions were made-the UCC facility making MIC in the
US was shut down; a task force led by Warren Anderson was set up; and medical and technical
teams were dispatched to the site of the tragedy "within 24 hours." The document also said that
"Union Carbide had a contingency plan for emergencies."

However analysts felt that contrary to what was said in UCC's document, UCC did not have any
kind of emergency plans in place at its Indian subsidiary. So much so, that when the accident
occurred and people started pouring into the hospitals in Bhopal complaining about the various
ailments, the hospital staff had no idea of what had happened or what to do.

UCC tried to defend its position by saying that it had only a 50.9% stake in UCIL. The company
also said that all the employees in the company were Indians and that "...the last American
employee at the site had left two years before." UCC maintained that it did not have any hold
over its Indian affiliate. UCC further argued that the day-to-day working of UCIL was
independent of the parent company and therefore it could not to be held responsible for the gas
leak.

However investigations revealed that this was not really true. In spite of denials, it appeared that
UCC had substantial authority over its affiliate. Many of the day to day details, such as staffing
and maintenance, were left to Indian officials, but every major decision, such as the annual
budget, had to be cleared with the parent company.

The Settlement

Within months after the disaster, the GoI issued an ordinance appointing itself as the sole
representative of the victims for any legal dealings with UCC as regards compensation. The
ordinance was later replaced by the Bhopal Gas Leak (Processing of Claims) Act, 1985. Armed
with this power, the GoI filed its suit for compensation and damages against UCC in the United
States District Court for the Southern District of New York.

Besides filing the suit, one of its prime responsibilities was to register the claims of each and
every gas victim in Bhopal. Analysts felt that this job was never done, or rather, not with any
seriousness for the next ten years. The government set up various inquiry commissions to
investigate the causes of the disaster; they remained half-hearted initiatives at best. UCC, on the
other hand, moved more quickly with its 'investigations': it announced by March 1985 that the
disaster was due to 'an act of sabotage' by a Sikh terrorist. Then they shifted blame to a
disgruntled worker.

In May 1986, Judge J.F. Keenan ruled that India and not the US was the appropriate forum for
the Bhopal compensation litigation. In the first pre trial hearing in the consolidated Bhopal
litigation in US federal courts, John F Keenan, asked UCC as 'a matter of fundamental human
decency' to provide an interim relief payment of $5 - 10 million.
UCC agreed to provide $5 million, provided a satisfactory plan of distribution and accounting of
the funds was devised. For 8 months, the UCC and the GoI haggled over terms of reference and
conditions for using the $5 million interim relief.

Finally, in November 1985, the parties agreed to channel the money through the American Red
Cross to the Indian Red Cross. Even after one year of the tragedy, no one-not even the official of
the MP Government in charge of relief for the victims-had any idea what the Red Cross would
do with the money. On December 17, 1987, a Bhopal District Court Judge passed an order
directing UCC to pay Rs. 3.5 billion as interim relief.

UCC challenged this order in the MP high court (at Jabalpur) on the grounds that the trial judge
was not authorised to pass the order under any provisions of the Indian Civil Penal Code. On
April 4, Justice S. K. Seth of the High Court upheld the liability of UCC for the Bhopal disaster,
but reduced the interim compensation to Rs 2.5 billion. UCC appealed to the Supreme Court of
India against the High Court order saying "No court that we know of in India or elsewhere in the
world has previously ordered interim compensation where there is no proof of damages or where
liability is strongly contested."

On February 14, 1989, the Supreme Court directed UCC to pay up US $ 470 million in "full and
final settlement" of all claims, rights, and liabilities arising out of the disaster. The Supreme
Court of India ruled that the $470 million settlement was "just, equitable and reasonable." UCC
described the court's decision as fair and reasonable, and the company's stock soared in the
London market. Analysts felt that the Bhopal Gas disaster, which left thousands of people dead
and injured, was settled for a mere US $ 470 million-which worked out to around Rs. 10,000 per
victim (if it was divided equally).

In the same year, a leading national daily9 stated that approximately US $ 40,000 was spent on
the rehabilitation of every sea otter affected by the Alaska oil spill.10 Each sea otter was given
rations of lobsters costing US $ 500 per day. Thus the life of an Indian citizen in Bhopal was
clearly much cheaper than that of a sea otter in America.

In 1991, the Bhopal court summoned Warren Anderson to appear on a charge of 'homicide in a
criminal case.' However, he did not turn up. On September 9, 1993, UCC sold its entire 50.9%
stake in UCIL to the Calcutta based Mc Leod Russell India Ltd., a company of the B M Khaitan
Group.

Till 2000, attempts to serve a summon on Warren Anderson by victims' organizations in the
Federal Court on Southern district of New York have been unsuccessful. Kenneth McCallion,
who was the lawyer for some of the victims and their family members, said a private investigator
also hired to deliver the summons at Anderson's residences in Vero Beach, Florida, and
Manhattan and Long Island in New York was unable to locate him. Asked if he believed Warren
Anderson had gone into hiding to avoid the summons, McCallion said, "We are just surprised we
have been unable to find him, a former CEO of a major corporation."
He observed, "And there is also a legal process which has been issued by the courts in India for
him to appear in Bhopal district court to answer criminal charges and those attempts to serve
him... have been unsuccessful as well." In 2001, in their book, It was five past midnight in
Bhopal, Dominique Lapierre and Javier Moro wrote that bringing UCC to justice was unlikely
because UCC had been sold out. In August 1999, Dow Chemical purchased UCC for US$ 9.3
billion.

Exhibits

Exhibit I: The Site for the Pesticide Factory

The T-Series Story: A Murder

In July 1997, some of the leading personalities from the Indian music industry gathered for a
meeting at a five-star hotel in Chennai. Among those attending were representatives from music
companies like Venus and Tips Industries (Tips) and the owner of Super Cassettes Industries,
Gulshan Kumar (Gulshan). The meeting had been called to persuade Gulshan to co-operate with
the other music companies.

One of the representatives pleaded with Gulshan, "You've ruined the market. No matter how
hard we try to sell, you undercut us. We owe huge amounts to lenders. For God's sake, ease up
on your business so that we can carry on with ours." To this, Gulshan calmly replied, "I won't do
it any more." Though the others did not really believe him, the meeting ended on a peaceful note.

But Gulshan could not continue run his music empire for much longer. A few days after this
meeting, he was shot dead, allegedly by the Mumbai underworld.

Two of Indian film industry's prominent names - music director Nadeem Saifi (Nadeem) and a
promoter of Tips, Ramesh Taurani (Taurani) - were arrested for conspiring to kill Gulshan.1 The
case, covered extensively in the national media, was still being fought in the courts in November
2001, with Nadeem hiding in UK and Taurani out on bail.

Gulshan's death brought to the attention of the nation the story of a man who had allegedly built
an empire on music piracy and plagiarism. Super Cassettes' 'T-Series' had completely changed
the way the Indian music industry functioned, allegedly by successfully exploiting the loopholes
in India's anti-piracy regulations.

Background Note

The Indian Music Industry

The Rs 12.50 billion2 Indian music industry has long been considered to be synonymous with
Indian film music. However, due to the promotional effects of satellite music television and the
entry of global music companies in the 1990s, non-film genres, such as international music, Indi-
pop and regional music have also become popular.

Traditional music such as classical and devotional music and ghazals have also received renewed
attention. The rapid increase in the number of corporate music retailing outlets, the increasing
penetration of Compact Discs (CDs), the emergence of distribution channels such as the Internet
and the ever-growing base of 60 million cassette players and four million CD players have
facilitated the trend.

During 1990-2000, the industry grew by 18%, selling 210 million music cassettes and 13 million
CDs in 2000. The industry was dominated by cassettes - the penetration level of CDs in India
was only 5-6%, against 70% in the developed markets. However, CD sales have been
consistently growing at a faster pace than music cassette sales.

Music is an extremely important feature of Indian films. (See Box). While a good soundtrack is
vital for getting a movie pre-release publicity, a good movie aids the music sales after the
release. Hindi film music accounts for 70% of the film industry's revenues.

T-Series was the overall market leader, followed by Saregama3, which had the largest number of
titles from old Hindi songs. The other players, in order of their position in the market were: Tips,
Sony, Universal, Venus, BMG Crescendo, Magnasound and Times Music. In addition, there
were many small players, both at the regional and national level.

Understanding the Movie/Music Connection

Producers usually sign music directors for a movie in the planning stages itself. Sometimes the
music directors are brought in after the story is completed. The producers then tie up with a
music company. The marketing of a movie starts usually a month before the release of the music
of the film, through print ads, posters, billboards and signboards. Once the music is released,
trailers are shown on various television channels. The promotion costs are either borne
completely by the music company or shared by the company and the producer. The overseas
distributor is responsible for promoting the movie in the foreign markets. The promotion is
sometimes continued even after the movie's release, depending on its performance.

Acquiring the rights to the music of a new Hindi film is costly, with the acquisition costs ranging
between Rs 20-120 million. With the market being price sensitive, margins were low and the
break-even volumes were high. There was considerable risk as predicting the success of a
soundtrack was extremely difficult. The initial promotion costs for the music companies ranged
from Rs 10-20 million. Besides this mode of paying an up-front amount, another model followed
was the Minimum Guarantee plus royalty model, wherein the company paid a smaller amount to
the producer and committed to paying royalty only if the income from the album exceeded a
certain amount.

Music Piracy

The term piracy is generally used to describe the deliberate infringement of copyright on a
commercial scale. It is illegal and criminal in nature. Music piracy basically refers to three kinds
of activities:

• Counterfeiting - The copying of the sound as well as artwork, trademark, label and
packaging of the original recording, with an aim to mislead the consumer into thinking that they
are buying the genuine product.

• Pirate Recording - The unauthorized duplication of music from legitimate recordings for
commercial gain. Pirated CDs or music cassettes may be compilations or combination of hit
titles of different music companies. Unlike a counterfeit product, the packing and presentation of
a pirate copy is usually not a replica of the legitimate commercial release.

• Bootlegging - The recording, duplication and sale of a live concert or broadcast without
the permission of the artiste or the music company which has the recording rights for the artistes
performances.

Those involved in music piracy range from owners of big recording facilities to small shops with
a single music system, which is used to record songs that the customers ask for.

According to the International Federation of the Phonographic Industry (IFPI), a worldwide trade
association for the music industry that identifies and attempts to solve problems of piracy, sales
of pirate recordings were $ 2.1 billion in 1995. This represented unauthorized sales of 954
million music cassettes, 84 million CDs and 4 million LPs - indicating that one in every five
recordings sold worldwide was a pirated copy.

India was the world's third largest pirate market in volume and sixth in value. The Indian music
industry lost millions of rupees each year to the pirates. Of the nearly 580 million cassettes sold
in the year 1997, 175 million were illegally manufactured and sold by pirates. The pirates evade
payment of royalty, excise duty and sales tax and also they do not have to incur the promotion
and publicity costs. Piracy levels were as high as 90 % in the early 1980s, coming down to 65%
in the 1990s and to 40% in 2000.

T-Series & Music Piracy

Gulshan's father Chandrabhan and his family moved to Delhi from West Punjab in 1947. The
family members began selling fruit on the roads and within a few years, earned enough money to
establish a small fruit juice shop. Chandrabhan later started selling pre-recorded music by
opening a record shop. In the early 1970s, Gulshan began looking after the music business and
named it Super Cassettes.

By 2000, T-Series had become a $ 90 million group with a presence in the Consumer Electronics
(color television, fans), CDs (12 million CDs per annum), Audio/Video Magnetic tapes and
cassettes (186 million cassettes per annum) and mineral water businesses. The company had
rights to over 2000 video and 18,000 audio titles, comprising of nearly 24,000 hours of music
software. T-Series had a technical collaboration with Hyundai of Japan for its color television
venture.

This meteoric rise of T-Series was termed by analysts4 as 'a story of avarice, greed and cunning
and the clash of two mafias - one represented by Gulshan and the other by those whom he
damaged.'
In the 1970s, the Indian music industry was dominated by GCI and Polydor (later named Music
India Ltd.- MIL), which sold only expensive LP records through a few record shops. These
companies did not set up facilities to manufacture cassettes on a large scale. Since cassette
players were not very common in the country at that time, GCI and Polydor were happy offering
cassettes in small numbers at very high prices.

In the late 1970s, cassette players flooded the country, many of them being Japanese 'two-in-
ones' (radio and cassette player) brought in large numbers by workers returning from the Gulf
states. In 1978, with the Indian government liberalizing the import and export trade, new kinds of
luxury consumer goods appeared in the market. These goods were popular with the rapidly
growing middle class population. Cassette players (and consequently, cassettes) were one such
new item that quickly became popular in the country.

Compared to the LP records, cassettes were incredibly cheap to produce and reproduce and could
be easily distributed and transported. Gradually, a large number of outfits began setting up illegal
copying operations. Most copyright violators chose old Hindi film songs from the GCI catalog.
All that was required to run a copying outfit were two cassette players and a supply of tape,
spools and cases.

Since the bootleggers paid no royalties and no excise and used cheap cassettes, they were able to
sell their products at half of GCI's prices. By the mid 1980s, cassettes reproduced in this fashion
accounted for a significant portion of the music sold in India. A major part of this piracy industry
was reportedly owned and operated by T-Series.

In the late 1970s and early 1980s, audio cassette production was defined as a small-scale industry
(SSI). Thus, Gulshan was able to take advantage of the subsidies, loans and all the other
incentives accruing to the SSIs. The only capital expense the company had was the cost of the
cassette - Rs 7 - and the cost of duplicating.

This cassette was retailed at about Rs 25. On the other hand, GCI and MIL cassettes retailed for
Rs 36-45, as the companies had to pay, in addition to royalties, an excise duty of 15 % on every
cassette. As T-Series did not pay any excise duty, the entire 15% benefit was passed on to the
customer. Gulshan also kept his dealers/retailers as happy as possible - if a T-Series cassette was
found to be defective, it was instantly replaced. Super Cassettes never became a member of the
IMI5, and therefore, was under no obligation to follow the organization's guidelines. The
company quickly emerged as the biggest competitor to GCI, which even came close to winding
up its operations.

By the mid 1980s, T-Series had reportedly stopped the pirated recording business and 'shifted'
completely to the legitimate businesses. However, controversies continued to dog the company,
with Gulshan coming out with the idea of 'cover versions.' Cover versions were albums that used
the musical compositions as well as the lyrics of original well-known Hindi film soundtracks.
Fresh recordings were made using the same compositions and lyrics, but with a different
orchestra and singers, from the ones used in the original.

These recordings were then sold in the same market in which the original soundtrack albums
were sold, in most cases with the same title. While some parties took permission before making
the recording, others merely sent notices, as required by Rule 21 of the Copyright Rules Act
1958, along with a cheque for a paltry sum towards royalty for the literary and musical works.
Cover versions were considered to be legal as long as the makers had acquired permission from
the original music companies. The Supreme Court had passed a directive that cover versions
done after a period of three years from the release of the original music score were legal.

Initially, Gulshan's cover versions featured only old Hindi film songs. Gulshan got unknown
singers to sing these as their rates were low and Gulshan was able to make good margins on the
overall deal. Soon, he began making cover versions of new movies as well. Though the cassettes
always made it clear in small print that these were not the original recordings, the consumers
were not always savvy enough to read the small print.

During the early 1990s, Gulshan released a number of albums featuring religious songs. These
were fairly successful. He even acted in, sang for and directed a few of the videos of such songs.
These were run on the state-owned television channel Doordarshan. T-Series also began
producing Hindi films. One of the company's first ventures, the musical 'Aashiqui,' was a huge
success. This was followed by many more movies, a majority of which flopped.

However, the music of these movies was a success in almost all the cases. The success of
'Bewafa Sanam,' one of the many mediocre T-Series movies starring Gulshan's actor-brother
Kishen Kumar, took the whole industry by surprise. Gulshan even invented the concept of the
'music bank' where tunes were stored till a movie or a record was identified to 'fit' them into.

Things were going on rather smoothly - till Gulshan released a cover version of what was
reportedly one of India's biggest blockbuster movie, 'Hum Aapke Hain Kaun' in 1997, violating
the three-year waiting period stipulated by the Supreme Court.

This time around, the attack on GCI's profits was too strong to be ignored and the company filed
a suit against T-Series. In the same year, a few music industry players approached the former
finance minister V P Singh, demanding that Gulshan be punished for violating copyright laws
and pirating music. However, V P Singh reportedly6 dismissed them saying, "Don't come to me
with your hard luck stories.

You've no marketing strategies so you haven't discovered the marketplace. Gulshan has. And you
want me to punish him for his entrepreneurial ability?" As the 'Hum Aapke Hain Kaun' case
went to the courts, Gulshan was murdered. With Gulshan's death began a period of uncertainty
for the T-Series group. The music company was not doing very well as Gulshan had stopped
buying music rights from outside7 and the T-Series' films had failed.

The other businesses were all relatively new and not yet well established. There were reports of
infighting in the family regarding the control of the various businesses. Saregama, Tips and
Venus, who had emerged as the leading players in the Hindi film music segment, had also
ventured into film production. Though Saregama's movies did not do well, quite a few Venus
and Tips movies were huge successes.

The December 1998 Delhi High Court ruling in the 'Hum Aapke Hain Kaun' case, which put an
end to the cover version recordings, was the biggest blow to T-Series. The High Court order said
that the makers of version recordings relied upon a special provision of the Indian Copyright Act
[S 52(1)(j)]. Taking advantage of this provision, the pirates claimed that copyright owners of the
compositions and lyrics were only entitled to a statutory license fee. They also said that once the
owners received the license fee, they had to allow the fee payers to make sound recordings.

The Delhi High Court held that there was no provision for such automatic licensing and the
sound recordings could be made by third parties only after they had obtained permission from
the copyright owners. The Court held that under the Copyright Act, assignments and licenses
could only be made in writing. They had to be signed by the assignor/licensee. As GCI had
categorically refused to grant a license/assignment in favor of T-Series and had also returned the
cheque for the royalty amount sent by T-Series, it was able to win the case.

The Unsolved Problem

Though GCI had won this case against T-Series, the problem of music piracy still plagued the
industry. The music companies were handicapped by the legal definition of copyright violation
wherein piracy was not a cognizable offence. The companies had to prove that cassettes were
being pirated before getting a warrant of arrest. According to certain reports, music pirates were
always tipped off about police raids in advance.

The nexus between the film/music industry and the Dubai/Mumbai underworld was another
problem. The mafia controlled a large portion of the Mumbai music piracy business. This nexus
was so strong that after an IMI raid in the early 1990s in Mumbai, IMI officers were beaten up
and its Mumbai office was destroyed. After this, all the markets in that area were closed for 15
days in protest against the raid.

According to IMI estimates, almost 95% of the distributors and dealers were involved in piracy
and on an average, only 40% of the stock was genuine. Analysts claimed that except for giving
leads to the police and initiating raids on pirated music vendors, even the music companies had
done precious little to curb music piracy.
The problems associated with the distribution network in the music business also substantially
helped the pirates. Market observers claimed that around 50 distributors had an absolute control
on the music industry's distribution network.

Gulshan - Pirate or Messiah?

Indian film music lovers have always regarded the decades prior to the 1980s as the 'golden era'
of Hindi film music. During the 1980s, there was blatant and sub-standard copying of
international music. In the late 1980s, videocassettes became extremely popular among India's
upper class and upper middle-class families.

As these people began watching the latest films in their homes, video piracy became rampant.
Now it were the lower classes that could not afford to buy color television sets and video players
or recorders, that went to the theatres. Hence, films were made to cater to their tastes. These
films were invariably medicore and the music was of very low quality.

T-Series was given credit for bringing the music industry out of this decline. Many critics praised
Gulshan's unerring instinct in picking up saleable music. Some of the films for which Gulshan
procured the music rights in the early 1980s went on to become huge successes. Almost all these
movies featured melodious music, bringing back the sounds of the pre-1980s era.

Gulshan's supporters held that till he came along, GCI and MIL had been virtually looting the
consumer by charging absurdly high prices for music cassettes. Gulshan had done the customers
a great service by making cheaper cassettes, and retailing them through small shops all over the
country, thus making cassettes affordable and easily available even to the common man.

T-Series even took back unsold cassettes (to re-use the shells as well as tapes) so that these small
retailers would not suffer losses. Gulshan was also lauded for promoting fresh talent8 through
the cover versions. (Interestingly enough, after Gulshan's death, the prices of audiocassettes
increased in the late 1990s.) Noted media personality Pritish Nandy said, "He may have made
some money through cover versions and piracy.

But what is more important is that he benefited listeners, expanded the market and created a
galaxy of new stars. He broke, in that sense, the existing monopolies and drove hard and fiercely
a sloth, decadent, exploitative market to make it boom. But, like all swashbuckling pioneers,
Gulshan Kumar got a bad name for doing it first."

The fact remains that while the music pirates made huge profits for themselves, they
inadvertently ended up benefiting the music industry as well. Since their entry in the 1970s, the
industry had more than quadrupled in size. Not surprising therefore, that some say the Indian
music industry 'owes its growth to the pirates.'
The Reality TV Controversies: A Series of Controversies

In January 2001, religious and conservative pressure groups worldwide (America, Europe,
Australia and Asia) protested strongly against the airing of, 'Temptation Island,' a TV show. The
show, belonging to the genre of reality TV, was made by the US media house Fox TV (Fox TV).

It was designed to 'test the fidelity' of four unmarried but committed couples, who were taken to
an exotic island, where 26 singles tried to lure them so that they would cheat on their partners.
Whoever succeeded in remaining faithful to his/her partner was declared the winner.

Critics of the program demanded a ban on it on the grounds that it promoted illicit sex and
endangered the relationship between the participating couples. A spokesman for the American
Family Association, Randall Murphree, remarked, "Even the trailers for the show were enough
to upset conservative organizations and various religious groups." The activists, in their
campaign, publicized the advertisers' identity and encouraged the public to compel the
advertisers to boycott the show.

Though Fox TV authorities argued that the focus of Temptation Island was on exploring the
dynamics of serious relationships and not on sex, the fact that Fox screened all contestants taking
part in the show for sexually transmitted diseases weakened its arguments. Many family
associations accused it of capitalizing on the entertainment value of sex and infidelity. The
controversy deepened when it was discovered that one of the four couples had an infant son.

Though Fox TV pleaded ignorance and removed the couple from the series, the protesters argued
that Fox TV could have broken up a family. Melissa Caldwell of Parents TV Council, a division
of Media Research Center, said, "I think a lot of people are appalled at the concept of trying to
break up committed relationships for the purpose of entertaining millions of viewers."

The program attracted similar reactions in other countries, especially in conservative countries
such as Japan, Taiwan and India. In Taiwan, the show was scrapped even before a single episode
was aired. In India, though the program was aired, it faced severe opposition and the Star TV
network had to give up the idea of making an Indian version of the program.

The 'Temptation Island' controversy sparked off a fresh round of heated debates worldwide
regarding reality TV shows. Since its inception in the late 1980s, Reality TV had always been
controversial genre because if emphasis on violence, crime and sex. Some of the major
controversial reality TV programs during the late 1990s and 2000 included Fox TV's 'Who
Wants To Marry A Multi-Millionaire,'1 CBS' 'Survivor,'2 Endemol Entertainment's 'Big
Brother,'3 and UPN's 'Chains of Love.'4 These and many other reality TV shows had been
criticized for encouraging voyeurism in viewers and exploiting the human weakness for violence
and sex.
Background Note

In 1926, John Logie Baird demonstrated the first television (TV), a black and white model,
which marked the beginning of a communication revolution in the world. Regular scheduled
telecasts first began in England in 1936. The TV market grew at a healthy pace in the late 1940s.
By 1949, there were over 100 TV stations and over one million families owning TV sets in US.
By 1951, the number of TV owning families in the US increased to over 100 million. After color
TV was launched in the 1950s, the TV market grew quickly across the world. The popularity of
TV over other communication media was attributed to the impact created by visual images.

During its initial years TV shows were primarily adaptations of existing radio shows. However,
in the mid 1950s, TV shows created a distinctive identity for themselves in the entertainment and
communication media. In the next two decades TV media extended its roots to all corners of the
world and became an inseparable part of almost every household.

The advent of satellite broadcasting technology during the mid 1970s transformed the entire TV
industry. It now became possible for TV networks to show their programs all over the world. In
the next couple of years, the satellite TV industry established itself strongly, reaching out to
millions of subscribers all over the world. By the 1980s, TV had established itself as one of the
most effective and powerful media, generating huge revenues through advertisements, with
access to the drawing rooms of billions of households.

Over the decades, TV became an integral part of the advertising strategies of companies the
world over. Companies either sponsored programs or developed 'between-the-program'
advertisements or sponsorship rights. A wide variety of programs were offered through a large
number of TV channels, targeting different sections of society. TV programming content
worldwide has been mostly dominated by trends in the Western countries, specially the US (see
Table I for Eras of TV Programming).

TABLE I

ERAS OF TV PROGRAMING

TV programming changed constantly to adapt to changing times and viewer preferences. Based
on the time frame, TV programming was divided into seven eras that constituted:

• Vaudeo (1948-1957): Era of sitcoms (situational comedy) including comedy specials based on
radio shows, ethnic sitcoms, domestic sitcoms and others.

• Adult Westerns Era (1957-1960): Era of telefilms.

• Idiot Sitcom Era (1961-late 1960s): Era of magic, barnyard, monstrous and escapist
comedies.
• Relevance Era (late 1960s-1975): The period of TV renaissance that gave rise to quality
TV.

• ABC Fantasy Era (1975-1980): The era of escapist dramas and sitcoms.

• Soap Operas and Real People Era (1980s): The era of prime time soaps (daily serials),
reality TV shows and domestic sitcoms.

• Era of Choice (1990s): Era of drama, action, sitcoms, reality TV, sports and news
magazines.

By the late 1990s, TV viewership seemed to be saturating. As a result, competition between

various TV channels intensified. With almost all channels offering similar stuff such as soaps,
sitcoms and do-it-yourself infotainment programs, companies realized the need for innovative
and novel programs that would attract users to their channel. Reality TV programs were soon
identified as a powerful method for attracting viewers.

Reality TV Programs

Reality TV constitutes non-fictional programs that supposedly provide a realistic account of

current or historical events or situations. Various reality TV programs comprised interviews and
talk shows; news and public affairs programming; documentaries; entertainment-news and
review programs, portrayed as a re-creation of real world events.

Reality TV programs were initially launched by major networks in Europe and the US. Fox TV,
one of the first media companies to realize the potential of reality TV, launched a series of
tabloid and crime-based reality shows. Three of its reality shows - A Current Affair, COPS and
America's Most Wanted topped the TV ratings. During the 1980s NBC, ABC and CBS also
offered reality TV shows5. In the early 1990s, reality shows focused mainly on tabloid news
shows and reality-based entertainment-news programs. The main growth sectors constituted
syndicated talk shows, network newsmagazines (including reality based police shows and tabloid
shows).

Reality programming quickly became popular in North and South America and Eastern and
Western Europe6. In other parts of the world such as Australia7, Asia and Africa, reality TV
programming only picked up in the late 1990s. Soon, almost all the major TV Networks in every
country got into reality TV programming.

Most of these shows were based on popular shows across the world. Country-specific versions of
'Who Wants to be a Millionaire,' 'The Weakest Link,' 'Survivor' and 'Big Brother' attracted a
large number of viewers (and recorded high TV ratings) even in conservative Asian countries
like Hong Kong, India,8 China, Russia,9 Taiwan, and Japan.
The proximity of the presented reality to the experiences of the viewers was a major reason for
the success of reality TV shows. The huge cash prizes also contributed to the success of these
programs. Since, these shows did not require actors and scriptwriters, they had low development
costs. As a result, reality TV was lucrative for TV channels (see Table II for Advantages and
Disadvantages of Reality TV).

However, the growing popularity of reality TV shows was accompanied by opposition from
critics, scholars and family associations on social, psychological, moral and ethical grounds.
Reality programs were criticized for degrading morals, through high focus on tabloid shows. It
was reported that during the mid-1990s the advertisers, unwilling to associate their products to
such sensational and exploitative tabloid programs, refused to sponsor them. However, the rising
viewership for such programs and the growing competition in the industry coaxed the advertisers
back into sponsoring them.

Though reality TV programming also offered newsmagazines and entertainment and education
based shows, analysts claimed that there was an obsession of reality TV producers towards the
lives and loves of real people, tending to the inherent voyeuristic nature in every human being
(See Exhibit I and II for Genres of Reality TV Programming and Most Popular and Criticized
Reality TV Programs).

TABLE II

ADVANTAGES AND DISADVANTAGES OF REALITY TV

Advantages:

• Offers an opportunity to gain instant exposure, fame or money.

• Gives a chance to narrate a story or promote a cause.

• Helps in increasing one's confidence level and self-awareness.

• Enhances the analytical abilities of the viewer.

• Gives high levels of entertainment and thrill.

Disadvantages:

• Invasion of Privacy.

• Generates social, moral and ethical conflicts in the viewer.

• Embarrassment, Humiliation and Loss of Reputation of participants.

• Invokes legal action for libel, slander, trespass, fraud and negligence resulting in bodily
harm or damage to property.
Reality TV - The Debate

According to experts, TV has a great influence over morality of viewers, as they tend to match
their own judgments of what is good and bad with the value system created by TV programs.
This could create moral and ethical conflicts in the viewer. As reality TV programs were
perceived to be more 'real' than other TV programs, their effect on the viewers' attitudes and
values was stronger. A majority of reality TV shows during the late 1990s and early 2000 were
criticized for portraying criminality and abnormality as normal day-to-day occurrences. Analysts
remarked that realism in TV programs increased the aggression and involvement of the viewer.
They claimed that the high violence shown in reality TV programs adversely influenced viewers'
perceptions; such programs made viewers regard the real world to be violent as that shown on
TV.

A media critic said, "The greatest flavoring of life that comes from these shows is a kind of
knowing cynicism, an embrace of the idea that everything is staged, that feelings are shallow,
that the difference between life and simulation is insignificant." Reality TV was also criticized
by critics and psychologists for fueling voyeurism and exhibitionism in society. Dr Edward
Spence, Lecturer in Media Ethics at Charles Sturt University, pointed that it is the intrinsic
tendency of human beings to revel in other people's miseries and misfortunes. Voyeurism is the
darker side of human nature, buried deep in every person. According to experts, every person has
a tendency to take pleasure from the embarrassment, humiliation and discomfort of others.

Interviews with many viewers revealed that they enjoyed seeing participants and contestants,
indulging in inter-group fights and eliminate each other from the game. According to analysts,
viewers actually waited in anticipation to see the embarrassment and misery caused to
contestants during the course of the program. To quote Brian Reeney, an employee of Channel
Nine (a media center) Program Department, "I think there is more opportunity for it (voyeurism)
possible and we're feeding it as well. The success of one program sprouts the creation of similar
programs and similar formats in that genre."

Critics of such shows claimed that the 'reality' in reality TV programs was often modified or
customized by TV networks to make a more powerful impact on the viewers. TV networks, they
argued, re-created 'reality' to promote their channels. The fact that such shows were being made
at the cost of what analysts called good programming (news, entertainment, education and
information-oriented shows, motivational and counseling shows) added to the resentment against
them.

However, TV networks across the globe seemed to be unperturbed by these developments. Not
only was the number of reality TV shows going up, they were increasingly featuring violence,
crime, profanity, helplessness and violation of privacy. TV networks argued that they had created
a new genre, which demonstrated that the common man could be as interesting as any film or TV
character.

The networks claimed that they had 'ignited a spirit to participate and achieve' in the people
through their reality based programs. The strongest argument put forward by the networks in
support of such shows was that viewers wanted to see reality TV programs. This was borne out
by the high viewership ratings recorded by these programs.

Bob Littiera (Littiera), Vice-President, DKB and Partners (New Jersey) Media Division, said,
"People will watch anything, they'll watch whatever is thrown at them. There's always going to
be someone who's watching, always a new audience for it, and there will always be executives
who give this to them. And there will always be advertisers."

Rabbi Kenneth Roseman, a renowned critic of reality TV, said, "Every human being is faced
with moral choices, temptations to make mistakes. But we're not faced with people who
deliberately set out to undermine or distort our morals, particularly for ratings and profit. This is
really offensive." He argued that TV networks deliberately exposed millions of people to moral
conflicts, encouraging them to give in to temptation, all for the sake of popularity and
profitability. How far are these TV networks justified in endangering the moral environment of
the society as a whole?

The Future

In late 2001, a survey conducted in the US by Adweek revealed that 50% of the surveyed people
had become more selective to the kind of programs they watched. Around 57% of the surveyed
people indicated that they were less willing to watch reality based programs. As many as 60% of
the respondents said that they were willing to watch comedies. This trend seemed to be catching
on in many parts of the world in early 2002. Though the repeated telecast of the September 11th
terrorist attacks in the US, which brought viewers very close to reality, was partly responsible for
this change, it was also caused to some extent, by viewer fatigue. The continuous telecast of
reality TV shows with more or less the same content, had bored viewers.

Many of the major networks had reportedly begun efforts to modify their offerings accordingly,
prompting rumors of the onset of 'the end of reality TV.' However, industry observers claimed
that the passiveness towards reality TV programs would be soon over as 'viewer memory' tends
to be very short.

Analysts observed that viewers continued to watch reality TV in spite of the criticism it received.
They therefore argued that viewers were as much to blame for these shows as the TV networks
and advertisers. Bill Press, a TV host and critic, summed up the situation: "I've got to tell you, as
long as people will go to casinos or continue to build them, as long as people will watch this junk
on TV they're going to continue to produce it. There's nobody to blame but the idiots who tune in
to it."
Exhibit I: Genres of Reality TV Programming

Exhibit II: Most Popular and Criticized Reality TV Shows

Distribution was the most profitable part of the music business. The average cost of a cassette for
the distributors was Rs 19. The selling price ranged from Rs 38 (large retailers) to Rs 44 (small
retailers) for a cassette. The retailers added their own margins to the price. The price for the
customer thus ranged between Rs 50 and 60.

The problem was compounded by the fact that in the case of film music, if supplies were not
made available immediately, the demand shifted either to pirated cassettes or to some other
album that was easily available. Thus, it was imperative for the music companies to sell in bulk
to the distributors.

The price for the customer thus ranged between Rs 50 and 60. The problem was compounded by
the fact that in the case of film music, if supplies were not made available immediately, the
demand shifted either to pirated cassettes or to some other album that was easily available. Thus,
it was imperative for the music companies to sell in bulk to the distributors.

The companies realized that they had a lot to gain by bypassing this network. The logical
solution, though time consuming and costly, was to set up their own music stores. The biggest
initiative in this direction had come from Saregama, whose owners, the RPG group had
successfully established the Music World chain of music retailing outlets all over the country.
The emergence of organized music retailing outfits like Planet M and Internet based stores such
as fabmart.com was expected to help the companies improve their performance.