The 1981 novel won a slew of awards -- including the Man Booker Prize, the James Tait Black Prize, and the "Booker of Bookers" (twice) -- but the film rights, Rushdie said, went for a dollar.
Stewart, who is about to leave to work on a film of his own, seemed unimpressed. "We in the business refer to that as 'bupkis,'" he said. "I don't know how long you're been in this business, but I know some good Jewish agents," he counseled.
[For the Record, 11:40 a.m. PDT April 24: A previous version of this post said that Jon Stewart had recently returned from making a film of his own. He's about to depart to work on that film.]
Rushdie wrote the screenplay for "Midnight's Children," which opens in the U.S. on Friday, and was able to retain a great deal of creative control over the final product, a rarity for an author. Rushdie also does voiceover narration in the film.
Stewart summarized the film's plot for his audience: "For those of you who don't know the story, it's a boy in a boat with a tiger," he said. A joke, of course. That's "The Life of Pi," not "Midnight's Children."
Rushdie's novel is in fact "about India doing something which America did a little earlier, which is kicking the British out," he explained to Stewart. "It's about these [two] boys born at that moment, and it's about that generation."
Rushdie said that did not write the novel with a film in mind. "I was just a kid," he said of writing it. "It took 30 years to make the film."
However, the deal that led to it was surprisingly brisk. The film's director, Deepa Mehta, and Rushdie are friends, and were having dinner in Toronto during Rushdie's book tour for "The Enchantress of Florence." In the middle of dinner, Mehta asked who had the rights to "Midnight's Children."
"And I said, 'As it happens I do,'" Rushdie told Stewart, "And she said, 'Can I make a movie of it?' and I said, 'OK,' and that was the deal."
"And then we had a fierce negotiation and I sold her the option for one dollar," he added.
Filming took place partly in Sri Lanka and partly in India -- and was helped by the latter's robust film industry.
"I always thought it was unfair on the Bombay film industry to call it 'Bollywood,' " Rushdie said. "Because it's actually much bigger than Hollywood. Hollywood should be called 'Hombay.' "
This is not Rushdie's first foray into the movie business. He has had cameo roles in several films and television shows, and even wrote a previous screenplay, called "Ground Beneath my Feet," though the film was never made. He is currently working on a science-fiction television series.