Are films a great investment opportunity? I believe these are for the right type of investor. Here’s why. I have written this in a Q&A style to answer the main questions that prospective investors inquire about whether or not to invest or otherwise.
1. Exactly why is film investment a beautiful investment opportunity? Is it as a result of high return or because of the nature of business? For a lot of investors, the top return is a major draw, because films do have the possibility for any huge return, though there is a extremely high risk with a lot of big “Ifs”. A film can perform well if it features a good script, good acting, good production value, has a budget that fits the kind of film this really is, and strikes a chord with distributors or buyers for that TV, DVD, foreign rights, or some other markets. Then, if the film goes into theatrical release, it provides the possibility with an even larger audience, though theatrical will not be the main income source for many films, only the big blockbusters, since the theater owners take about 75% of the box office unless a film is put into an extended-term release and there exists a high costs for prints (though a lot more theaters are going digital). The value of a theatrical release is much more because of its promotional value for gaining other sorts of sales, aside from the huge blockbusters.
Despite the potential for high returns for some films, Kia Jam inside it for the money need to recognize that any film investment is a huge risk, because many problems can develop from when a film enters into production to when it is finally released and distributed. Theses risks are the film not being completed since it goes over budget and struggles to get additional financing or you can find problems on the set. Another risk would be that the film will not be well-received by distributors and TV buyers, therefore it doesn’t get acquired. Or perhaps if a film gets a distribution deal, the risk is that there is very little or no money at the start, and so the film does not see further returns. So yes – a film can have a high return, but a trader can lose it all.
Consequently, for most investors, other key reasons for investing are more important. They think within the message from the film. They love and keep the film producers, cast, and crew. They like the glamour for being included in a film, including meeting the heavens and planning to film festivals. They see their investment as a chance to go to distant locations for filming as well as for promoting the film. And they see purchasing the film being a tax write-off, just like giving to your charity.
2. What sort of investment returns can investors can expect, because so many independent productions usually are not created for big screens, where are the sales provided by? If each of the stars align, and there exists a good film completed with a fair budget and distributors, buyers, plus an audience responds, the film could readily earn 4 to 10 times its cost, making everyone delighted. A low-budget indy scenario for this degree of return might be a film shot for $50,000-200,000. It might get $500,000-750,000 for a TV sale and earn $1-2 million more through DVD, streaming, and foreign rights sales, even without a theatrical release.
For many films, the key price of a theatrical release will be the PR value of having the film known, so buyers would want to purchase or rent the DVD and television buyers will want to show it on one of the premium cable movie channels. Also, most films don’t obtain a theatrical release, as well as the funds are earned through other channels.
3. What type of movies can usually generate good profits, considering that the recent Oscar Awards demonstrate that a large investment will not necessary mean big returns? A few of the big blockbusters that pass the $100 million threshold can certainly make a profit from an excellent theatrical release, in both the U.S. and abroad. But whether or not they produce a profit depends on their budget. As a result of high salaries of stars which can be typical in these films along with other high cost items, including special effects, many blockbusters still might not create a profit. Thus, dollar for dollar, many low-budget indy films might be a better investment, because the multiples are higher using a success; there is more likelihood that the low-budget indy, which is done well with a reasonable budget, will be sold making back it’s money, and the potential for loss is far less.
4. Are documentaries a wise investment opportunity? Good documentaries are an especially good investment opportunity, considering that the costs of making documentaries are far lower than for feature films. They may be done with a lot smaller crew – even two or three folks the sector – one for the camera, someone to handle sound and lighting, and the other to coordinate arrangements and get good questions in the field. Post-production can be easier too, with fewer takes and much less film to edit for that final cut. Many documentaries are carried out with a budget of $10,000-50,000, which may be easily recouped 5 to 20 times over with DVD, TV, and foreign sales.
5. Are there any legal or regulatory restrictions preventing individual investors to participate in film investment opportunities?
Generally, if you’ve got the cash to invest, the filmmakers will find a way for you to legally to give them the amount of money. Various vehicles include nonprofit corporations, LLCs, private placement memorandums, and loans. An average requirement is that the individual have the funds to shell out funds that could be lost in a risky venture and is also advised of the potential risk of an investment.
6. Do you know the key risks behind film investments and how do you prevent them? The key risks behind film investments will be the possibility to lose everything if the film doesn’t get completed or doesn’t find distribution. The easiest method to protect yourself is always to assess the chance of the feature film or documentary going in; assess if the budget and expected return appears to be reasonable for that project; and assess whether the producer, director, and others on the film seem to have the experience to accomplish and market the film
7. How much will be the initial investment necessary to invest in a film production? A preliminary investment can range from the few thousand to many hundred thousand, depending on the film and the way a smart investment swosox structured. As an example, some indy filmmakers doing low budget films have discovered creative ways to get funds by inviting investments of $1000-2000 from those participating in the film, such as the actors and crew members. Others have divided up investment packages into $5000 each for 25 investors to raise $100,000. And others have looked for a few big investors, that can contribute at least $20,000, $50,000, $100,000 or more.
Then is some investment in place, there can be other types of funds, such as GAP funding and incentives from states and cities in the form of rebates after filming is done. VC funds can also be plausible, particularly after there is some initial investment within the film, in the event the film’s budget is going to be at the very least $1-2 million.
8. With modern technology advancements, what are the opportunities for independent and emerging film producers; or are these developments more of a threat as a result of piracy and competition?