Are films a great investment opportunity? I think they are for the best kind of investor. Here’s why. I have written this in a Q&A style to respond to the major questions that prospective investors ask about whether to invest or otherwise.
1. Why is film investment a stylish investment opportunity? Will it be as a result of high return or as a result of nature of business? For many investors, the high return is a major draw, because films do have the possibility for any huge return, though there exists a extremely high risk with many different big “Ifs”. A film can perform well if it possesses a good script, good acting, good production value, has a budget that suits the kind of film this really is, and strikes a chord with distributors or buyers for the TV, DVD, foreign rights, or some other markets. Then, when the film enters into theatrical release, it offers the possible with an even larger audience, though theatrical is not really the key revenue stream for the majority of films, only the big blockbusters, because the theater owners take about 75% from the box office unless a film is put into an extended-term release and there exists a high costs for prints (though progressively more theaters are getting digital). The value of a theatrical release is much more for its promotional value for gaining other sorts of sales, aside from the massive blockbusters.
Despite the opportunity of high returns for a few films, wikimedia.org in it for the money have to recognize that any film investment is a huge risk, because many problems can develop from when a film goes into production to after it is finally released and distributed. Theses risks are the film not completed since it goes over budget and is unable to get additional financing or you can find problems on the set. Another risk is that the film will not be well-received by distributors and TV buyers, therefore it doesn’t get acquired. Or even if a film gets a distribution deal, the chance is that there is very little or no money up front, and so the film does not see any further returns. So yes – a film can have a high return, but a trader can lose everything.
Consequently, for most investors, other key reasons for investing are more important. They think within the message of the film. They like and support the film producers, cast, and crew. They like the glamour to be involved with a film, including meeting the heavens and planning to film festivals. They see their investment as a chance to travel to distant locations for filming and for promoting the film. And they also see purchasing the film being a tax write-off, similar to giving to some charity.
2. What type of investment returns can investors should expect, since several independent productions are not intended for big screens, where are definitely the sales coming from? If all of the stars align, and there is a good film finished with a reasonable budget and distributors, buyers, as well as an audience responds, the film could readily earn 4 to 10 times its cost, making everyone thrilled. A minimal-budget indy scenario for this level of return might be a film shot for $50,000-200,000. It might get $500,000-750,000 to get a TV sale and earn $1-2 million more through DVD, streaming, and foreign rights sales, even without a theatrical release.
For most films, the key price of a theatrical release is definitely the PR value of obtaining the film known, so buyers may wish to purchase or rent the DVD and TV buyers would want to show it on among the premium cable movie channels. Also, most films don’t get yourself a theatrical release, and the funds are earned through other channels.
3. What kind of movies usually can generate good profits, since the recent Oscar Awards demonstrate that a big investment fails to necessary mean big returns? Some of the big blockbusters that pass the $100 million threshold can certainly produce a benefit from a successful theatrical release, in the U.S. and abroad. But whether or not they create a profit is dependent upon their budget. Due to the high salaries of stars which are typical within these films as well as other high cost items, including effects, many blockbusters still may not make a profit. Thus, dollar for dollar, many low-budget indy films can be a better investment, considering that the multiples are higher using a success; there is more likelihood that the low-budget indy, that is done well with a reasonable budget, is going to be sold making back it’s money, and the chance of loss is far less.
4. Are documentaries a good investment opportunity? Good documentaries are an especially good investment opportunity, since the costs of creating documentaries are much lower than for feature films. They may be completed with a much smaller crew – even two or three people in the sector – one for the camera, someone to handle sound and lighting, and another to coordinate arrangements and ask good questions inside the field. Post-production can be easier too, with fewer takes and fewer film to edit for that final cut. Many documentaries are done having a budget of $ten thousand-50,000, which can easily be recouped 5 to 20 times over with DVD, TV, and foreign sales.
5. Are there legal or regulatory restrictions preventing individual investors to participate in film investment opportunities?
Generally, if you’ve got the cash to shell out, the filmmakers will discover a way to legally to provide them the cash. Various vehicles include nonprofit corporations, LLCs, private placement memorandums, and loans. A typical requirement would be that the individual have the funds to shell out funds that could be lost in a risky venture and is also advised of the risk of your time and money.
6. Exactly what are the key risks behind film investments and how do you prevent them? The true secret risks behind film investments is the possibility to lose all of it if the film doesn’t get completed or doesn’t find distribution. The best way to protect yourself is always to assess the potential of the feature film or documentary going in; assess whether the budget and expected return is apparently reasonable for your project; and assess if the producer, director, and others on the film seem to have the knowledge to finish and market the film
7. Exactly how much would be the initial investment required to invest in a film production? An initial investment can range from the few thousand to a few hundred thousand, depending on the film and the way a smart investment swosox structured. For 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, like the actors and crew members. Others have divided up investment packages into $5000 each for 20 investors to increase $100,000. Still others have looked for a couple of big investors, who are able to contribute at the very least $20,000, $50,000, $100,000 or maybe more.
Once there is a few investment in place, there might be other causes of funds, including GAP funding and incentives from states and cities by means of rebates after filming is done. VC funds will also be plausible, particularly after there exists some initial investment in the film, if the film’s budget will likely be at least $1-2 million.
8. With modern technology advancements, exactly what are the opportunities for independent and emerging film producers; or are these developments much more of a threat due to piracy and competition?