Are films a great investment opportunity? I believe these are for the best sort of investor. Here’s why. I have written this in a Q&A style to answer the key questions that prospective investors find out about if you should invest or not.
1. Exactly why is film investment an attractive investment opportunity? Could it be as a result of high return or due to the nature of business? For a lot of investors, the high return is a major draw, because films do have the potential for any very large return, though there exists a high risk with a lot of big “Ifs”. A film can perform extremely well if it possesses a good script, good acting, good production value, has a budget that fits the sort of film this really is, and strikes a chord with distributors or buyers for that TV, DVD, foreign rights, or other markets. Then, when the film is put into theatrical release, it offers the potential with an even larger audience, though theatrical is not the key revenue stream for the majority of films, just the big blockbusters, because the theater owners take about 75% of the box office unless a film enters into an extended-term release and there is a high costs for prints (though an increasing number of theaters are going digital). The price of a theatrical release is more because of its promotional value for gaining other kinds of sales, aside from the huge blockbusters.
Despite the opportunity of high returns for some films, Kia Jam inside it for the investment have to realize that any film investment is a huge risk, because many problems can develop from the time a film goes into production to after it is finally released and distributed. Theses risks include the film not completed as it goes over budget and struggles to get additional financing or you will find problems on the set. Another risk would be that the film is not really well-received by distributors and TV buyers, therefore it doesn’t get picked up. Or perhaps when a film gets a distribution deal, the chance is the fact that there is little or no money in advance, and so the film fails to see further returns. So yes – a film may have a high return, but an investor can lose everything.
As a result, for many investors, other key reasons behind investing tend to be more important. They feel within the message in the film. They like and secure the film producers, cast, and crew. They love the glamour of being involved with a film, including meeting the stars and likely to film festivals. They see their investment as the opportunity to visit distant locations for filming and for promoting the film. And they also see investing in the film as being a tax write-off, much like giving to a charity.
2. What type of investment returns can investors should expect, since several independent productions are not designed for big screens, where would be the sales provided by? If all of the stars align, and you will find a good film finished with a fair budget and distributors, buyers, as well as an audience responds, the film could readily earn 4 to 10 times its cost, making everyone very happy. A minimal-budget indy scenario for this level of return may well be a film shot for $50,000-200,000. It could get $500,000-750,000 for a TV sale and earn $1-2 million more through DVD, streaming, and foreign rights sales, even without having a theatrical release.
For most films, the key value of a theatrical release will be the PR price of getting the film known, so buyers may wish 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 get a theatrical release, and also the funds are earned through other channels.
3. What sort of movies normally can generate good profits, considering that the recent Oscar Awards reveal that a big investment will not necessary mean big returns? A few of the big blockbusters that pass the $100 million threshold can certainly make a make money from an effective theatrical release, both in the U.S. and abroad. But if they produce a profit depends upon their budget. Because of the high salaries of stars which can be typical during these films as well as other high cost items, such as special effects, many blockbusters still may well not produce a profit. Thus, dollar for dollar, many low-budget indy films might be a better investment, since the multiples are higher using a success; there is more likelihood that a low-budget indy, which can be done well at a reasonable budget, will likely be sold to make 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, considering that the costs of making documentaries tend to be lower than for feature films. They may be completed with a significantly smaller crew – even 2 or 3 people in the area – one for that camera, someone to handle sound and lighting, and another to coordinate arrangements and get good questions in the field. Post-production could be easier too, with fewer takes and less film to edit for the final cut. Many documentaries are done having a budget of $10,000-50,000, which can easily be recouped 5 to 20 times over with DVD, TV, and foreign sales.
5. What are the legal or regulatory restrictions preventing individual investors to participate in film investment opportunities?
Generally, if you’ve got the amount of money to spend, the filmmakers will find a way to legally to provide them the money. Various vehicles include nonprofit corporations, LLCs, private placement memorandums, and loans. A normal requirement would be that the individual possess the funds to invest funds that could be lost in a risky venture and it is advised of the potential risk of the investment.
6. Do you know the key risks behind film investments and how will you prevent them? The true secret risks behind film investments is definitely the possibility to lose all of it in the event the film doesn’t get completed or doesn’t find distribution. The simplest way to protect yourself is to assess the potential of the feature film or documentary going in; assess whether or not the budget and expected return appears to be reasonable for your project; and assess if the producer, director, yet others on the film seem to have the knowledge to accomplish and market the film
7. Exactly how much will be the initial investment needed to invest in a film production? An initial investment can range from a few thousand to a few hundred thousand, depending on the film and exactly how a good 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, including 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 least $20,000, $50,000, $100,000 or more.
Then is some investment set up, there might be other causes of funds, like GAP funding and incentives from states and cities in the form of rebates after filming is finished. VC funds can also be plausible, particularly after there exists some initial investment within the film, if the film’s budget will likely be at the very least $1-2 million.
8. With modern technology advancements, do you know the opportunities for independent and emerging film producers; or are these developments much more of a threat because of piracy and competition?