Are films a good investment opportunity? I think they are for the right sort of investor. Here’s why. We have written this in a Q&A style to answer the key questions that prospective investors inquire about whether or not to invest or otherwise.
1. Why is film investment a beautiful investment opportunity? Will it be as a result of high return or due to the nature of business? For a lot of investors, the top return is a huge draw, because films do have the possibility for any very large return, though there exists a very high risk with a lot of big “Ifs”. A film are capable of doing 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 the TV, DVD, foreign rights, or other markets. Then, when the film is put into theatrical release, it has the potential to get an even larger audience, though theatrical is not really the primary income source for the majority of films, merely the big blockbusters, since the theater owners take about 75% in the box office unless a film goes 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 a lot more for its promotional value for gaining other kinds of sales, with the exception of the massive blockbusters.
Despite the chance of high returns for many films, wikimedia.org in it for the money must recognize that any film investment is a huge risk, because many problems can get from when a film enters into production to when it is finally released and distributed. Theses risks are the film not completed as it goes over budget and is not able to get additional financing or there are 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 even if a film turns into a distribution deal, the risk is that there is very little or no money up front, so the film will not see any further returns. So yes – a film can have a high return, but an investor can lose everything.
As a result, for most investors, other key reasons behind investing are definitely more important. They think inside the message of the film. They love and support the film producers, cast, and crew. They love the glamour to be associated with a film, including meeting the stars and going to film festivals. They see their investment as the opportunity to visit distant locations for filming and then for promoting the film. Plus they see purchasing the film as being a tax write-off, much like giving to your charity.
2. What sort of investment returns can investors can get, since several independent productions are not designed for big screens, where are the sales originating from? If all 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 very happy. A small-budget indy scenario with this level of return can be quite 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 main value of a theatrical release will be the PR value of obtaining the film known, so buyers would want to purchase or rent the DVD and television buyers may wish to show it on one of the premium cable movie channels. Also, most films don’t get yourself a theatrical release, as well as the funds are earned through other channels.
3. What sort of movies can usually generate good profits, considering that the recent Oscar Awards demonstrate that a huge investment does not necessary mean big returns? A few of the big blockbusters that pass the $100 million threshold can certainly create a benefit from an effective theatrical release, in the U.S. and abroad. But if they produce a profit is dependent upon their budget. As a result of high salaries of stars that are typical within these films and other high cost items, like special effects, many blockbusters still may not make a profit. Thus, dollar for dollar, many low-budget indy films may be a better investment, considering that the multiples are higher having a success; there is certainly more likelihood which a low-budget indy, that is done well with a reasonable budget, will be sold making back it’s money, and the chance of loss is much less.
4. Are documentaries a wise investment opportunity? Good documentaries are an especially good investment opportunity, because the costs of making documentaries are much less than for feature films. They could be completed with a lot smaller crew – even several individuals the sector – one for your camera, one 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 much less film to edit for your final cut. Many documentaries are carried out having a budget of $ten thousand-50,000, which may be easily recouped 5 to 20 times over with DVD, TV, and foreign sales.
5. What are the legal or regulatory restrictions preventing individual investors to sign up in film investment opportunities?
Generally, if you’ve got the money to invest, the filmmakers will discover a technique to legally to give them the amount of money. Various vehicles include nonprofit corporations, LLCs, private placement memorandums, and loans. A typical requirement would be that the individual hold the funds to invest funds that might be lost in a risky venture and is also advised of the chance of the investment.
6. Do you know the key risks behind film investments and how can you prevent them? The key risks behind film investments will be the possibility to lose it all when 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 whether or not the budget and expected return appears to be reasonable for the project; and assess if the producer, director, and others on the film have the experience to complete and market the film
7. Exactly how much could be the initial investment necessary to invest in a film production? An initial investment can vary coming from a few thousand to a few hundred thousand, depending on the film and exactly how an investment swosox structured. As an example, some indy filmmakers doing low budget films have found 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 25 investors to raise $100,000. Still others have looked for a few big investors, who can contribute at the very least $20,000, $50,000, $100,000 or maybe more.
Then is a few investment in place, there might be other types of funds, such as GAP funding and incentives from states and cities by means of rebates after filming is finished. VC funds can also be plausible, particularly after there exists some initial investment within the film, when 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?