Are films a great investment opportunity? I believe they are for the ideal type of investor. Here’s why. I have written this in a Q&A style to answer the main questions that prospective investors ask about whether or not to invest or otherwise.
1. Why is film investment an attractive investment opportunity? Could it be due to the high return or because of the nature of business? For a lot of investors, the high return is a major draw, because films do have the potential to get a huge return, though there exists a very high risk with plenty of big “Ifs”. A film are capable of doing extremely well if it possesses a good script, good acting, good production value, includes 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 other markets. Then, if the film enters into theatrical release, it offers the possibility to get an even larger audience, though theatrical is not really the primary revenue stream for most 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 a lot more for the promotional value for gaining other sorts of sales, except for the large blockbusters.
Despite the chance of high returns for many films, Kia Jam inside it for the investment have to realize that any film investment is a major 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 struggles to get additional financing or you can find problems on the set. Another risk is the fact that film will not be well-received by distributors and television buyers, so that it doesn’t get picked up. Or perhaps in case a film gets a distribution deal, the risk is the fact there is very little or no money at the start, so the film fails to see any more returns. So yes – a film can have a high return, but a trader can lose it all.
Because of this, for a lot of investors, other key reasons for investing are definitely more important. They think in the message of the film. They love and keep the film producers, cast, and crew. They love the glamour for being included in a film, including meeting the heavens and going to film festivals. They see their investment as an opportunity to visit distant locations for filming and for promoting the film. Plus they see purchasing the film being a tax write-off, just like giving to some charity.
2. What kind of investment returns can investors can expect, because so many independent productions usually are not intended for big screens, where are the sales provided by? If all the stars align, and there is a good film completed with a good budget and distributors, buyers, and an audience responds, the film could readily earn 4 to 10 times its cost, making everyone thrilled. A small-budget indy scenario with this degree of return may well be a film shot for $50,000-200,000. It may 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 will want to purchase or rent the DVD and television buyers may wish to show it on one of many premium cable movie channels. Also, most films don’t get yourself a theatrical release, and also the funds are earned through other channels.
3. What kind of movies can usually generate good profits, considering that the recent Oscar Awards show that a large investment does not necessary mean big returns? A few of the big blockbusters that pass the $100 million threshold can easily produce a make money from an excellent theatrical release, in the U.S. and abroad. But whether they create a profit depends upon their budget. Due to the high salaries of stars which can be typical during these films along with other high cost items, including effects, many blockbusters still may well not create a profit. Thus, dollar for dollar, many low-budget indy films can be a better investment, since the multiples are higher having a success; there exists more likelihood that a low-budget indy, which is done well at a reasonable budget, will be sold making back it’s money, and the potential for loss is far less.
4. Are documentaries a great investment opportunity? Good documentaries are an especially good investment opportunity, since the costs of producing documentaries are much below for feature films. They could be finished with a lot smaller crew – even 2 or 3 people in the field – one for that camera, anyone to handle sound and lighting, and the other to coordinate arrangements and get good questions within the field. Post-production may be easier too, with fewer takes and fewer film to edit for the final cut. Many documentaries are done having a budget of $ten thousand-50,000, which could be 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 in film investment opportunities?
Generally, if you’ve got the money to invest, the filmmakers will discover a technique to legally to provide them the cash. Various vehicles include nonprofit corporations, LLCs, private placement memorandums, and loans. An average requirement is the fact that individual have the funds to spend 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 key risks behind film investments is definitely the possibility to lose it all in the event 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 the budget and expected return is apparently reasonable for your project; and assess if the producer, director, yet others on the film appear to have the event to accomplish and market the film
7. Just how much will be the initial investment needed 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 how a good investment swosox structured. For example, some indy filmmakers doing low budget films are finding creative ways to get funds by inviting investments of $1000-2000 from those taking part in the film, such as the actors and crew members. Others have divided up investment packages into $5000 each for 25 investors to increase $100,000. And others have looked for a few big investors, that can contribute at the very least $20,000, $50,000, $100,000 or more.
Then is a few investment in position, there might be other sources 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 a possibility, particularly after there exists some initial investment inside the film, when the film’s budget is going to be at least $1-2 million.
8. With modern technology advancements, do you know the opportunities for independent and emerging film producers; or are these developments more of a threat due to piracy and competition?