Are films a good investment opportunity? I think they may be for the right kind of investor. Here’s the reason why. I have written this in a Q&A style to answer the major questions that prospective investors ask about regardless of whether to invest or not.
1 . Why is movie investment an attractive investment opportunity? Is it because of the high return or because of the nature of business?
For many investors, the high return is a big pull, because films do have the potential for a very large return, though there is a quite high risk with a lot of big “Ifs”. A film can do extremely well if it has a good script, good acting, great production value, has a budget that fits the type of film this is, plus strikes a chord with distributors or buyers for the TV, DVD, foreign rights, or other marketplaces. Then, if the film goes into theatrical release, it has the potential to have an actually larger audience, though theatrical is not really the primary source of income for most films, just the big blockbusters, since the theater proprietors take about 75% of the container office unless a film goes into a long-term release and there is a high costs for prints (though an increasing number of theaters are going digital). The value of a theatrical release is more for its promotional value for gaining other kinds of sales, except for the huge blockbusters.
Despite the potential for high returns for a few films, investors in it for the money have to realize that any film investment is really a big risk, because many difficulties can develop from when a film goes into production to when it is finally launched and distributed. Theses risks include the film not being completed since it goes over budget and is unable to get additional financing or there are issues on the set. Another risk is that the film is not well-received by distributors and TV buyers, so it does not get picked up. Or even if a movie gets a distribution deal, the risk is that there is little or no money up front, so the film does not see any more returns. So yes – a movie can have a high return, but a good investor can lose it all.
Consequently, for many investors, other key reasons for investing are more important. They trust in the message of the film. They will like and support the film producers, cast, and crew. These people like the glamour of being involved with a film, including meeting the stars and going to film festivals. They see their investment as an opportunity to visit distant locations for filming and for promoting the film. And they notice investing in the film as a taxes write-off, much like giving to a charitable organisation.
2 . What kind of investment returns may investors can expect, since many independent shows are not designed for big screens, exactly where are the sales coming from?
If all the stars align, and there is a great film done with a reasonable budget plus distributors, buyers, and an market responds, the film could readily earn 4 to 10 moments its cost, making everyone happy. A low-budget indy scenario with this level of return might be a film shot for $50, 000-200, 000. It may get $500, 000-750, 000 for the TV sale and earn $1-2 million more through DVD, streaming, and foreign rights sales, even without a theatrical release.
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For most films, the main value of a theatrical launch is the PR value of getting the film known, so buyers will want to purchase or rent the DVD plus TV buyers will want to show it on one of the premium cable film channels. Also, most films don’t get a theatrical release, and the money are earned through other stations.
3. What kind of movies can usually generate good profits, since the recent Oscar Awards show that a large investment does not necessary mean large returns?
Some of the big blockbusters that pass the $100 million tolerance can certainly make a profit from a successful theatrical release, both in the U. S i9000. and abroad. But whether they make money depends on their budget. Because of the higher salaries of stars that are common in these films and other high cost items, such as special effects, many blockbusters still may not make a profit. Thus, buck for dollar, many low-budget indy films may be a better investment, because the multiples are higher with an achievement; there is more likelihood that a low-budget indy, which is done well at a reasonable budget, will be sold and make back it’s money, and the potential for loss is much less.
4. Are documentaries a good investment opportunity?
Great documentaries are an especially good expense opportunity, since the costs of making documentaries are much lower than for feature movies. They can be done with a much smaller crew – even two or three people in the field – one for the camera, one to handle sound and lighting, and one more to coordinate arrangements and ask good questions in the field. Post-production can be simpler too, with fewer takes and less film to edit for the final cut. Many documentaries are done with a budget of $10, 000-50, 000, which can easily be recouped 5 to 20 times more than with DVD, TV, and international sales.
5. Are there any legal or regulatory restrictions preventing individual traders to participate in film investment opportunities?
Generally, if you’ve got the money to invest, the filmmakers will find a way for you to lawfully to give them the money. Various vehicles include nonprofit corporations, LLCs, private placement memorandums, and loans. A typical requirement is that the individual have the funds to take a position funds that might be lost in a risky venture and is advised of the risk of the investment.
6. What are the important risks behind film investments and exactly how do you prevent them?
The key risks behind film investments is the possible to lose it all if the film will not get completed or doesn’t discover distribution. The best way to protect yourself would be to assess the potential of the feature movie or documentary going in; assess if the budget and expected return appears to be reasonable for the project; and assess whether the producer, director, and others around the film seem to have the experience to finish and market the film
7. How much will be the initial investment necessary to invest in a film production?
An initial expenditure can range from a few thousand to many hundred thousand, depending on the film and the way an investment is structured. For example , some indy filmmakers doing low quality films have found creative ways to get funds by inviting investments of $1000-2000 from those participating in the movie, such as the actors and crew associates. Others have divided up investment decision packages into $5000 each regarding 20 investors to raise $100, 000. Still others have looked for some big investors, who can contribute at least $20, 000, $50, 000, hundred buck, 000 or more.
Once there is several investment in place, there can be other sources associated with funds, such as GAP funding and incentives from states and cities in the form of rebates after filming is completed. VC funds are also a possibility, particularly after there is some initial investment decision in the film, if the film’s budget will be at least $1-2 million.
eight. With modern technology advancements, what are the opportunities for independent and emerging film producers; or are these advancements more of a threat due to piracy and competition?
There is a growing chance today for indy and emerging film producers to get distribution within alternate ways, such as through the Web, self-distributed streaming downloads or DVD AND BLU-RAY sales, play on mobile devices, plus sales of DVDs or loading rights to Netflix and Blockbuster. While piracy has always been a concern, brand new technological fixes can help to prevent this, such as locks to prevent duplication or even more than one or two showings of the movie. Other protections can come through license a film for distribution to platforms like iPhones, which have their own protections against copying.
Certainly, there is increasingly more competition, because more and more people can make films today, though the big studios and distributors still dominate in the theatrical arena and they have the money to make the large films with big stars and special effects. But the new technologies regarding production and distribution offer so much more avenues to create and market indy films at a much lower costs. So there are naturally many more films around from many thousands of producers.
But with creative promotion, filmmakers can help their film stand out among the clutter. They could creatively use the social media, such as LinkedIn, Facebook, and Twitter to let people know about their film. They could gain recognition on the film event circuit. They can get endorsements from well-known people. They can mount a good e-mail PR campaign to the press. They can rent theaters to set up showings in different cities. They can put on events with their film as a centerpiece. Plus they can make themselves available to appear on stereo and TV shows, as well as for interviews with reporters for the print media. Consequently, all of these activities can help to sell their film to distributors and buyers for TV, DVD, foreign, along with other sales, while attracting a growing market for the film, making distributors and buyers even more eager to promote the film.