Are films a great investment opportunity? I think these are for the right kind of investor. Here’s why. We have written this in a Q&A style to respond to the key questions that prospective investors find out about whether to invest or otherwise.
1. The reason why film investment an attractive investment opportunity? Could it be due to the high return or because of the nature of business? For many investors, the high return is a huge draw, because films do have the possibility for a very large return, though there is a very high risk with a lot of big “Ifs”. A film can perform extremely well if it features a good script, good acting, good production value, includes a budget that matches the type of film this is, and strikes a chord with distributors or buyers for the TV, DVD, foreign rights, or other markets. Then, if the film goes into theatrical release, it offers the potential with an even larger audience, though theatrical is not really the key source of income for most films, only the big blockbusters, considering that the theater owners take about 75% from the box office unless a film enters into a long-term release and there exists a high costs for prints (though a lot more theaters are getting digital). The price of a theatrical release is a lot more for its promotional value for gaining other sorts of sales, except for the massive blockbusters.
Despite the potential for high returns for a few films, Kia Jam inside it for the money need to understand that any film investment is a major risk, because many problems can produce from the time a film is put into production to when it is finally released and distributed. Theses risks range from the film not being completed because it goes over budget and struggles to get additional financing or you will find problems on the set. Another risk is that the film is not well-received by distributors and TV buyers, therefore it doesn’t get acquired. As well as if a film gets a distribution deal, the risk is the fact there is little or no money in advance, and so the film does not see any further returns. So yes – a film could have a high return, but a venture capitalist can lose all of it.
As a result, for many investors, other key reasons behind investing are definitely more important. They think in the message in the film. They like and keep the film producers, cast, and crew. They like the glamour of being associated with a film, including meeting the heavens and going to film festivals. They see their investment as the opportunity to travel to distant locations for filming and then for promoting the film. And they see purchasing the film as being a tax write-off, just like giving to your charity.
2. What sort of investment returns can investors should expect, since many independent productions usually are not intended for big screens, where would be the sales coming from? If all of the stars align, and there is a good film completed with a good budget and distributors, buyers, plus an audience responds, the film could readily earn 4 to 10 times its cost, making everyone thrilled. A minimal-budget indy scenario for this amount 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 having a theatrical release.
For most films, the main value of a theatrical release is the PR value of obtaining the film known, so buyers would want to purchase or rent the DVD and TV buyers may wish to show it on among 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 type of movies can usually generate good profits, because the recent Oscar Awards show that a huge investment fails to necessary mean big returns? A few of the big blockbusters that pass the $100 million threshold could certainly produce a profit from a successful theatrical release, in both the U.S. and abroad. But if they make a profit depends on their budget. As a result of high salaries of stars which are typical in these films as well as other high cost items, like 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 with a success; there exists more likelihood which a low-budget indy, that is done well at a reasonable budget, is going to be sold and make back it’s money, and the opportunity of loss is far less.
4. Are documentaries a wise investment opportunity? Good documentaries are an especially good investment opportunity, considering that the costs of producing documentaries are far below for feature films. They may be finished with a lot smaller crew – even two or three folks the field – one for your camera, anyone to handle sound and lighting, and the other to coordinate arrangements and get good questions in the field. Post-production could be easier too, with fewer takes and fewer film to edit for that final cut. Many documentaries are done with a budget of $ten thousand-50,000, which may be easily 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 in film investment opportunities?
Generally, if you’ve got the money to spend, the filmmakers will find a technique to legally to give them the money. Various vehicles include nonprofit corporations, LLCs, private placement memorandums, and loans. A normal requirement is that the individual have the funds to spend funds that may be lost in a risky venture and is also advised of the potential risk of your time and money.
6. Exactly what are the key risks behind film investments and how can you prevent them? The key risks behind film investments is the potential to lose it all when the film doesn’t get completed or doesn’t find distribution. The simplest way to protect yourself would be to assess the potential for the feature film or documentary going in; assess whether the budget and expected return is apparently reasonable for that project; and assess whether the producer, director, and others on the film appear to have the experience to finish and market the film
7. How much would be the initial investment necessary to invest in a film production? A preliminary investment may range coming from a few thousand to a few hundred thousand, depending on the film and how a good investment swosox structured. As an example, some indy filmmakers doing low budget films have discovered 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 boost $100,000. Still others have looked for a couple big investors, that can contribute at the very least $20,000, $50,000, $100,000 or even more.
Once there is some investment set up, there may be other sources of funds, including GAP funding and incentives from states and cities in the form of rebates after filming is finished. VC funds are also plausible, particularly after there exists some initial investment inside the film, when the film’s budget will be a minimum of $1-2 million.
8. With modern technology advancements, do you know the opportunities for independent and emerging film producers; or are these developments even more of a threat because of piracy and competition?