Are films a great investment opportunity? I believe they are for the right kind of investor. Here’s why. We have written this in a Q&A style to reply to the main questions that prospective investors find out about whether or not to invest or not.
1. Why is film investment an attractive investment opportunity? Could it be due to the high return or as a result of nature of business? For many investors, the top return is a big draw, because films do have the possibility for a huge return, though you will find a very high risk with many different big “Ifs”. A film can perform very well if it features a good script, good acting, good production value, has a budget that fits the type of film this can be, and strikes a chord with distributors or buyers for your TV, DVD, foreign rights, or any other markets. Then, in the event the film goes into theatrical release, it has the possibility with an even larger audience, though theatrical is not really the key source of income for many films, only the big blockbusters, because the theater owners take about 75% in the box office unless a film is put into an extended-term release and there is a high costs for prints (though a lot more theaters will be going digital). The value of a theatrical release is a lot more for its promotional value for gaining other sorts of sales, with the exception of the massive blockbusters.
Despite the chance of high returns for some films, Kia Jam within it for the money need to recognize that any film investment is a major risk, because many problems can get from the time a film is put into production to when it is finally released and distributed. Theses risks include the film not completed because it goes over budget and is unable 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 TV buyers, so that it doesn’t get picked up. Or even when a film gets a distribution deal, the danger is that there is very little or no money at the start, therefore the film will not see any more returns. So yes – a film may have a high return, but a venture capitalist can lose everything.
Because of this, for a lot of investors, other key reasons for investing tend to be more important. They feel in the message of the film. They enjoy and support the film producers, cast, and crew. They love the glamour for being associated with a film, including meeting the heavens and likely to film festivals. They see their investment as the opportunity to go to distant locations for filming and for promoting the film. And they see investing in the film as being a tax write-off, much like giving to your charity.
2. What kind of investment returns can investors can expect, since several independent productions are certainly not created for big screens, where are the sales coming from? If all of the stars align, and you will find a good film done with a good budget and distributors, buyers, and an audience responds, the film could readily earn 4 to ten times its cost, making everyone very happy. A low-budget indy scenario for this particular amount of return may well be a film shot for $50,000-200,000. It may get $500,000-750,000 for a TV sale and earn $1-2 million more through DVD, streaming, and foreign rights sales, even with no theatrical release.
For most films, the key price of a theatrical release is the PR price of having the film known, so buyers will want to purchase or rent the DVD and television buyers will want to show it on one of many premium cable movie channels. Also, most films don’t get yourself a theatrical release, and the funds are earned through other channels.
3. What type of movies normally can generate good profits, considering that the recent Oscar Awards demonstrate that a large investment will not necessary mean big returns? A number of the big blockbusters that pass the $100 million threshold could certainly make a make money from an effective theatrical release, in both the U.S. and abroad. But whether they create a profit depends on their budget. Due to the high salaries of stars that are typical in these films as well as other high cost items, such as effects, many blockbusters still may not create a profit. Thus, dollar for dollar, many low-budget indy films can be a better investment, since the multiples are higher using a success; there is certainly more likelihood that a low-budget indy, that is done well in a reasonable budget, is going to be sold and make back it’s money, and the potential for loss is much less.
4. Are documentaries a good investment opportunity? Good documentaries are an especially good investment opportunity, since the costs of producing documentaries are far lower than for feature films. They could be finished with a lot smaller crew – even 2 or 3 folks the field – one for your camera, someone to handle sound and lighting, and another to coordinate arrangements and get good questions inside the field. Post-production could be easier too, with fewer takes and much less film to edit for the final cut. Many documentaries are carried out with a budget of $10,000-50,000, which may be easily recouped 5 to 20 times over with DVD, TV, and foreign sales.
5. Are there any legal or regulatory restrictions preventing individual investors to sign up in film investment opportunities?
Generally, if you’ve got the money to spend, the filmmakers will find a technique to legally to offer them the cash. Various vehicles include nonprofit corporations, LLCs, private placement memorandums, and loans. A normal requirement is that the individual possess the funds to spend funds that might be lost in a risky venture and is also advised of the potential risk of the investment.
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 best way to protect yourself is always to assess the potential of the feature film or documentary going in; assess whether the budget and expected return is apparently reasonable for your project; and assess whether or not 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 required to invest in a film production? An initial investment may range coming from a few thousand to several hundred thousand, depending on the film and exactly how a smart investment swosox structured. For instance, some indy filmmakers doing low budget films are finding creative methods for getting funds by inviting investments of $1000-2000 from those taking part in the film, like 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 least $20,000, $50,000, $100,000 or more.
Then is some investment in position, there might be other types of funds, including GAP funding and incentives from states and cities as rebates after filming is completed. VC funds are also a possibility, particularly after there exists some initial investment within the film, when the film’s budget is going to be a minimum of $1-2 million.
8. With modern technology advancements, what are the opportunities for independent and emerging film producers; or are these developments much more of a threat as a result of piracy and competition?