Are films a good investment opportunity? I do believe these are for the right kind of investor. Here’s why. I have written this in a Q&A style to reply to the main questions that prospective investors ask about if you should invest or not.
1. Exactly why is film investment a stylish investment opportunity? Will it be because of the high return or due to the nature of business? For most investors, the top return is a big draw, because films do have the potential to get a huge return, though there exists 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, has a budget that matches the kind of film this can be, and strikes a chord with distributors or buyers for the TV, DVD, foreign rights, or some other markets. Then, if the film enters into theatrical release, it offers the possibility with an even larger audience, though theatrical will not be the key income source for the majority of films, only the big blockbusters, considering that the theater owners take about 75% in the box office unless a film is put into a lengthy-term release and there is a high costs for prints (though a lot more theaters are getting digital). The price of a theatrical release is much more because of its promotional value for gaining other kinds of sales, aside from the huge blockbusters.
Despite the opportunity of high returns for some films, Kia Jam in it for the investment need to realize that any film investment is a big risk, because many problems can develop from when a film is put into production to after it is finally released and distributed. Theses risks range from the film not completed because it goes over budget and struggles to get additional financing or there are problems on the set. Another risk is the fact that film will not be well-received by distributors and television buyers, therefore it doesn’t get picked up. As well as in case a film gets a distribution deal, the risk is the fact that there is very little or no money at the start, and so the film will not see further returns. So yes – a film can have a high return, but a trader can lose it all.
As a result, for most investors, other key reasons for investing are more important. They believe within the message of the film. They love and secure the film producers, cast, and crew. They enjoy the glamour of being involved with a film, including meeting the heavens and planning to film festivals. They see their investment as a chance to visit distant locations for filming as well as for promoting the film. And they also see making an investment in the film as a tax write-off, similar to giving to your charity.
2. What sort of investment returns can investors can get, since several independent productions usually are not designed for big screens, where would be the sales originating from? If all of the stars align, and you will find a good film completed with a fair budget and distributors, buyers, and an audience responds, the film could readily earn 4 to ten times its cost, making everyone thrilled. A small-budget indy scenario for this particular amount of return might 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 key price of a theatrical release is definitely the PR worth of having the film known, so buyers will want to purchase or rent the DVD and TV buyers may wish to show it on one of the premium cable movie channels. Also, most films don’t get a theatrical release, as well as the funds are earned through other channels.
3. What sort of movies normally can generate good profits, because the recent Oscar Awards reveal that a large investment does not necessary mean big returns? Some of the big blockbusters that pass the $100 million threshold can easily 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 and other high cost items, like effects, many blockbusters still may not produce a profit. Thus, dollar for dollar, many low-budget indy films may be a better investment, considering that the multiples are higher using a success; there is certainly more likelihood that the low-budget indy, which is done well with a reasonable budget, will be sold to 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, because the costs of producing documentaries tend to be below for feature films. They may be finished with a much smaller crew – even two or three folks the field – one for the camera, someone to handle sound and lighting, and another to coordinate arrangements and get good questions inside the field. Post-production may be easier too, with fewer takes and much less film to edit for the final cut. Many documentaries are carried out having a budget of $10,000-50,000, 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 participate in in film investment opportunities?
Generally, if you’ve got the amount of money to shell out, the filmmakers will discover 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 shell out funds that might be lost in a risky venture and is advised of the risk of the investment.
6. What are the key risks behind film investments and how do you prevent them? The key risks behind film investments is definitely the possible ways to lose everything in the event the film doesn’t get completed or doesn’t find distribution. The simplest way to protect yourself would be to assess the potential of the feature film or documentary going in; assess if the budget and expected return seems to be reasonable for that project; and assess if the producer, director, yet others on the film seem to have the event to finish and market the film
7. Exactly how much will be the initial investment required to invest in a film production? A preliminary investment may range from a few thousand to a few hundred thousand, depending on the film and the way a good investment swosox structured. As an example, some indy filmmakers doing low budget films have found creative techniques for getting 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. And others have looked for a couple big investors, that can contribute at the very least $20,000, $50,000, $100,000 or more.
Once there is a few investment in place, there might be other types of funds, including GAP funding and incentives from states and cities by means of rebates after filming is completed. VC funds are also a possibility, particularly after there is certainly some initial investment within the film, if the film’s budget is going to be at least $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 due to piracy and competition?