Are films a great 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 respond to the main questions that prospective investors ask about if you should invest or not.
1. The reason why film investment an attractive investment opportunity? Is it 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 possibility to get a large return, though there exists a high risk with plenty of big “Ifs”. A film can perform extremely well if it has a good script, good acting, good production value, has a budget that fits the sort of film this is, and strikes a chord with distributors or buyers for that TV, DVD, foreign rights, or other markets. Then, when the film goes into theatrical release, it offers the possible to get an even larger audience, though theatrical is not the primary source of income for the majority of films, just the big blockbusters, because 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 an increasing number of theaters are getting digital). The value of a theatrical release is a lot more because of its promotional value for gaining other kinds of sales, aside from the huge blockbusters.
Despite the opportunity of high returns for many films, Kia Jam in it for the money need to realize that any film investment is a huge risk, because many problems can produce from the time a film is put into production to after it is finally released and distributed. Theses risks are the film not being completed because it goes over budget and is not able to get additional financing or you will find problems on the set. Another risk would be that the film is not really well-received by distributors and television buyers, so that it doesn’t get picked up. Or perhaps if a film receives a distribution deal, the chance is the fact that there is little or no money up front, therefore the film fails to see any further returns. So yes – a film could have a high return, but a trader can lose everything.
As a result, for most investors, other key factors behind investing are definitely more important. They feel within the message from the film. They enjoy and keep the film producers, cast, and crew. They love the glamour for being associated with a film, including meeting the stars and planning to film festivals. They see their investment as an opportunity to travel to distant locations for filming as well as for promoting the film. Plus they see investing in the film as being a tax write-off, similar to giving to a charity.
2. What kind of investment returns can investors should expect, since many independent productions are certainly not designed for big screens, where would be the sales provided by? If all of the stars align, and there is a good film finished with a fair budget and distributors, buyers, plus an audience responds, the film could readily earn 4 to ten times its cost, making everyone thrilled. A low-budget indy scenario for this level 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 the majority of films, the primary worth of a theatrical release will be the PR price of having the film known, so buyers will want to purchase or rent the DVD and television buyers may wish to show it on one of the premium cable movie channels. Also, most films don’t get a theatrical release, and the funds are earned through other channels.
3. What type of movies usually can generate good profits, since the recent Oscar Awards show that a huge investment fails to necessary mean big returns? Some of the big blockbusters that pass the $100 million threshold can easily create a make money from a successful theatrical release, in both the U.S. and abroad. But whether they create a profit depends upon their budget. Because of the high salaries of stars which can be typical in these films as well as other high cost items, such as effects, many blockbusters still may not make a profit. Thus, dollar for dollar, many low-budget indy films can be a better investment, since the multiples are higher with a success; there exists more likelihood which a low-budget indy, which is done well in a reasonable budget, will be sold making back it’s money, and the opportunity of loss is much less.
4. Are documentaries a wise investment opportunity? Good documentaries are an especially good investment opportunity, since the costs of making documentaries are far below for feature films. They could be finished with a much smaller crew – even two or three folks the area – one for that camera, one to handle sound and lighting, and another to coordinate arrangements and ask good questions within the field. Post-production may be easier too, with fewer takes and fewer film to edit for your final cut. Many documentaries are carried out 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 legal or regulatory restrictions preventing individual investors to sign up in film investment opportunities?
Generally, if you’ve got the money to shell out, the filmmakers will discover a way to legally to give them the money. Various vehicles include nonprofit corporations, LLCs, private placement memorandums, and loans. A typical requirement would be that the individual possess the funds to invest funds that might be lost in a risky venture and is advised of the chance of the investment.
6. What are the key risks behind film investments and how can you prevent them? The real key risks behind film investments will be the possibility to lose it all in the event the film doesn’t get completed or doesn’t find distribution. The best way to protect yourself is always to assess the potential for the feature film or documentary going in; assess if the budget and expected return is apparently reasonable for the project; and assess whether or not the producer, director, yet others on the film seem to have the experience to accomplish and market the film
7. Just how much could be the initial investment needed to invest in a film production? A primary investment may range coming from a few thousand to several hundred thousand, depending on the film and the way a smart investment swosox structured. For example, some indy filmmakers doing low budget films have found creative techniques 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 20 investors to raise $100,000. Still others have looked for a couple big investors, who can contribute at the very least $20,000, $50,000, $100,000 or more.
Once there is a few investment in place, there may be other causes of funds, like GAP funding and incentives from states and cities by means of rebates after filming is finished. VC funds can also be a chance, particularly after there is some initial investment within the film, if the film’s budget will be at least $1-2 million.
8. With modern technology advancements, exactly what are the opportunities for independent and emerging film producers; or are these developments more of a threat due to piracy and competition?