Are films a good investment opportunity? I do believe these are for the right sort of investor. Here’s why. I have written this in a Q&A style to respond to the major questions that prospective investors ask about if you should invest or otherwise.
1. The reason why film investment a beautiful investment opportunity? Will it be because of the high return or because of the nature of economic? For most investors, the high return is a huge draw, because films do have the potential to get a huge return, though there exists a extremely high risk with plenty of big “Ifs”. A film can do well if it has a good script, good acting, good production value, features a budget that fits the kind of film this is, and strikes a chord with distributors or buyers for that TV, DVD, foreign rights, or any other markets. Then, in the event the film goes into theatrical release, it provides the potential to have an even larger audience, though theatrical is not really the key income source for the majority of films, merely the big blockbusters, considering that the theater owners take about 75% from the box office unless a film is put into an extended-term release and you will find a high costs for prints (though an increasing number of theaters will be going digital). The need for a theatrical release is more for the promotional value for gaining other kinds of sales, aside from the massive blockbusters.
Despite the chance of high returns for a few films, Kia Jam inside it for the investment have to understand that any film investment is a major risk, because many problems can get from the time a film is put into production to after it is finally released and distributed. Theses risks range from the film not being completed since it goes over budget and struggles to get additional financing or you can find problems on the set. Another risk is that the film will not be well-received by distributors and television buyers, therefore it doesn’t get picked up. Or perhaps in case a film receives a distribution deal, the risk is the fact there is little or no money at the start, and so the film fails to see further returns. So yes – a film could have a high return, but a trader can lose it all.
Because of this, for a lot of investors, other key reasons behind investing tend to be more important. They feel in the message from the film. They like and keep the film producers, cast, and crew. They enjoy the glamour to be 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 making an investment in the film as being a tax write-off, similar to giving to your charity.
2. What sort of investment returns can investors can expect, because so many independent productions are certainly not designed for big screens, where are the sales originating from? If all of the stars align, and there is a good film done with a reasonable budget and distributors, buyers, plus an audience responds, the film could readily earn 4 to ten times its cost, making everyone delighted. A low-budget indy scenario for this amount of return can be quite a film shot for $50,000-200,000. It may get $500,000-750,000 for any TV sale and earn $1-2 million more through DVD, streaming, and foreign rights sales, even without having a theatrical release.
For many films, the main worth of a theatrical release is the PR price of having the film known, so buyers may wish to purchase or rent the DVD and television buyers would want to show it on one of many premium cable movie channels. Also, most films don’t obtain a theatrical release, and also the funds are earned through other channels.
3. What kind of movies can usually generate good profits, considering that the recent Oscar Awards reveal that a huge investment will not necessary mean big returns? A number of the big blockbusters that pass the $100 million threshold could certainly create a benefit from an effective theatrical release, both in the U.S. and abroad. But whether or not they create a profit is dependent upon their budget. Due to the high salaries of stars that are typical in these films along with other high cost items, including effects, many blockbusters still may not make a profit. Thus, dollar for dollar, many low-budget indy films might be a better investment, since the multiples are higher using a success; there is more likelihood that the low-budget indy, that is done well in a reasonable budget, is going to be sold to make back it’s money, and the opportunity of loss is much less.
4. Are documentaries a good investment opportunity? Good documentaries are an especially good investment opportunity, since the costs of creating documentaries are far lower than for feature films. They can be completed with a significantly smaller crew – even two or three folks the field – one for the camera, one to handle sound and lighting, and another to coordinate arrangements and get good questions in the field. Post-production can be easier too, with fewer takes and fewer 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 over with DVD, TV, and foreign sales.
5. Are there any legal or regulatory restrictions preventing individual investors to participate in in film investment opportunities?
Generally, if you’ve got the amount of money to spend, the filmmakers will find a technique to legally to give them the cash. Various vehicles include nonprofit corporations, LLCs, private placement memorandums, and loans. A normal requirement would be that the individual hold the funds to shell out funds that could be lost in a risky venture and it is advised of the chance of the investment.
6. What are the key risks behind film investments and how will you prevent them? The true secret risks behind film investments is the potential to lose all of it when 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 whether or not the budget and expected return seems to be reasonable for that project; and assess if the producer, director, and others on the film seem to have the knowledge to accomplish and market the film
7. Exactly how much could be the initial investment needed to invest in a film production? An initial investment can range from a few thousand to many hundred thousand, depending on the film and the way a good investment swosox structured. For example, some indy filmmakers doing low budget films have found creative methods for getting 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, who are able to contribute at the very least $20,000, $50,000, $100,000 or more.
Once there is some investment in position, there might be other sources of funds, like GAP funding and incentives from states and cities as rebates after filming is completed. VC funds are also plausible, particularly after there is some initial investment in the film, if the film’s budget will 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 even more of a threat because of piracy and competition?