Are films a great investment opportunity? I do believe they are for the best type of investor. Here’s why. We have written this in a Q&A style to respond to the key questions that prospective investors ask about if you should invest or not.
1. Why is film investment an attractive investment opportunity? Is it due to the high return or because of the nature of economic? For many investors, our prime return is a huge draw, because films do have the possibility for a very large return, though there exists a very high risk with plenty of big “Ifs”. A film are capable of doing well if it features a good script, good acting, good production value, has a budget that suits the type 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 possible to get an even larger audience, though theatrical is not the main revenue stream for the majority of films, merely the big blockbusters, since the theater owners take about 75% in the box office unless a film enters into a lengthy-term release and there exists a high costs for prints (though an increasing number of theaters are going digital). The need for a theatrical release is much more because of its promotional value for gaining other sorts of sales, with the exception of the large blockbusters.
Despite the opportunity of high returns for some films, Kia Jam inside it for the money need to realize that any film investment is a big risk, because many problems can produce from when 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 struggles to get additional financing or there are problems on the set. Another risk would be that the film will not be well-received by distributors and TV buyers, so it doesn’t get picked up. Or perhaps when a film receives a distribution deal, the chance is that there is very little or no money in advance, and so the film fails to see further returns. So yes – a film can have a high return, but an investor can lose everything.
Consequently, for most investors, other key factors behind investing tend to be more important. They believe in the message from the film. They like and secure the film producers, cast, and crew. They love the glamour of being associated with a film, including meeting the stars and likely to film festivals. They see their investment as an opportunity to visit distant locations for filming as well as for promoting the film. And they see investing in the film as a tax write-off, similar to giving to a charity.
2. What type of investment returns can investors should expect, because so many independent productions usually are not created for big screens, where would be the sales originating from? If all of the stars align, and there is a good film done 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 minimal-budget indy scenario for this amount of return may well be 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 with no theatrical release.
For most films, the main price of a theatrical release will be the PR price of getting 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 obtain a theatrical release, as well as the funds are earned through other channels.
3. What sort of movies usually can generate good profits, since the recent Oscar Awards reveal that a huge investment fails to necessary mean big returns? A few of the big blockbusters that pass the $100 million threshold could certainly make a benefit from an effective theatrical release, in the U.S. and abroad. But whether or not they produce a profit is dependent upon their budget. As a result of high salaries of stars which can be typical during these films along with other high cost items, such as 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 using a success; there exists more likelihood that a low-budget indy, which is done well at a reasonable budget, will likely be sold to make back it’s money, and the potential for loss is far less.
4. Are documentaries a wise investment opportunity? Good documentaries are an especially good investment opportunity, because the costs of creating documentaries are far less than for feature films. They could be done with a lot smaller crew – even several individuals the area – one for your camera, someone to handle sound and lighting, and another to coordinate arrangements and ask good questions in the field. Post-production could be easier too, with fewer takes and less film to edit for the final cut. Many documentaries are done having 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 film investment opportunities?
Generally, if you’ve got the money to shell out, the filmmakers will discover a way to legally to provide them the cash. Various vehicles include nonprofit corporations, LLCs, private placement memorandums, and loans. An average requirement is that the individual have the funds to invest funds that could be lost in a risky venture and is advised of the potential risk of the investment.
6. What are the key risks behind film investments and how do you prevent them? The true secret risks behind film investments will be the possible ways to lose all of it in the event the film doesn’t get completed or doesn’t find distribution. The easiest method to protect yourself would be to assess the chance of the feature film or documentary going in; assess if the budget and expected return appears to be reasonable for your project; and assess whether the producer, director, as well as others on the film have the experience to finish and market the film
7. How much could be the initial investment needed to invest in a film production? A preliminary investment can vary coming from a few thousand to many hundred thousand, depending on the film and exactly how an investment swosox structured. As an example, some indy filmmakers doing low budget films are finding creative techniques for getting funds by inviting investments of $1000-2000 from those participating in the film, including 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 of big investors, that can contribute at least $20,000, $50,000, $100,000 or even more.
Once there is some investment in position, there might be other causes of funds, like GAP funding and incentives from states and cities in the form of rebates after filming is completed. VC funds will also be a chance, particularly after there exists some initial investment within the film, if the film’s budget will likely be at the very least $1-2 million.
8. With modern technology advancements, what are the opportunities for independent and emerging film producers; or are these developments more of a threat because of piracy and competition?