Are films a good investment opportunity? I think they are for the best type of investor. Here’s why. I have written this in a Q&A style to reply to the major questions that prospective investors inquire about whether or not to invest or otherwise.
1. The reason why film investment a stylish investment opportunity? Will it be as a result of high return or because of the nature of business? For a lot of investors, the top return is a huge draw, because films do have the possibility for any very large return, though you will find a very high risk with many different big “Ifs”. A film can do well if it possesses a good script, good acting, good production value, features a budget that matches the type of film this can be, and strikes a chord with distributors or buyers for your TV, DVD, foreign rights, or some other markets. Then, when the film is put into theatrical release, it offers the possible to get an even larger audience, though theatrical is not the primary revenue stream for many films, just the big blockbusters, because the theater owners take about 75% of 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 going digital). The price of a theatrical release is more for its promotional value for gaining other kinds of sales, with the exception of the large blockbusters.
Despite the chance of high returns for a few films, wikimedia.org within it for the money need to recognize that any film investment is a major risk, because many problems can produce from when a film enters into production to after it is finally released and distributed. Theses risks include the film not being completed as it goes over budget and is not able 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. As well as in case a film gets a distribution deal, the chance is the fact that there is little or no money at the start, therefore the film does not see any further returns. So yes – a film may have a high return, but a venture capitalist can lose it all.
Because of this, for a lot of investors, other key factors behind investing tend to be more important. They think in the message of the film. They love and secure the film producers, cast, and crew. They like the glamour to be included in a film, including meeting the heavens and planning to film festivals. They see their investment as an opportunity to travel to distant locations for filming and then for promoting the film. Plus they see making an investment in the film as a tax write-off, similar to giving to some charity.
2. What sort of investment returns can investors can expect, because so many independent productions are not created for big screens, where are definitely the sales provided by? If all the stars align, and you will find a good film finished with a fair budget and distributors, buyers, plus an audience responds, the film could readily earn 4 to 10 times its cost, making everyone delighted. A low-budget indy scenario with this level 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 without a theatrical release.
For the majority of films, the key worth of a theatrical release will be the PR worth of getting the film known, so buyers may wish to purchase or rent the DVD and television buyers may wish to show it on among the premium cable movie channels. Also, most films don’t get a theatrical release, and the funds are earned through other channels.
3. What sort of movies normally can generate good profits, because the recent Oscar Awards demonstrate that a huge investment will not necessary mean big returns? A few of the big blockbusters that pass the $100 million threshold can certainly make a benefit from an effective theatrical release, in the U.S. and abroad. But if they produce a profit is dependent upon their budget. Due to the high salaries of stars which are typical within these films as well as other high cost items, including effects, many blockbusters still may not produce a profit. Thus, dollar for dollar, many low-budget indy films may be a better investment, because the multiples are higher having a success; there is certainly more likelihood that the low-budget indy, which is done well at a reasonable budget, is going to be sold to make back it’s money, and the chance of loss is far less.
4. Are documentaries a wise investment opportunity? Good documentaries are an especially good investment opportunity, since the costs of creating documentaries are much less than for feature films. They could be finished with a lot smaller crew – even 2 or 3 folks the area – one for your camera, one to handle sound and lighting, and the other to coordinate arrangements and get good questions inside the field. Post-production may be easier too, with fewer takes and 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 participate in in film investment opportunities?
Generally, if you’ve got the cash to invest, the filmmakers will find a technique to legally to offer them the money. Various vehicles include nonprofit corporations, LLCs, private placement memorandums, and loans. A typical requirement is the fact that individual possess the funds to shell out funds that might be lost in a risky venture and is also advised of the risk of the investment.
6. Exactly what are the key risks behind film investments and how will you prevent them? The true secret risks behind film investments is definitely the potential to lose everything 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 potential 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, yet others on the film appear to have the knowledge to complete and market the film
7. Just how much will be the initial investment necessary to invest in a film production? An initial investment can range coming from a few thousand to several hundred thousand, depending on the film and how an investment swosox structured. For instance, some indy filmmakers doing low budget films have discovered 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 20 investors to raise $100,000. And others have looked for a couple of big investors, that can contribute at the very least $20,000, $50,000, $100,000 or more.
Once there is a few investment set up, there may be other sources of funds, such as GAP funding and incentives from states and cities by means of rebates after filming is done. VC funds are also plausible, particularly after there is some initial investment in the film, when the film’s budget is going to be a minimum of $1-2 million.
8. With modern technology advancements, do you know the opportunities for independent and emerging film producers; or are these developments even more of a threat because of piracy and competition?