Are films a good investment opportunity? I do believe they are for the best type 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 not.
1. Exactly why is film investment a beautiful investment opportunity? Is it because of the high return or as a result of nature of business? For most investors, our prime return is a big draw, because films do have the possibility for any large return, though there is a extremely high risk with plenty of big “Ifs”. A film are capable of doing very well if it possesses a good script, good acting, good production value, includes a budget that suits the type of film this really is, and strikes a chord with distributors or buyers for your TV, DVD, foreign rights, or any other markets. Then, in the event the film enters into theatrical release, it provides the possible to get an even larger audience, though theatrical is not really the primary income source for the majority of films, only the big blockbusters, considering that the theater owners take about 75% from the box office unless a film enters into a lengthy-term release and there is a high costs for prints (though a lot more theaters will be going digital). The price of a theatrical release is much more for the promotional value for gaining other kinds of sales, with the exception of the massive blockbusters.
Despite the chance of high returns for a few films, wikimedia inside it for the investment need to recognize that any film investment is a big risk, because many problems can develop 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 as it goes over budget and is not able to get additional financing or you can find problems on the set. Another risk would be that the film is not well-received by distributors and television buyers, so that it doesn’t get acquired. Or even if a film gets a distribution deal, the danger is the fact there is very little or no money in advance, so the film does not see any further returns. So yes – a film can have a high return, but a venture capitalist can lose all of it.
Because of this, for a lot of investors, other key reasons behind investing are more important. They feel in the message in the film. They enjoy and secure the film producers, cast, and crew. They like the glamour for being involved with a film, including meeting the heavens and planning 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 also see purchasing the film as being a tax write-off, much like giving to a charity.
2. What sort of investment returns can investors can get, because so many independent productions are not designed for big screens, where would be the sales coming from? If each of the stars align, and there exists a good film done with a fair budget and distributors, buyers, plus an audience responds, the film could readily earn 4 to 10 times its cost, making everyone very happy. 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 for 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 value of a theatrical release is definitely the PR price of having the film known, so buyers may wish to purchase or rent the DVD and TV buyers may wish to show it on one of many 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 type of movies can usually generate good profits, because the recent Oscar Awards show that a huge investment will not necessary mean big returns? A few of the big blockbusters that pass the $100 million threshold can easily make a profit from an excellent theatrical release, in both the U.S. and abroad. But whether they produce a profit depends on their budget. As a result of high salaries of stars that are typical during these films as well as other high cost items, such as special effects, many blockbusters still might not create 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 exists more likelihood that the low-budget indy, that is done well with 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 great investment opportunity? Good documentaries are an especially good investment opportunity, because the costs of making documentaries are much lower than for feature films. They can be done with a much smaller crew – even 2 or 3 individuals the field – one for that camera, one to handle sound and lighting, and another to coordinate arrangements and ask good questions inside the field. Post-production could be easier too, with fewer takes and much less film to edit for your final cut. Many documentaries are carried out having a budget of $ten thousand-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 film investment opportunities?
Generally, if you’ve got the amount of money to invest, the filmmakers will find a technique to legally to give them the amount of money. Various vehicles include nonprofit corporations, LLCs, private placement memorandums, and loans. A typical requirement is the fact that individual hold the funds to invest funds that might be lost in a risky venture and is advised of the potential risk of the investment.
6. Exactly what are the key risks behind film investments and how do you prevent them? The true secret risks behind film investments is definitely the potential to lose everything when the film doesn’t get completed or doesn’t find distribution. The best way to protect yourself is always to assess the potential of the feature film or documentary going in; assess if the budget and expected return is apparently reasonable for your project; and assess if the producer, director, as well as others on the film have the experience to complete and market the film
7. Exactly how much would be the initial investment necessary to invest in a film production? An initial investment can range coming from a few thousand to a few hundred thousand, depending on the film and the way an investment swosox structured. As an example, some indy filmmakers doing low budget films have found creative methods 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 increase $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 some investment in place, there can be other types of funds, including GAP funding and incentives from states and cities by means of rebates after filming is finished. VC funds will also be plausible, particularly after there exists some initial investment in the film, when the film’s budget is going to be at least $1-2 million.
8. With modern technology advancements, do you know the opportunities for independent and emerging film producers; or are these developments more of a threat because of piracy and competition?