Are films a good investment opportunity? I believe they are for the best 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 whether or not to invest or not.
1. Exactly why is film investment an attractive investment opportunity? Is it due to the high return or as a result of nature of economic? For many investors, the high return is a major draw, because films do have the possibility to get a large return, though you will find a very high risk with a lot of big “Ifs”. A film are capable of doing very well if it features a good script, good acting, good production value, includes a budget that fits the sort of film this is, and strikes a chord with distributors or buyers for your TV, DVD, foreign rights, or other markets. Then, if the film is put into theatrical release, it offers the possible to have an even larger audience, though theatrical is not really the key revenue stream for most films, just the big blockbusters, since the theater owners take about 75% in the box office unless a film goes into a lengthy-term release and you will find a high costs for prints (though a lot more theaters are getting digital). The price of a theatrical release is much more for the promotional value for gaining other sorts of sales, aside from the large blockbusters.
Despite the opportunity of high returns for many films, Kia Jam in it for the investment must realize that any film investment is a major risk, because many problems can get from the time a film is put into production to when it is finally released and distributed. Theses risks are the film not completed since 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 it doesn’t get found. Or even if a film turns into a distribution deal, the risk is the fact there is little or no money at the start, and so the film will not see any further returns. So yes – a film can have a high return, but a trader can lose everything.
Because of this, for many investors, other key factors behind investing are definitely more important. They believe in the message from the film. They enjoy and keep the film producers, cast, and crew. They like the glamour to be involved with a film, including meeting the heavens and likely to film festivals. They see their investment as the opportunity to travel to distant locations for filming and then for promoting the film. And they also see investing in the film as being a tax write-off, just like giving to a charity.
2. What sort of investment returns can investors should expect, since many independent productions are certainly not designed for big screens, where are the sales provided by? If each of the stars align, and you will find a good film finished with a reasonable budget and distributors, buyers, as well as 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 particular degree of return may well be a film shot for $50,000-200,000. It might get $500,000-750,000 for any TV sale and earn $1-2 million more through DVD, streaming, and foreign rights sales, even with no theatrical release.
For the majority of films, the key price of a theatrical release will be the PR worth of obtaining the film known, so buyers will want to purchase or rent the DVD and television buyers will want to show it on among 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 type of movies can usually generate good profits, considering that the recent Oscar Awards demonstrate that a big investment will not necessary mean big returns? A few of the big blockbusters that pass the $100 million threshold could certainly create a make money from an effective theatrical release, in the U.S. and abroad. But if they make a profit depends on their budget. Due to the high salaries of stars that are typical within these films and other high cost items, including effects, many blockbusters still may not produce a profit. Thus, dollar for dollar, many low-budget indy films might be a better investment, because the multiples are higher with a success; there is certainly more likelihood which a low-budget indy, that is done well at a reasonable budget, is going to be sold and make back it’s money, and the opportunity of loss is much less.
4. Are documentaries a great investment opportunity? Good documentaries are an especially good investment opportunity, because the costs of producing documentaries are much less than for feature films. They may be done with a lot smaller crew – even two or three folks the field – one for your camera, one to handle sound and lighting, and another to coordinate arrangements and ask good questions within the field. Post-production could be easier too, with fewer takes and fewer film to edit for your final cut. Many documentaries are done 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 amount of money to shell out, the filmmakers will find a way to legally to offer them the money. Various vehicles include nonprofit corporations, LLCs, private placement memorandums, and loans. An average requirement would be that the individual have the funds to spend funds that may be lost in a risky venture and is also advised of the chance of your time and money.
6. Do you know the key risks behind film investments and how will you prevent them? The real key risks behind film investments will be the potential to lose everything if the film doesn’t get completed or doesn’t find distribution. The simplest way to protect yourself is always to assess the potential of the feature film or documentary going in; assess whether the budget and expected return seems to be reasonable for your project; and assess whether the producer, director, as well as others on the film have the knowledge to complete and market the film
7. How much will be the initial investment required to invest in a film production? An initial investment can vary coming from a few thousand to many hundred thousand, depending on the film and exactly how a smart investment swosox structured. For instance, 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, like the actors and crew members. Others have divided up investment packages into $5000 each for 25 investors to raise $100,000. Still others have looked for a couple of big investors, who are able to contribute a minimum of $20,000, $50,000, $100,000 or more.
Once there is a few investment in place, there might be other sources of funds, like GAP funding and incentives from states and cities as rebates after filming is done. VC funds are also a possibility, particularly after there is some initial investment in the film, when 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 due to piracy and competition?