Are films a good investment opportunity? I think these are for the right sort of investor. Here’s why. I have written this in a Q&A style to reply to the major questions that prospective investors find out about whether to invest or not.
1. Exactly why is film investment a stylish investment opportunity? Will it be because of the high return or because of the nature of business? For a lot of investors, the high return is a big draw, because films do have the possibility for any huge return, though there is a very high risk with plenty of big “Ifs”. A film are capable of doing 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 the TV, DVD, foreign rights, or any other markets. Then, when the film goes into theatrical release, it has the possible to have an even larger audience, though theatrical is not the primary source of income for most films, just the big blockbusters, since the theater owners take about 75% from the box office unless a film goes into a lengthy-term release and there exists a high costs for prints (though progressively more theaters are going digital). The value of a theatrical release is much more because of its promotional value for gaining other kinds of sales, with the exception of the huge blockbusters.
Despite the potential for high returns for many films, Kia Jam within it for the investment have to understand that any film investment is a big risk, because many problems can produce from when a film enters into production to after it is finally released and distributed. Theses risks range from the film not completed because it goes over budget and is unable to get additional financing or you will find problems on the set. Another risk is that the film will not be well-received by distributors and television buyers, so that it doesn’t get found. Or even if a film receives a distribution deal, the danger is that there is very little or no money at the start, therefore the film fails to see any further returns. So yes – a film could have a high return, but a venture capitalist can lose all of it.
Because of this, for most investors, other key reasons for investing are more important. They feel in the message from the film. They like and support the film producers, cast, and crew. They love the glamour of being associated 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 for promoting the film. And they also see purchasing the film as a tax write-off, much like giving to a charity.
2. What type of investment returns can investors can expect, since several independent productions are not intended for big screens, where are definitely the sales coming from? If all 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 thrilled. A low-budget indy scenario with this amount 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 with no theatrical release.
For most films, the primary price of a theatrical release is the PR price of obtaining the film known, so buyers may wish to purchase or rent the DVD and TV 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 sort of movies usually can generate good profits, because the recent Oscar Awards reveal that a big investment does not necessary mean big returns? Some of the big blockbusters that pass the $100 million threshold can certainly produce a profit from a successful theatrical release, in both the U.S. and abroad. But whether they produce a profit depends upon their budget. Due to the high salaries of stars that are typical during these films as well as other high cost items, such as special effects, many blockbusters still may not create a profit. Thus, dollar for dollar, many low-budget indy films can be a better investment, considering that the multiples are higher having a success; there is certainly more likelihood that the low-budget indy, which is done well in a reasonable budget, will 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, since the costs of producing documentaries are far less than for feature films. They could be done with a significantly smaller crew – even two or three individuals the field – one for that camera, one to handle sound and lighting, and another to coordinate arrangements and ask good questions within the field. Post-production may be easier too, with fewer takes and much less film to edit for that final cut. Many documentaries are performed with a budget of $10,000-50,000, which could 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 money to shell out, the filmmakers will discover a way to legally to offer them the cash. Various vehicles include nonprofit corporations, LLCs, private placement memorandums, and loans. An average requirement is the fact that individual possess the funds to shell out funds that might be lost in a risky venture and is advised of the potential risk of your time and money.
6. Do you know the key risks behind film investments and how do you prevent them? The key risks behind film investments is the potential to lose everything when the film doesn’t get completed or doesn’t find distribution. The simplest way to protect yourself would be to assess the chance of the feature film or documentary going in; assess whether the budget and expected return is apparently reasonable for the project; and assess whether or not the producer, director, as well as others on the film seem to have the event to finish and market the film
7. Just how much would be the initial investment needed to invest in a film production? A preliminary investment may range from a few thousand to many hundred thousand, depending on the film and exactly how a good investment swosox structured. As an example, some indy filmmakers doing low budget films are finding creative ways to get 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 20 investors to boost $100,000. Still others have looked for a few big investors, who can contribute a minimum of $20,000, $50,000, $100,000 or maybe more.
Then is some investment set up, there might be other causes of funds, like GAP funding and incentives from states and cities in the form of rebates after filming is finished. VC funds are also a chance, particularly after there is some initial investment within the film, if the film’s budget is going to 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 as a result of piracy and competition?