Are films a great investment opportunity? I do believe they are for the ideal sort of investor. Here’s why. I have written this in a Q&A style to answer the major questions that prospective investors inquire about if you should invest or otherwise.
1. Exactly why is film investment a beautiful investment opportunity? Could it be due to the high return or because of the nature of business? For a lot of investors, our prime return is a huge draw, because films do have the possibility to get a very large return, though there is a high risk with many different big “Ifs”. A film can perform very well if it features a good script, good acting, good production value, has a budget that fits the type of film this is, and strikes a chord with distributors or buyers for your TV, DVD, foreign rights, or some other markets. Then, in the event the film enters into theatrical release, it provides the potential to have an even larger audience, though theatrical is not really the key source of income for most films, only the big blockbusters, because the theater owners take about 75% from the box office unless a film is put into a long-term release and there exists a high costs for prints (though progressively more theaters are getting digital). The need for a theatrical release is much more for the promotional value for gaining other kinds of sales, except for the large blockbusters.
Despite the chance of high returns for a few films, Kia Jam inside it for the investment need to understand that any film investment is a huge risk, because many problems can produce from when a film goes into production to when it is finally released and distributed. Theses risks are the film not being completed because it goes over budget and is not able to get additional financing or you will find problems on the set. Another risk is that the film is not really well-received by distributors and television buyers, so that it doesn’t get found. Or perhaps if a film gets a distribution deal, the chance is the fact that there is very little or no money at the start, therefore the film fails to see any further returns. So yes – a film may have a high return, but an investor can lose all of it.
Consequently, for most investors, other key reasons behind investing are definitely more important. They believe inside the message of the film. They enjoy and secure the film producers, cast, and crew. They enjoy the glamour for being included in a film, including meeting the heavens and planning to film festivals. They see their investment as the opportunity to visit distant locations for filming as well as for promoting the film. And they also see purchasing the film being a tax write-off, much like giving to some charity.
2. What sort of investment returns can investors can get, since many independent productions usually are not created for big screens, where would be the sales provided by? If each of the stars align, and there is a good film done with a good budget and distributors, buyers, plus an audience responds, the film could readily earn 4 to 10 times its cost, making everyone thrilled. A minimal-budget indy scenario for this level of return might be a film shot for $50,000-200,000. It may get $500,000-750,000 to get a TV sale and earn $1-2 million more through DVD, streaming, and foreign rights sales, even without a theatrical release.
For most films, the key value of a theatrical release will be the PR value of having the film known, so buyers would want to purchase or rent the DVD and television buyers will want to show it on one of the premium cable movie channels. Also, most films don’t get yourself a theatrical release, and also the funds are earned through other channels.
3. What kind of movies can usually generate good profits, because the recent Oscar Awards reveal that a big investment does not necessary mean big returns? A number of the big blockbusters that pass the $100 million threshold can certainly produce a benefit from an effective theatrical release, in the U.S. and abroad. But whether they produce a profit depends on their budget. Due to the high salaries of stars that are typical within these films along with other high cost items, like effects, many blockbusters still may well not create a profit. Thus, dollar for dollar, many low-budget indy films can be a better investment, because the multiples are higher with a success; there is certainly more likelihood which a low-budget indy, which is done well in a reasonable budget, is going to be sold making back it’s money, and the opportunity of loss is far less.
4. Are documentaries a great investment opportunity? Good documentaries are an especially good investment opportunity, because the costs of producing documentaries are far below for feature films. They could be completed with a significantly smaller crew – even 2 or 3 folks the field – one for your camera, one to handle sound and lighting, and another to coordinate arrangements and get good questions inside the field. Post-production can be easier too, with fewer takes and less film to edit for your 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 legal or regulatory restrictions preventing individual investors to participate in in film investment opportunities?
Generally, if you’ve got the amount of money to invest, the filmmakers will find a way for you to legally to offer them the money. Various vehicles include nonprofit corporations, LLCs, private placement memorandums, and loans. A typical requirement would be 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 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 possibility to lose everything in the event the film doesn’t get completed or doesn’t find distribution. The best way to protect yourself would be to assess the chance of the feature film or documentary going in; assess if the budget and expected return is apparently reasonable for the project; and assess whether the producer, director, yet others on the film have the experience to finish and market the film
7. How much would be the initial investment necessary to invest in a film production? A primary investment may range from a few thousand to many hundred thousand, depending on the film and how an investment swosox structured. As an example, some indy filmmakers doing low budget films are finding creative methods for getting funds by inviting investments of $1000-2000 from those engaging in the film, like the actors and crew members. Others have divided up investment packages into $5000 each for 25 investors to boost $100,000. And others have looked for a few big investors, who can contribute at the very least $20,000, $50,000, $100,000 or even more.
Then is a few investment in position, there might be other types of funds, like GAP funding and incentives from states and cities in the form of rebates after filming is finished. VC funds can also be plausible, particularly after there is certainly some initial investment in the film, in the event the film’s budget is going to be at the very least $1-2 million.
8. With modern technology advancements, exactly what are the opportunities for independent and emerging film producers; or are these developments more of a threat as a result of piracy and competition?