Are films a good investment opportunity? I do believe these are for the right kind of investor. Here’s why. I have written this in a Q&A style to reply to the key questions that prospective investors ask about whether to invest or not.
1. Why is film investment a beautiful investment opportunity? Could it be as a result of high return or because of the nature of business? For a lot of investors, our prime return is a major draw, because films do have the potential to get a large return, though you will find a very high risk with plenty of big “Ifs”. A film can do extremely well if it has a good script, good acting, good production value, features a budget that suits the type of film this is, and strikes a chord with distributors or buyers for your TV, DVD, foreign rights, or any other markets. Then, if the film is put into theatrical release, it offers the possible to have an even larger audience, though theatrical will not be the primary source of income for many films, merely the big blockbusters, since the theater owners take about 75% in the box office unless a film is put into a lengthy-term release and you will find a high costs for prints (though a lot more theaters are getting digital). The need for a theatrical release is more because of its promotional value for gaining other sorts of sales, with the exception of the massive blockbusters.
Despite the chance of high returns for many films, Kia Jam in it for the investment have to understand that any film investment is a huge risk, because many problems can produce from the time a film enters into production to after it is finally released and distributed. Theses risks are the film not being completed because it goes over budget and struggles 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 it doesn’t get acquired. Or even when a film gets a distribution deal, the risk is that there is very little or no money in advance, and so the film will not see any more returns. So yes – a film may have a high return, but an investor can lose all of it.
Consequently, for a lot of investors, other key reasons for investing are definitely more important. They think inside the message of the film. They love and secure the film producers, cast, and crew. They love the glamour of being associated with a film, including meeting the stars and going to film festivals. They see their investment as an opportunity to travel to distant locations for filming and for promoting the film. And they also see investing in the film as a tax write-off, much like giving to a charity.
2. What kind of investment returns can investors should expect, since several independent productions are certainly not designed for big screens, where are the sales originating from? If all the stars align, and there is a good film finished with a fair budget and distributors, buyers, as well as an audience responds, the film could readily earn 4 to ten times its cost, making everyone delighted. A low-budget indy scenario for this particular degree of return can be quite a film shot for $50,000-200,000. It could get $500,000-750,000 for any 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 is the PR value of having the film known, so buyers would want to purchase or rent the DVD and TV buyers will want to show it on one of many premium cable movie channels. Also, most films don’t get a theatrical release, and also the funds are earned through other channels.
3. What type of movies usually can generate good profits, considering that the recent Oscar Awards demonstrate that a big investment fails to necessary mean big returns? Some of the big blockbusters that pass the $100 million threshold can certainly create a benefit from an excellent theatrical release, both in the U.S. and abroad. But whether or not they produce a profit is dependent upon their budget. Due to the high salaries of stars which are typical in these films as well as other high cost items, like special effects, many blockbusters still may well not produce a profit. Thus, dollar for dollar, many low-budget indy films may be a better investment, considering that the multiples are higher with a success; there is more likelihood which a low-budget indy, which is done well in a reasonable budget, is going to be sold to make back it’s money, and the potential for loss is much less.
4. Are documentaries a great investment opportunity? Good documentaries are an especially good investment opportunity, because the costs of creating documentaries are far below for feature films. They could be done with a significantly smaller crew – even two or three folks the area – 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 less film to edit for that final cut. Many documentaries are performed having a budget of $ten thousand-50,000, which could be recouped 5 to 20 times over with DVD, TV, and foreign sales.
5. What are the legal or regulatory restrictions preventing individual investors to participate in in film investment opportunities?
Generally, if you’ve got the amount of money to spend, 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. An average requirement is the fact that individual have the funds to invest funds that may be lost in a risky venture and is advised of the risk of an investment.
6. What are the key risks behind film investments and how do you prevent them? The real key risks behind film investments is the possibility to lose all of it if the film doesn’t get completed or doesn’t find distribution. The simplest way to protect yourself would be to assess the potential for the feature film or documentary going in; assess whether or not the budget and expected return seems to be reasonable for that project; and assess whether the producer, director, yet others on the film appear to have the knowledge to accomplish and market the film
7. Just how much will be the initial investment needed to invest in a film production? A preliminary investment can range coming from a few thousand to many hundred thousand, depending on the film and the way a smart investment swosox structured. For example, some indy filmmakers doing low budget films have found creative ways to get 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 25 investors to increase $100,000. And others have looked for a few big investors, who are able to contribute at the very least $20,000, $50,000, $100,000 or even more.
Then is some investment set up, there may be other causes of funds, including GAP funding and incentives from states and cities as rebates after filming is done. VC funds will also be a chance, particularly after there is some initial investment in the film, if the film’s budget will likely be at least $1-2 million.
8. With modern technology advancements, exactly what are the opportunities for independent and emerging film producers; or are these developments much more of a threat because of piracy and competition?