Are films a great investment opportunity? I do believe these are for the best kind of investor. Here’s why. I have written this in a Q&A style to reply to the main 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 because of the high return or because of the nature of business? For most investors, the top return is a major draw, because films do have the potential to get a very large return, though there is a very high risk with many different big “Ifs”. A film can do extremely well if it has a good script, good acting, good production value, features a budget that matches the sort of film this really is, and strikes a chord with distributors or buyers for the TV, DVD, foreign rights, or other markets. Then, when the film enters into theatrical release, it has the possible to have an even larger audience, though theatrical is not really the main revenue stream for the majority of films, merely the big blockbusters, since the theater owners take about 75% in the box office unless a film enters into a long-term release and there is a high costs for prints (though an increasing number of theaters will be going digital). The price of a theatrical release is more because of its promotional value for gaining other kinds of sales, except for the massive blockbusters.
Despite the opportunity of high returns for some films, kjammedia in it for the investment must understand that any film investment is a big risk, because many problems can develop from when a film enters into production to when it is finally released and distributed. Theses risks range from the film not completed because 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 will not be well-received by distributors and television buyers, therefore it doesn’t get found. Or perhaps in case a film turns into a distribution deal, the risk is the fact that there is little or no money at the start, and so the film does not see any more returns. So yes – a film can have a high return, but an investor can lose all of it.
As a result, for many investors, other key reasons behind investing are more important. They believe within the message from the film. They like and secure the film producers, cast, and crew. They like the glamour for being included in a film, including meeting the heavens and going to film festivals. They see their investment as a chance to go to distant locations for filming as well as for promoting the film. And they see purchasing the film as being a tax write-off, much like giving to your charity.
2. What type of investment returns can investors should expect, because so many independent productions are not created for big screens, where are definitely the sales coming from? If each of the stars align, and you will find a good film completed with a good budget and distributors, buyers, and an audience responds, the film could readily earn 4 to 10 times its cost, making everyone thrilled. A small-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 with no theatrical release.
For most films, the key worth of a theatrical release is the PR value of obtaining the film known, so buyers would want to purchase or rent the DVD and TV buyers may wish to show it on among the premium cable movie channels. Also, most films don’t obtain a theatrical release, and the funds are earned through other channels.
3. What sort of movies usually can 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 can easily create a make money from an excellent theatrical release, in both the U.S. and abroad. But whether they produce a profit is dependent upon their budget. Because of the high salaries of stars which are typical during these films and other high cost items, including 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, since the multiples are higher having a success; there is more likelihood that a low-budget indy, which can be done well in a reasonable budget, will be sold to make back it’s money, and the potential for loss is much less.
4. Are documentaries a wise investment opportunity? Good documentaries are an especially good investment opportunity, since the costs of creating documentaries are much less than for feature films. They could be finished with a significantly smaller crew – even 2 or 3 people in the area – one for the camera, someone to handle sound and lighting, and the other to coordinate arrangements and get good questions within the field. Post-production could be easier too, with fewer takes and much less film to edit for the final cut. Many documentaries are done 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 legal or regulatory restrictions preventing individual investors to participate in in film investment opportunities?
Generally, if you’ve got the money to invest, the filmmakers will discover a way for you to legally to provide them the money. Various vehicles include nonprofit corporations, LLCs, private placement memorandums, and loans. An average requirement is the fact that individual possess the funds to spend funds that could be lost in a risky venture and is also advised of the potential risk of the investment.
6. Exactly what are the key risks behind film investments and how will you prevent them? The true secret risks behind film investments is the potential to lose it all 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 if the budget and expected return is apparently reasonable for your project; and assess whether or not the producer, director, and others on the film seem to have the experience to finish and market the film
7. Just how much will be the initial investment needed to invest in a film production? An initial investment can range from a few thousand to a few hundred thousand, depending on the film and how a smart investment swosox structured. For instance, some indy filmmakers doing low budget films have found creative methods for getting funds by inviting investments of $1000-2000 from those engaging in the film, such as the actors and crew members. Others have divided up investment packages into $5000 each for 20 investors to raise $100,000. Still others have looked for a couple of big investors, who are able to contribute at the very least $20,000, $50,000, $100,000 or more.
Then is a few investment set up, there may be other types of funds, like GAP funding and incentives from states and cities as rebates after filming is completed. VC funds can also be a chance, particularly after there exists some initial investment inside the film, if the film’s budget is going to be at the very least $1-2 million.
8. With modern technology advancements, what are the opportunities for independent and emerging film producers; or are these developments much more of a threat as a result of piracy and competition?