Are films a great investment opportunity? I believe these are for the right type of investor. Here’s why. I have written this in a Q&A style to answer the major questions that prospective investors inquire about whether or not to invest or otherwise.
1. Why is film investment a stylish investment opportunity? Could it be due to the high return or because of the nature of business? For most investors, the top return is a huge draw, because films do have the potential to get a very large return, though you will find a very high risk with many different big “Ifs”. A film can do very well if it possesses a good script, good acting, good production value, includes a budget that suits the kind of film this really 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 is put into theatrical release, it provides the potential to get an even larger audience, though theatrical will not be the key income source for most films, just the big blockbusters, since the theater owners take about 75% from the box office unless a film enters into an extended-term release and there is a high costs for prints (though a lot more theaters are going digital). The price of a theatrical release is more for its promotional value for gaining other kinds of sales, except for the huge blockbusters.
Despite the opportunity of high returns for some films, Kia Jam in it for the money must understand that any film investment is a major risk, because many problems can produce from the time a film is put into production to when it is finally released and distributed. Theses risks are the film not being completed as it goes over budget and is not able to get additional financing or you can find problems on the set. Another risk is that the film will not be well-received by distributors and television buyers, therefore it doesn’t get picked up. As well as in case a film gets a distribution deal, the chance is the fact that there is little or no money at the start, therefore the film will not see any further returns. So yes – a film could have a high return, but a venture capitalist can lose it all.
Consequently, for a lot of investors, other key factors behind investing are more important. They believe within the message in the film. They enjoy and keep the film producers, cast, and crew. They love the glamour of being associated with a film, including meeting the heavens and going to film festivals. They see their investment as an opportunity to visit distant locations for filming and then for promoting the film. And they see investing in the film being a tax write-off, much like giving to a charity.
2. What sort of investment returns can investors should expect, since many independent productions usually are not designed for big screens, where are the sales coming from? If each of the stars align, and there is a good film completed with a fair budget and distributors, buyers, and an audience responds, the film could readily earn 4 to ten times its cost, making everyone delighted. A small-budget indy scenario for this particular amount of return may well be a film shot for $50,000-200,000. It could 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 the majority of films, the primary price of a theatrical release is the PR worth of having 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 get yourself a theatrical release, and also the funds are earned through other channels.
3. What type of movies can usually generate good profits, considering that the recent Oscar Awards reveal that a huge investment fails to necessary mean big returns? A number of the big blockbusters that pass the $100 million threshold could certainly create a make money from an excellent theatrical release, in the U.S. and abroad. But whether or not they create a profit is dependent upon their budget. As a result of high salaries of stars that are typical in these films as well as other high cost items, including effects, many blockbusters still may not produce a profit. Thus, dollar for dollar, many low-budget indy films can be a better investment, considering that the multiples are higher using a success; there is certainly more likelihood that a low-budget indy, that is done well in a reasonable budget, will likely be sold to make back it’s money, and the opportunity of loss is far less.
4. Are documentaries a good investment opportunity? Good documentaries are an especially good investment opportunity, considering that the costs of creating documentaries are much below for feature films. They could be done with a significantly smaller crew – even several individuals the field – one for that camera, one to handle sound and lighting, and the other to coordinate arrangements and inquire good questions within the field. Post-production can be easier too, with fewer takes and much less film to edit for that final cut. Many documentaries are done with a budget of $ten thousand-50,000, which can easily 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 cash to shell out, the filmmakers will discover a way for you 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 hold the funds to spend funds that may be lost in a risky venture and it is advised of the chance of an investment.
6. Exactly what are the key risks behind film investments and how do you prevent them? The true secret risks behind film investments is definitely the possibility to lose it all if the film doesn’t get completed or doesn’t find distribution. The best way to protect yourself would be to assess the potential for the feature film or documentary going in; assess if the budget and expected return appears to be reasonable for that project; and assess whether or not the producer, director, yet others on the film have the experience to complete and market the film
7. How much could be the initial investment needed to invest in a film production? An initial investment can range coming from a few thousand to several hundred thousand, depending on the film and the way a good investment swosox structured. As an example, some indy filmmakers doing low budget films have found creative methods for getting funds by inviting investments of $1000-2000 from those participating in the film, including the actors and crew members. Others have divided up investment packages into $5000 each for 25 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 more.
Then is some investment set up, there can be other sources of funds, like GAP funding and incentives from states and cities as rebates after filming is done. VC funds can also be a possibility, particularly after there is some initial investment within the film, when 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?