Are films a good investment opportunity? I think these are for the ideal sort of investor. Here’s why. I have written this in a Q&A style to respond to the major questions that prospective investors find out about whether to invest or otherwise.
1. Exactly why is film investment an attractive investment opportunity? Could it be as a result of high return or because of the nature of economic? For most investors, our prime return is a major draw, because films do have the potential to get a huge return, though you will find a high risk with plenty of big “Ifs”. A film can do well if it possesses a good script, good acting, good production value, includes a budget that suits the type of film this can be, and strikes a chord with distributors or buyers for that TV, DVD, foreign rights, or other markets. Then, in the event the film is put into theatrical release, it provides the possible to get an even larger audience, though theatrical is not really the main source of income for many films, just the big blockbusters, since the theater owners take about 75% in the box office unless a film is put into an extended-term release and you will find a high costs for prints (though a lot more theaters will be going digital). The price of a theatrical release is much more for its promotional value for gaining other sorts of sales, except for the large blockbusters.
Despite the opportunity of high returns for many films, wikimedia in it for the money have to realize that any film investment is a major risk, because many problems can develop from when a film is put into production to after it is finally released and distributed. Theses risks include the film not being completed as it goes over budget and is not able to get additional financing or you will find problems on the set. Another risk is the fact that film is not really well-received by distributors and television buyers, so that it doesn’t get found. As well as when a film receives a distribution deal, the chance is the fact that there is very little or no money at the start, so the film does not see any more returns. So yes – a film could have a high return, but a venture capitalist can lose everything.
As a result, for most investors, other key factors behind investing are more important. They believe in the message in the film. They like and support the film producers, cast, and crew. They like the glamour to be included in a film, including meeting the heavens and likely to film festivals. They see their investment as a chance to travel to distant locations for filming and for promoting the film. And they see purchasing the film as being a tax write-off, similar to giving to some charity.
2. What type of investment returns can investors can get, since many independent productions are certainly not intended for big screens, where are definitely the sales originating from? If each of the stars align, and there exists a good film completed with a good budget and distributors, buyers, and an audience responds, the film could readily earn 4 to ten times its cost, making everyone thrilled. A low-budget indy scenario with this amount 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 main worth of a theatrical release is the PR worth of having the film known, so buyers may wish to purchase or rent the DVD and TV buyers may wish to show it on one of the premium cable movie channels. Also, most films don’t get yourself a theatrical release, as well as the funds are earned through other channels.
3. What type of movies normally can generate good profits, because the recent Oscar Awards show that a large investment does not necessary mean big returns? A few of the big blockbusters that pass the $100 million threshold can easily produce a make money from a successful theatrical release, in the U.S. and abroad. But whether they create a profit is dependent upon their budget. Because of the high salaries of stars which can be typical during these films as well as other high cost items, such as effects, many blockbusters still may not make 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 exists more likelihood which a low-budget indy, that is done well at a reasonable budget, will be sold to make back it’s money, and the chance of loss is far less.
4. Are documentaries a good investment opportunity? Good documentaries are an especially good investment opportunity, because the costs of producing documentaries are far lower than for feature films. They could be completed with a much smaller crew – even 2 or 3 individuals the area – one for your camera, anyone to handle sound and lighting, and another to coordinate arrangements and inquire good questions in the field. Post-production could be easier too, with fewer takes and much less film to edit for the final cut. Many documentaries are carried out having a budget of $10,000-50,000, which can easily 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 cash to shell out, the filmmakers will find a way for you to legally to give them the amount of money. Various vehicles include nonprofit corporations, LLCs, private placement memorandums, and loans. An average requirement would be that the individual hold the funds to invest funds that may be lost in a risky venture and is also advised of the potential risk of your time and money.
6. What are the key risks behind film investments and how will you prevent them? The key risks behind film investments is definitely the possible ways to lose all of it when the film doesn’t get completed or doesn’t find distribution. The easiest method to protect yourself is to assess the chance of the feature film or documentary going in; assess whether the budget and expected return seems to be reasonable for your project; and assess whether or not the producer, director, and others on the film appear to have the event to finish and market the film
7. Exactly how much would be the initial investment needed to invest in a film production? An initial investment can vary from a few thousand to many hundred thousand, depending on the film and exactly how an 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 participating 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. Still others have looked for a couple of big investors, who can contribute a minimum of $20,000, $50,000, $100,000 or even more.
Once there is some investment in position, there can be other types of funds, such as GAP funding and incentives from states and cities by means of rebates after filming is finished. VC funds can also be plausible, particularly after there exists some initial investment inside the film, when the film’s budget is going to be a minimum of $1-2 million.
8. With modern technology advancements, do you know the opportunities for independent and emerging film producers; or are these developments more of a threat as a result of piracy and competition?