Are films a good investment opportunity? I do believe they are for the best kind of investor. Here’s why. We have written this in a Q&A style to respond to the major questions that prospective investors find out about whether or not to invest or not.
1. Why is film investment an attractive investment opportunity? Will it be as a result of high return or as a result of nature of economic? For a lot of investors, our prime return is a major draw, because films do have the possibility for any very large 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, features a budget that matches the type of film this is, and strikes a chord with distributors or buyers for that TV, DVD, foreign rights, or any other markets. Then, if the film is put into theatrical release, it has the potential to get an even larger audience, though theatrical will not be the key revenue stream for many films, merely the big blockbusters, because the theater owners take about 75% from the box office unless a film enters into a long-term release and there is a high costs for prints (though progressively more theaters are getting digital). The price of a theatrical release is a lot more because of its promotional value for gaining other kinds of sales, aside from the large blockbusters.
Despite the potential for high returns for a few films, wikimedia in it for the investment need to realize that any film investment is a major risk, because many problems can get from when a film enters into production to after 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 can find problems on the set. Another risk is the fact that film is not well-received by distributors and TV buyers, therefore it doesn’t get found. Or even in case a film receives a distribution deal, the chance is the fact that there is little or no money up front, and so the film will not see further returns. So yes – a film could have a high return, but an investor can lose all of it.
Because of this, for a lot of investors, other key reasons for investing tend to be more important. They believe within the message in the film. They like and secure the film producers, cast, and crew. They love the glamour for being involved with a film, including meeting the heavens and likely to film festivals. They see their investment as a chance to visit distant locations for filming and then for promoting the film. And they see making an investment in the film being a tax write-off, similar to giving to your charity.
2. What sort of investment returns can investors can expect, since several independent productions usually are not intended for big screens, where are definitely the sales originating from? If each of the stars align, and there exists a good film done with a reasonable budget and distributors, buyers, plus an audience responds, the film could readily earn 4 to ten times its cost, making everyone delighted. A small-budget indy scenario with this degree of return can be quite 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 many films, the main worth of a theatrical release is definitely the PR price of obtaining the film known, so buyers would want to purchase or rent the DVD and TV buyers would want to show it on one of the premium cable movie channels. Also, most films don’t get a theatrical release, as well as the funds are earned through other channels.
3. What sort of movies normally can generate good profits, because the recent Oscar Awards demonstrate that a big investment does not necessary mean big returns? A few of the big blockbusters that pass the $100 million threshold can easily make a profit from a successful theatrical release, in both the U.S. and abroad. But if they create a profit depends on their budget. As a result of high salaries of stars that are typical within these films along with other high cost items, including special effects, many blockbusters still may not create 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 exists more likelihood that a low-budget indy, which can be done well in a reasonable budget, will likely 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 making documentaries are far below for feature films. They may be done with a lot smaller crew – even two or three folks the area – one for the camera, someone 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 fewer film to edit for the final cut. Many documentaries are carried out using 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 any legal or regulatory restrictions preventing individual investors to participate in film investment opportunities?
Generally, if you’ve got the cash to spend, the filmmakers will find a technique to legally to give them the money. Various vehicles include nonprofit corporations, LLCs, private placement memorandums, and loans. A typical requirement would be that the individual possess the funds to invest funds that might be lost in a risky venture and is advised of the 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 possibility to lose everything when the film doesn’t get completed or doesn’t find distribution. The easiest method to protect yourself is always to assess the potential of the feature film or documentary going in; assess whether the budget and expected return is apparently reasonable for the project; and assess whether the producer, director, as well as others on the film appear to have the event to complete and market the film
7. Just how much would be the initial investment needed to invest in a film production? A preliminary investment may range coming from a few thousand to a few hundred thousand, depending on the film and exactly how a smart investment swosox structured. As an example, some indy filmmakers doing low budget films are finding creative techniques for getting funds by inviting investments of $1000-2000 from those taking part 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 couple of big investors, who can contribute at the very least $20,000, $50,000, $100,000 or more.
Once there is some investment in place, there may be other sources of funds, like GAP funding and incentives from states and cities by means of rebates after filming is done. VC funds will also be a chance, particularly after there is some initial investment within the film, if the film’s budget will likely be a minimum of $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 due to piracy and competition?