Are films a great investment opportunity? I believe these are for the best sort of investor. Here’s why. We have written this in a Q&A style to reply to the main questions that prospective investors ask about if you should invest or not.
1. The reason why film investment a beautiful investment opportunity? Will it be due to the high return or due to the nature of business? For a lot of investors, the top return is a big draw, because films do have the potential to get a huge return, though there exists a extremely high risk with plenty of big “Ifs”. A film are capable of doing extremely well if it has a good script, good acting, good production value, has a budget that fits the sort of film this really is, and strikes a chord with distributors or buyers for that TV, DVD, foreign rights, or any other markets. Then, if the film enters into theatrical release, it has the possible to get an even larger audience, though theatrical is not the primary source of income for the majority of films, just the big blockbusters, considering that the theater owners take about 75% of the box office unless a film goes into a lengthy-term release and you will find a high costs for prints (though progressively more theaters will be going digital). The need for a theatrical release is more for the promotional value for gaining other sorts of sales, aside from the massive blockbusters.
Despite the potential for high returns for many films, Kia Jam within it for the money need to understand that any film investment is a major risk, because many problems can develop from the time a film enters into production to when it is finally released and distributed. Theses risks are the film not being completed since it goes over budget and struggles 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 TV buyers, so it doesn’t get found. Or perhaps when a film gets a distribution deal, the danger is the fact that there is little or no money up front, therefore the film will not see any further returns. So yes – a film could have a high return, but a trader can lose it all.
Because of this, for most investors, other key reasons behind investing are definitely more important. They believe within the message from the film. They enjoy and keep the film producers, cast, and crew. They enjoy the glamour to be included in a film, including meeting the stars and planning to film festivals. They see their investment as a chance to travel to distant locations for filming and then for promoting the film. And they see investing in the film as being a tax write-off, just like giving to some charity.
2. What kind of investment returns can investors can get, since several independent productions are certainly not created for big screens, where are definitely the sales originating from? If each of the stars align, and there is a good film completed with a good budget and distributors, buyers, as well as an audience responds, the film could readily earn 4 to 10 times its cost, making everyone thrilled. A low-budget indy scenario for this particular 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 the majority of films, the primary value of a theatrical release will be the PR worth of obtaining 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 obtain a theatrical release, and also the funds are earned through other channels.
3. What sort of movies can usually generate good profits, since the recent Oscar Awards demonstrate that a large investment fails to necessary mean big returns? A number 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 create a profit depends upon their budget. Due to the high salaries of stars that are typical during these films and other high cost items, like effects, many blockbusters still may not make a profit. Thus, dollar for dollar, many low-budget indy films might be a better investment, considering that the multiples are higher with a success; there exists more likelihood which a low-budget indy, which is done well with a reasonable budget, is going to be sold and make back it’s money, and the potential for loss is far less.
4. Are documentaries a great investment opportunity? Good documentaries are an especially good investment opportunity, considering that the costs of creating documentaries tend to be lower than for feature films. They can be finished with a lot smaller crew – even 2 or 3 people in the area – one for that camera, someone to handle sound and lighting, and another to coordinate arrangements and ask good questions within the field. Post-production may be easier too, with fewer takes and less film to edit for that final cut. Many documentaries are done having 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 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 discover a technique to legally to give them the money. Various vehicles include nonprofit corporations, LLCs, private placement memorandums, and loans. A typical requirement is that the individual hold the funds to shell out funds that might be lost in a risky venture and it is advised of the risk of the investment.
6. What are the key risks behind film investments and how can you prevent them? The true secret risks behind film investments will be the possible ways to lose all of it if the film doesn’t get completed or doesn’t find distribution. The simplest way to protect yourself is always to assess the potential of the feature film or documentary going in; assess whether or not the budget and expected return seems to be reasonable for your project; and assess if the producer, director, and others on the film have the experience to finish and market the film
7. Exactly how much could be the initial investment necessary to invest in a film production? A primary investment may range coming from a few thousand to a few hundred thousand, depending on the film and exactly how a good investment swosox structured. For example, some indy filmmakers doing low budget films have found creative techniques 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 20 investors to boost $100,000. Still others have looked for a few big investors, who are able to contribute a minimum of $20,000, $50,000, $100,000 or even more.
Then is a few investment in place, there might be other sources 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 exists some initial investment within 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 due to piracy and competition?