Are films a great investment opportunity? I do believe these are for the ideal kind of investor. Here’s why. I have written this in a Q&A style to reply to the key questions that prospective investors ask about if you should invest or otherwise.
1. Why is film investment a beautiful investment opportunity? Will it be as a result of high return or as a result of nature of business? For many investors, the high return is a huge draw, because films do have the possibility to get a large return, though there is a high risk with a lot of big “Ifs”. A film are capable of doing very well if it has a good script, good acting, good production value, has a budget that fits the sort of film this can be, and strikes a chord with distributors or buyers for that TV, DVD, foreign rights, or some other markets. Then, if the film is put into theatrical release, it offers the possible with an even larger audience, though theatrical is not the main source of income for many films, only the big blockbusters, considering that the theater owners take about 75% in the box office unless a film is put into a long-term release and you will find a high costs for prints (though an increasing number of theaters are going digital). The price of a theatrical release is a lot more because of its promotional value for gaining other sorts of sales, with the exception of the huge blockbusters.
Despite the chance of high returns for many films, Kia Jam inside it for the investment must realize that any film investment is a major risk, because many problems can produce from when a film enters into production to when it is finally released and distributed. Theses risks include 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 that the film will not be well-received by distributors and TV buyers, so that it doesn’t get picked up. As well as 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 does not see any more returns. So yes – a film could have a high return, but an investor can lose all of it.
Because of this, for most investors, other key reasons for investing tend to be more important. They feel in the message in the film. They enjoy and secure the film producers, cast, and crew. They like the glamour to be associated with a film, including meeting the heavens and going to film festivals. They see their investment as the opportunity to travel to distant locations for filming and for promoting the film. And they see purchasing the film as being a tax write-off, just like giving to some charity.
2. What kind of investment returns can investors should expect, because so many independent productions are certainly not intended for big screens, where are the sales provided by? If each of the stars align, and you will find a good film completed with a fair budget and distributors, buyers, plus an audience responds, the film could readily earn 4 to 10 times its cost, making everyone very happy. A low-budget indy scenario for this particular degree of return can be quite a film shot for $50,000-200,000. It might get $500,000-750,000 for any TV sale and earn $1-2 million more through DVD, streaming, and foreign rights sales, even without a theatrical release.
For many films, the key value of a theatrical release is the PR price of getting the film known, so buyers may wish to purchase or rent the DVD and television buyers would want to show it on one of 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 normally can generate good profits, considering that the recent Oscar Awards demonstrate that a huge investment fails to necessary mean big returns? A few of the big blockbusters that pass the $100 million threshold could certainly create a benefit from an excellent theatrical release, in both the U.S. and abroad. But if they produce a profit depends on their budget. As a result of high salaries of stars that are typical during these films and other high cost items, such as special effects, many blockbusters still may not make a profit. Thus, dollar for dollar, many low-budget indy films may be a better investment, because the multiples are higher using a success; there is certainly more likelihood which a low-budget indy, which is done well at a reasonable budget, will be sold to make back it’s money, and the chance of loss is much less.
4. Are documentaries a wise investment opportunity? Good documentaries are an especially good investment opportunity, since the costs of producing documentaries are much lower than for feature films. They can be finished with a much smaller crew – even several individuals the field – one for that camera, one to handle sound and lighting, and another to coordinate arrangements and ask good questions within the field. Post-production could be easier too, with fewer takes and much less film to edit for your final cut. Many documentaries are carried out using a budget of $ten thousand-50,000, which could be recouped 5 to 20 times over with DVD, TV, and foreign sales.
5. What are the legal or regulatory restrictions preventing individual investors to participate in in film investment opportunities?
Generally, if you’ve got the amount of money to spend, the filmmakers will find a technique to legally to offer them the money. Various vehicles include nonprofit corporations, LLCs, private placement memorandums, and loans. A typical requirement is the fact that individual have the funds to invest funds that might be lost in a risky venture and is also advised of the chance of the investment.
6. What are the key risks behind film investments and how can you prevent them? The key risks behind film investments will be the possible ways to lose everything if the film doesn’t get completed or doesn’t find distribution. The best way to protect yourself is to assess the chance of the feature film or documentary going in; assess whether or not the budget and expected return is apparently reasonable for your project; and assess whether or not the producer, director, yet others on the film seem to have the event to finish and market the film
7. Exactly how much would be the initial investment required to invest in a film production? A preliminary investment may range from a few thousand to many hundred thousand, depending on the film and how an investment swosox structured. As an example, some indy filmmakers doing low budget films have found creative ways to get funds by inviting investments of $1000-2000 from those engaging in the film, like the actors and crew members. Others have divided up investment packages into $5000 each for 25 investors to raise $100,000. Still others have looked for a few big investors, that can contribute at least $20,000, $50,000, $100,000 or more.
Then is a few investment set up, there may be other causes of funds, like GAP funding and incentives from states and cities as rebates after filming is finished. VC funds will also be a possibility, particularly after there exists some initial investment in the film, when the film’s budget will be at the very least $1-2 million.
8. With modern technology advancements, do you know the opportunities for independent and emerging film producers; or are these developments even more of a threat as a result of piracy and competition?