Are films a good investment opportunity? I do believe these are for the right sort of investor. Here’s why. We have written this in a Q&A style to answer the key questions that prospective investors inquire about whether or not to invest or otherwise.
1. The reason why film investment a beautiful investment opportunity? Could it be due to the 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 for a huge return, though there exists a very high risk with a lot of big “Ifs”. A film can perform extremely well if it features a good script, good acting, good production value, includes a budget that suits the kind of film this can be, and strikes a chord with distributors or buyers for your TV, DVD, foreign rights, or any other markets. Then, in the event the film is put into theatrical release, it provides the possibility to get an even larger audience, though theatrical is not the primary revenue stream for many films, only the big blockbusters, since the theater owners take about 75% in the box office unless a film enters into a long-term release and you will find a high costs for prints (though progressively more theaters are going digital). The price of a theatrical release is much more for the promotional value for gaining other kinds of sales, aside from the huge blockbusters.
Despite the potential for high returns for some films, wikimedia in it for the investment need to recognize that any film investment is a big risk, because many problems can develop from when a film goes into production to after it is finally released and distributed. Theses risks range from the film not completed because 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 will not be well-received by distributors and television buyers, so that it doesn’t get picked up. Or perhaps in case a film receives a distribution deal, the risk is the fact that there is very little or no money up front, therefore the film will not see any further returns. So yes – a film may have a high return, but a trader can lose it all.
Consequently, for many investors, other key reasons for investing are definitely more important. They believe within the message of the film. They like and support the film producers, cast, and crew. They love the glamour of being involved with a film, including meeting the stars and going to film festivals. They see their investment as a chance to go to distant locations for filming and then for promoting the film. Plus they see making an investment in the film being a tax write-off, much like giving to your charity.
2. What sort of investment returns can investors can expect, since several independent productions are not intended for big screens, where are the sales provided by? If all the stars align, and there exists a good film completed with a fair budget and distributors, buyers, as well as an audience responds, the film could readily earn 4 to 10 times its cost, making everyone delighted. A minimal-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 the majority of films, the main price 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, and also the funds are earned through other channels.
3. What kind of movies normally can generate good profits, because the recent Oscar Awards show that a big investment fails to necessary mean big returns? A number of the big blockbusters that pass the $100 million threshold could certainly make a profit from a successful theatrical release, in the U.S. and abroad. But whether they produce a profit is dependent upon their budget. Because of the high salaries of stars that are typical within these films as well as other high cost items, including effects, many blockbusters still may not create a profit. Thus, dollar for dollar, many low-budget indy films might be a better investment, because the multiples are higher using a success; there is certainly more likelihood that a low-budget indy, which is done well with a reasonable budget, will be sold and make back it’s money, and the potential for loss is far less.
4. Are documentaries a wise investment opportunity? Good documentaries are an especially good investment opportunity, because the costs of creating documentaries are much less than for feature films. They could be completed with a lot smaller crew – even several individuals the area – one for your camera, anyone to handle sound and lighting, and the other to coordinate arrangements and ask good questions in the field. Post-production may be easier too, with fewer takes and fewer film to edit for the final cut. Many documentaries are done with a budget of $ten thousand-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 money to invest, 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. A normal requirement is the fact that individual have the funds to invest funds that could be lost in a risky venture and is advised of the potential risk of the investment.
6. Exactly what are the key risks behind film investments and how will you prevent them? The real key risks behind film investments is the possible ways to lose everything if the film doesn’t get completed or doesn’t find distribution. The easiest method to protect yourself is to assess the potential of the feature film or documentary going in; assess whether the budget and expected return appears to be reasonable for your project; and assess whether the producer, director, as well as others on the film appear to have the experience to finish and market the film
7. Just how much will be the initial investment necessary to invest in a film production? A primary investment can range from the 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 discovered creative techniques for getting funds by inviting investments of $1000-2000 from those participating in the film, such as 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 are able to contribute at the very least $20,000, $50,000, $100,000 or even more.
Then is a few investment set up, there can be other sources of funds, including GAP funding and incentives from states and cities by means of rebates after filming is finished. VC funds are also plausible, particularly after there is some initial investment within the film, when the film’s budget will be a minimum of $1-2 million.
8. With modern technology advancements, what are the opportunities for independent and emerging film producers; or are these developments even more of a threat as a result of piracy and competition?