Are films a great investment opportunity? I do believe these are for the ideal sort of investor. Here’s why. We have written this in a Q&A style to answer the major questions that prospective investors inquire about whether or not to invest or not.
1. The reason why film investment a stylish investment opportunity? Is it due to the high return or due to the nature of business? For many investors, the high return is a huge draw, because films do have the possibility for any huge return, though there exists 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 suits the sort of film this is, and strikes a chord with distributors or buyers for your TV, DVD, foreign rights, or some other markets. Then, if the film goes into theatrical release, it provides the potential to get an even larger audience, though theatrical will not be the key revenue stream for most films, merely the big blockbusters, because the theater owners take about 75% in the box office unless a film goes into a lengthy-term release and there is a high costs for prints (though a lot more theaters are going digital). The need for a theatrical release is much more for the promotional value for gaining other kinds of sales, with the exception of the massive blockbusters.
Despite the potential for high returns for many films, Kia Jam inside it for the investment need to recognize that any film investment is a big risk, because many problems can produce from the time a film goes into production to when it is finally released and distributed. Theses risks include the film not completed as it goes over budget and struggles to get additional financing or you will find problems on the set. Another risk is that the film is not really well-received by distributors and TV buyers, so that it doesn’t get found. As well as when a film turns into a distribution deal, the chance is the fact that there is little or no money in advance, and so the film does not see any more returns. So yes – a film can have a high return, but an investor can lose it all.
Because of this, for most investors, other key factors behind investing are definitely more important. They believe within the message of the film. They enjoy and secure the film producers, cast, and crew. They love the glamour of being associated with a film, including meeting the stars and going to film festivals. They see their investment as an opportunity to travel to distant locations for filming and for promoting the film. And they also see making an investment in the film as a tax write-off, similar to giving to your charity.
2. What type of investment returns can investors can get, because so many independent productions usually are not designed for big screens, where are definitely the sales originating from? If all the stars align, and you will find a good film done 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 very happy. A low-budget indy scenario with this 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 the majority of films, the key value of a theatrical release will be the PR price of getting the film known, so buyers may wish to purchase or rent the DVD and television buyers may wish to show it on among 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 usually can generate good profits, since the recent Oscar Awards demonstrate that a huge investment does not necessary mean big returns? A number of the big blockbusters that pass the $100 million threshold could certainly make a benefit from a successful theatrical release, both in the U.S. and abroad. But whether or not they create a profit is dependent upon their budget. Due to the high salaries of stars which can be typical during these films as well as other high cost items, such as special effects, many blockbusters still might not produce a profit. Thus, dollar for dollar, many low-budget indy films may be a better investment, considering that the multiples are higher having a success; there is certainly more likelihood that the low-budget indy, which is done well in a reasonable budget, will be sold and make back it’s money, and the opportunity of loss is much less.
4. Are documentaries a great investment opportunity? Good documentaries are an especially good investment opportunity, considering that the costs of creating documentaries are far less than for feature films. They could be done with a significantly smaller crew – even two or three folks the field – one for that camera, one to handle sound and lighting, and the other to coordinate arrangements and ask good questions within the field. Post-production may 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 $ten thousand-50,000, which may be easily recouped 5 to 20 times over with DVD, TV, and foreign sales.
5. What are the legal or regulatory restrictions preventing individual investors to sign up in film investment opportunities?
Generally, if you’ve got the amount of money to spend, the filmmakers will discover a way to legally to give them the money. Various vehicles include nonprofit corporations, LLCs, private placement memorandums, and loans. A normal requirement is that the individual hold the funds to shell out funds that could be lost in a risky venture and is also advised of the chance of the investment.
6. Exactly what are the key risks behind film investments and how can you prevent them? The key risks behind film investments is definitely the possible ways to lose it all in the event 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 is apparently reasonable for that project; and assess whether or not the producer, director, as well as others on the film seem to have the experience to complete and market the film
7. Exactly how much could be the initial investment necessary to invest in a film production? An initial investment can range from the few thousand to several hundred thousand, depending on the film and how an investment swosox structured. For instance, some indy filmmakers doing low budget films have discovered creative techniques for getting funds by inviting investments of $1000-2000 from those engaging in the film, such as the actors and crew members. Others have divided up investment packages into $5000 each for 20 investors to raise $100,000. And others have looked for a few big investors, who can contribute at the very least $20,000, $50,000, $100,000 or even more.
Once there is some investment in place, there can be other types 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 certainly some initial investment inside the film, when the film’s budget will likely be at the very least $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?