Are films a fantastic investment opportunity? I believe that they are for the perfect kind of investor.
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Here’s the reason why. I have written this in a Q&A style to answer the major questions that prospective investors ask about whether to invest or not.1. Why is movie investment an attractive investment opportunity? Can it be because of the high return or due to the nature of business?For most investors, the large return is a big draw, since films do have the potential for quite a large yield, though there’s a really high risk with a lot of big”Ifs”. A movie can perform exceptionally well if it’s a good script, fantastic acting, fantastic production value, has a budget that fits the sort of movie this is, and strikes a chord with buyers or sellers for the TV, DVD, foreign rights, or alternative markets. Then, in the event the movie goes into theatrical release, it has the potential to have a much bigger audience, even though theatrical is not the principal source of revenue for the majority of movies, only the huge blockbusters, because the theater owners consider roughly 75% of their box office unless a film goes into a long-term release and there’s a high costs for prints (though an increasing number of theaters are going digital). The value of a theatrical release is much more for its own promotional value for gaining different sorts of earnings, but for the huge blockbusters.Regardless of the potential for high yields for some films, investors in it for the money need to understand that any film investment is a major risk, since many problems can develop from when a movie goes into production to when it is eventually released and distributed. Theses risks include the movie not being completed since it moves over budget and is not able to get additional financing or there are problems on the set. The other danger is that the movie is not well-received by distributors and TV buyers, therefore it will not get picked up. Or even if a film receives a distribution deal, the risk is that there’s little or no money up front, so the film does not see any additional yields. So yes – a movie may have a high yield, but an investor could lose everything.Because of this, for many investors, other key reasons for investing are far more significant. They believe in the concept of the film. They enjoy the glamour of being involved with a movie, such as meeting the celebrities and visiting film festivals. They see their investment as an opportunity to travel to distant locations for filming and for boosting the film. 2. What type of investment returns can investors can anticipate, because many independent productions are not intended for large screens, where are the earnings coming from?If all the stars align, and there’s a fantastic film done with a reasonable budget and vendors, buyers, and an audience reacts, the movie could easily earn 4 to 10 times its cost, which makes everybody very pleased. A low-budget indy scenario for this amount of return may be a movie shot for $50,000-200,000. It may get $500,000-750,000 to get a TV purchase and get $1-2 million through DVD, streaming, and foreign rights sales, even with no theatrical release.For most movies, the most important significance of a theatrical release is the PR value of getting the picture known, so buyers might want to buy or rent the DVD and TV buyers may wish to show it upon one of the premium cable movie channels. 3. What type of films can usually generate excellent profits, since the recent Oscar Awards show a huge investment does not necessary mean big returns?A number of the big blockbusters that pass the $100 million threshold can certainly make a profit from a successful theatrical release, both in the U.S. and abroad. But if they make a profit depends on their budget. Thus, dollar for dollar, many low-budget indy movies could possibly be a better investment, since the multiples are higher with a victory; there’s more likelihood that a non invasive indy, which can be done nicely at a reasonable budget, will likely be sold and make back it’s money, and also the potential for reduction is much less.4. Are documentaries a fantastic investment prospect?Superior documentaries are an especially good investment opportunity, since the costs of earning documentaries are much lower than for feature films. They may be carried out with a much smaller team – even a couple of people in the field – one for your camera, you to handle lighting and sound, and another to organize arrangements and ask great questions within the field. Post-production can be simpler too, with fewer takes and much less film to edit for the final cut. Many documentaries are done with a budget of $10,000-50,000, which can easily be recouped 5 to 20 times over with DVD, TV, and foreign sales.5. Are there any regulatory or legal constraints preventing individual investors to take part in film investment opportunities?Normally, if you have got the money to invest, the filmmakers will find a means for you to lawfully to give them the cash. A normal requirement is that the person possess the funds to spend funds that may be lost in a risky enterprise and is advised of the risk of the investment.