The Appeal of Investing in Films

Are films a good investment prospect? I believe they are for the right type 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 which potential investors ask about whether to invest or not.1. Can it be due to the high return or due to the nature of business?For most investors, the large return is a big draw, since films have the potential for a very large yield, even though there is a very high risk with a great deal of big”Ifs”. A film can perform exceptionally well if it’s a good script, good acting, fantastic manufacturing value, has a budget that is suitable for the sort of film this is, and strikes a chord with distributors or buyers to your TV, DVD, foreign rights, or other markets. Then, in the event the movie goes into theatrical release, it has the potential to have an even larger audience, even though theatrical is not the primary source of revenue for the majority of movies, only the huge blockbusters, since the theater owners consider roughly 75% of the box office unless a movie goes into a long-term launch and there is a high costs for prints (even though an increasing number of theaters are moving digital). The value of a theatrical release is more because of its promotional value for gaining different sorts of earnings, except for the large blockbusters.Despite the potential for high returns for some films, investors in it for the money have to understand that any film investment is a major threat, because most problems can develop from when a movie goes into production to when it is eventually released and distributed. Theses dangers include the movie not being finished since it moves over budget and is not able to find additional financing or there are problems on the set. The other risk is that the film isn’t well-received by distributors and TV buyers, so it will not get picked up. Or even when a film receives a distribution deal, the danger is that there’s little or no money up front, so the movie does not observe any further returns. So yes – a film may have a high return, but an investor can lose it all.Because of this, for many investors, other important reasons for investing are far more significant. They believe in the message of the film. They enjoy the charm of becoming involved with a movie, such as meeting the celebrities and going to film festivals. They see that their investment as an chance to travel to distant locations for filming and for boosting the movie. 2. What type of investment returns can investors can anticipate, since many independent productions are not designed for big screens, where are the sales coming from?If all the stars align, and there’s a good movie done with a fair budget and vendors, buyers, along with also an audience reacts, the movie could easily earn 4 to ten times its cost, making everyone very happy. A low-budget indy scenario for this amount of return may be a film shot for $50,000-200,000. It may get $500,000-750,000 for a TV sale and earn $1-2 million through DVD, streaming, and international rights sales, even without a theatrical release.For many films, the main significance of a theatrical release is the PR value of finding the picture known, so buyers will want to buy or rent the DVD and TV buyers may wish to show it on one of the premium cable movie channels. 3. What kind of movies can usually generate good profits, since the recent Oscar Awards demonstrate that a huge investment doesn’t necessary mean big returns? But whether they make a gain depends on their funding. Thus, dollar for dollar, lots of low-budget indy movies could possibly be a better investment, because the multiples are greater with a victory; there is more likelihood that a low-budget indy, which is done nicely at a sensible budget, will be sold and return it’s money, and also the potential for reduction is much less.4. Are documentaries a good investment prospect?Superior documentaries are an especially excellent investment opportunity, because the expenses of earning documentaries are a lot lower than for feature films. They can be done with a much smaller crew – even two or three people in the field – one for the camera, you to handle lighting and sound, and yet another to coordinate arrangements and ask good questions in the field. Post-production can be easier also, with fewer chooses and less movie to edit for the final cut. 5. Are there any legal or regulatory constraints preventing individual investors to participate in film investment opportunities? A typical requirement is that the individual possess the funds to invest money that may be lost in a risky venture and is advised of the danger of the investment.

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