The particular Appeal of Investing in Films

Are usually films a good investment opportunity? I think they are for the right kind of investor. Here’s why. I have written this in a Q&A style to answer the major queries that prospective investors ask about whether to invest or not.

1 . Why is movie investment an attractive investment opportunity? Is it because of the high return or due to the nature of business?

For many traders, the high return is a big attract, because films do have the potential for an extremely large return, though there is a high risk with a lot of big “Ifs”. A film can do extremely well if it includes a good script, good acting, great production value, has a budget that fits the type of film this is, plus strikes a chord with vendors or buyers for the TV, DIGITAL VIDEO DISC, foreign rights, or other marketplaces. Then, if the film goes into theatrical release, it has the potential to have an even larger audience, though theatrical is not the primary source of income for most films, only the big blockbusters, since the theater owners take about 75% of the container office unless a film goes into the long-term release and there is a higher costs for prints (though an increasing number of theaters are going digital). The value of the theatrical release is more for its marketing value for gaining other types of sales, except for the huge blockbusters.

Despite the potential for high returns for a few films, investors in it for the money need to realize that any film investment is a big risk, because many troubles can develop from when a film goes into production to when it is finally launched and distributed. Theses risks include the film not being completed because it goes over budget and is unable to obtain additional financing or there are issues on the set. Another risk is that the film is not well-received by distributors and TV buyers, so it won’t get picked up. Or even if a film gets a distribution deal, the chance is that there is little or no money in advance, so the film does not see any further returns. So yes – a movie can have a high return, but an investor can lose it all.

Consequently, for many investors, other key reasons behind investing are more important. They believe in the message of the film. They like and support the film producers, cast, and crew. They will like the glamour of being involved with a film, including meeting the stars plus 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 see investing in the film as a taxes write-off, much like giving to a charitable organisation.

2 . What kind of investment returns can investors can expect, since many independent productions are not designed for big screens, where are the sales coming from?

If all of the stars align, and there is a good film done with a reasonable budget and distributors, buyers, and an market responds, the film could easily earn 4 to 10 instances its cost, making everyone very happy. A low-budget indy scenario with this level of return might be a film photo for $50, 000-200, 000. It may get $500, 000-750, 000 for any TV sale and earn $1-2 million more through DVD, streaming, and foreign rights sales, actually without a theatrical release.

For most films, the main value of a theatrical launch is the PR value of getting the movie known, so buyers will want to buy or rent the DVD plus TV buyers will want to show it on one of the premium cable movie channels. Also, most films do not get a theatrical release, and the money are earned through other stations.

3. What kind of movies can generally generate good profits, since the latest Oscar Awards show that a huge investment does not necessary mean huge returns?

Some of the big blockbusters that will pass the $100 million tolerance can certainly make a profit from a successful theatrical release, both in the U.
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H. and abroad. But whether they make money depends on their budget. Because of the high salaries of stars that are standard in these films and other high cost items, such as special effects, many blockbusters still may not make a profit. Thus, money for dollar, many low-budget indy films may be a better investment, since the multiples are higher with an achievement; there is more likelihood that a low-budget indy, which is done well in a reasonable budget, will be sold and make back it’s money, as well as the potential for loss is much less.

4. Are documentaries a good investment opportunity?

Great documentaries are an especially good expense opportunity, since the costs of making documentaries are much 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, one to handle sound and lighting, and one more to coordinate arrangements and ask good questions in the field. Post-production can be simpler too, with fewer takes plus less film to edit for that final cut. Many documentaries are usually done with a budget of $10, 000-50, 000, which can easily be recouped 5 to 20 times over with DVD, TV, and international sales.

5. Are there any legal or regulatory restrictions preventing individual traders to participate in film investment opportunities?

Generally, if you’ve got the money to invest, the filmmakers will find a way for you to lawfully to give them the money. Various automobiles include nonprofit corporations, LLCs, personal placement memorandums, and loans. A normal requirement is that the individual have the funds to invest funds that might be lost in a dangerous venture and is advised of the risk of the investment.

6. What are the important risks behind film investments and exactly how do you prevent them?

The key dangers behind film investments is the potential to lose it all if the film won’t get completed or doesn’t find distribution. The best way to protect yourself is to assess the potential of the feature movie or documentary going in; assess if the budget and expected return appears to be reasonable for the project; and evaluate whether the producer, director, and others around the film seem to have the experience to finish and market the film

7. How much will be the initial investment necessary to invest in a film production?

An initial expenditure can range from a few thousand to many hundred thousand, depending on the film and the way an investment is structured. For example , some indy filmmakers doing low budget films have found creative ways to get money by inviting investments of $1000-2000 from those participating in the film, such as the actors and crew members. Others have divided up expense packages into $5000 each regarding 20 investors to raise $100, 000. Still others have looked for a few big investors, who can contribute at least $20, 000, $50, 000, hundred buck, 000 or more.

Once there is some investment in place, there can be other sources associated with funds, such as GAP funding plus incentives from states and cities in the form of rebates after filming is done. VC funds are also a possibility, especially after there is some initial investment in the film, if the film’s budget will be at least $1-2 million.

eight. With modern technology advancements, what are the opportunities for independent and emerging film producers; or are these developments more of a threat due to piracy and competition?

There is a growing possibility today for indy and rising film producers to get distribution within alternate ways, such as through the Web, self-distributed streaming downloads or DVD AND BLU-RAY sales, play on mobile devices, and sales of DVDs or streaming rights to Netflix and Blockbuster. While piracy has always been a concern, brand new technological fixes can help to prevent this particular, such as locks to prevent duplication or even more than one or two showings of the movie. Other protections can come through licensing a film for distribution to platforms like iPhones, which have their own protections against copying.

Certainly, there is increasingly more competition, because more and more people can make films today, though the big studios plus distributors still dominate in the theatrical arena and they have the money to make the large films with big stars and special effects. But the new technologies for production and distribution offer so much more avenues to create and market indy films at a much lower costs. So there are naturally many more films out there from many thousands of producers.

But with creative promotion, filmmakers can help their film stand out among the clutter. They can creatively use the social media, such as LinkedIn, Facebook, and Twitter to let people know about their film. They could gain recognition on the film event circuit. They can get endorsements through well-known people. They can mount an e-mail PR campaign to the press. They can rent theaters to set up showings in different cities. They can put on activities with their film as a centerpiece. And they can make themselves available to appear on stereo and TV shows, as well as for interviews along with reporters for the print media. Consequently, all of these activities can help to sell their own film to distributors and purchasers for TV, DVD, foreign, as well as other sales, while attracting a growing market for the film, making distributors plus buyers even more eager to promote the film.

So , yes, indy films can be a great investment for certain films. And whether you make money or not, an investment can open u g many opportunities for more involvement within the film industry and for having fun.

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