Are movies a good investment prospect? I believe they are for the perfect kind of investor. Here’s why. I have written this at a Q&A style to answer the significant questions which prospective investors ask about whether to invest or not.1.
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Is it because of the large return or due to the nature of business?For many investors, the large return is a big draw, because movies have the potential for quite a large return, though there is a very high risk with a great deal of big”Ifs”. A movie can perform exceptionally well if it has a fantastic script, fantastic acting, good production value, has a budget that fits the type of film this is, and strikes a chord with buyers or sellers to the TV, DVD, international rights, or other niches. Next, in the event the film goes into theatrical release, it has the potential to have a much larger audience, though theatrical is not the principal source of income for the majority of films, just the big blockbusters, because the theater owners consider about 75% of the box office unless a movie goes into a long-term release and there is a high costs for prints (though an increasing amount of theaters are going digital). The worth of a theatrical release is more because of its own promotional value for gaining other sorts of sales, except for the huge blockbusters.Despite the potential for high returns for some films, investors in it for the money have to understand that any movie investment is a major threat, because most problems can grow from when a film goes into production to if it’s eventually released and dispersed. Theses dangers include the movie not being finished since it moves over budget and is unable to find additional financing or there are issues on the set. The other risk is that the movie isn’t well-received by distributors and TV buyers, therefore it doesn’t get picked up. Or even if a film receives a distribution deal, the danger is that there’s little if any money up front, so the movie does not see any further returns. So yes – a movie can have a high return, but an investor can lose everything.As a result, for many investors, other key reasons for investing are far more important. They believe in the concept of the film. They enjoy and encourage the movie producers, cast, and crew. They like the glamour of being involved with a movie, such as meeting the celebrities and visiting film festivals. They see that their investment as an opportunity to travel to distant places for filming and also for promoting the movie. 2. What type of investment returns can investors can expect, since many independent productions are not designed for large screens, where are the sales coming from?If all the stars align, and there’s a good film done with a fair budget and vendors, buyers, and also an audience reacts, the movie could readily earn 4 to ten times its cost, making everyone very happy. 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 for a TV sale and earn $1-2 million through DVD, streaming, and foreign rights sales, even with no theatrical release.For many films, the most important value of a theatrical release is the PR value of finding the film known, so buyers might want to buy or rent the DVD and TV buyers will want to show it on one of the premium cable movie channels. 3. What type of movies can usually generate excellent profits, because the recent Oscar Awards demonstrate that a huge investment doesn’t necessary mean big returns? But whether they make a gain is dependent upon their funding. Due to the high salaries of stars which are typical in such pictures and other high cost items, such as special effects, many blockbusters still may not make a profit. Therefore, dollar for dollar, many low-budget indy films could possibly be a better investment, since the multiples are higher with a victory; there’s more likelihood that a low-budget indy, which can be done well at a reasonable budget, will be marketed and make back it’s money, and the potential for loss is less.4. Are documentaries a fantastic investment opportunity?Superior documentaries are a particularly good investment opportunity, since the costs of making documentaries are a lot lower than for feature films. They can be done with a much smaller crew – even a couple of people in the field – one for your camera, one to handle lighting and sound, and yet another to coordinate arrangements and ask great questions within the area. Post-production can be easier too, with fewer takes and less film to edit for the last cut. Many documentaries are complete using a budget of $10,000-50,000, which may easily be recouped 5 to 20 times over with DVD, TV, and overseas sales.5. Are there any legal or regulatory constraints preventing individual investors to participate in film investment opportunities? A variety of vehicles include nonprofit corporations, LLCs, private placement memorandums, and loans. A normal requirement is that the individual have the funds to invest money that may be missing in a risky enterprise and is advised of the risk of the investment.