Are films a good investment opportunity? I think they are for the right kind of investor. Here’s exactly why. I have written this in a Q&A style to answer the major queries that prospective investors ask about regardless of whether to invest or not.
1 . Why is film investment an attractive investment opportunity? Could it be because of the high return or due to the nature of business?
For many investors, the high return is a big draw, because films do have the potential for a very large return, though there is a quite 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 will fits the type of film this is, plus strikes a chord with marketers or buyers for the TV, DVD, foreign rights, or other marketplaces. Then, if the film goes into theatrical release, it has the potential to have an also larger audience, though theatrical is just not the primary source of income for most films, only the big blockbusters, since the theater proprietors take about 75% of the box office unless a film goes into a long-term release and there is a high costs for prints (though progressively more theaters are going digital). The value of a theatrical release is more for its marketing value for gaining other kinds of sales, except for the huge blockbusters.
Despite the potential for high returns for some films, investors in it for the money need to realize that any film investment is a big risk, because many difficulties can develop from when a film switches into production to when it is finally released and distributed. Theses risks include the film not being completed since it goes over budget and is unable to obtain additional financing or there are troubles on the set. Another risk would be that the film is not well-received by suppliers and TV buyers, so it isn’t going to get picked up. Or even if a movie gets a distribution deal, the chance is that there is little or no money up front, so the film does not see any more returns. So yes – a movie can have a high return, but a good investor can lose it all.
Because of this, for many investors, other key reasons behind investing are more important. They trust in the message of the film. These people like and support the film producers, cast, and crew. These people like the glamour of being involved with a movie, including meeting the stars and going to film festivals. They discover their investment as an opportunity to visit distant locations for filming as well as for promoting the film. And they discover investing in the film as a tax write-off, much like giving to a charitable trust.
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2 . What kind of investment returns may investors can expect, since many independent shows 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 plus distributors, buyers, and an viewers responds, the film could easily earn 4 to 10 instances its cost, making everyone happy. A low-budget indy scenario for this level of return might be a film photo for $50, 000-200, 000. It may get $500, 000-750, 000 for the 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 purchase or rent the DVD and TV buyers will want to show this on one of the premium cable film 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 recent Oscar Awards show that a huge investment does not necessary mean large returns?
Some of the big blockbusters that pass the $100 million tolerance can certainly make a profit from a successful theatrical release, both in the U. Ersus. and abroad. But whether they make money depends on their budget. Because of the high salaries of stars that are typical in these films and other high cost items, such as special effects, many blockbusters still may not make a profit. Thus, dollar 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 at a reasonable budget, will be sold plus make back it’s money, as well as the potential for loss is much less.