You have heard this story before… One lucky investor takes a chance by putting money into a quirky indie film project. Fast-forward a year or two later and that same investor is experiencing mountain-sized returns while walking the red carpet and planning an early retirement.
Could the same thing happen to you? The short answer is “yes.” However, before you start counting your money it’s vital that you have a solid understanding of how films are produced and how they typically generate income so you can make an informed decision.
While any investment is speculative, film investment is extremely risky and should
be treated as such. To that end, this is the first in a series of articles designed to demystify the business of film investment.
“The film industry” is a broad label and encompasses so much more than just the mega-budgeted films you see in the multiplex. In fact, estimates indicate that only 6% of the films made ever see the inside of a movie theater. However, that same 6% make up close to 80% of the income generated in what is a multi-billion dollar industry. A bit of simple math will show that the remaining 20% of income generated by the movie viewing public, is done so through digital downloads and streaming, cable viewing/subscriptions, and to a lessening extent, DVD rental and purchase. Therefore, it is not uncommon for a film to be fiscally successful without becoming a “hit” in the eye of the general public.
So what do you
look for when considering a film investment? That list varies based on genre, but there are several key pieces that should be in place before you move forward with film investment.
Experience: Look for a production team with at least some experience producing movies. That team may have never worked together before but if the individuals involved have at least one or two feature films under their belt, acting in a management capacity, then they will do a much better job of shepherding the proposed project through the appropriate motions.
A Solid Business Plan: As with any other venture, make sure the filmmakers have a business plan that answers all or at least most of your questions. You will want to see a concise description of the project, background of the filmmakers, comps of similar films in the same genre with like budgets and level of talent, and a realistic distribution plan that should take the project from initial investment through at least a seven year cycle (the standard length for a distribution contract). This distribution plan should also provide tiered strategies for success. If “Strategy A” doesn’t work then the filmmakers will employ “Strategy B” and so on.
Realistic Expectations: While lighting-fast ROI is what everyone strives for, it is important that you have an understanding of the life cycle of a film project, which some say is akin the gestation period of a baby elephant.
Count on a period of at least eighteen months from the time the director calls “action” to the time the film even starts to see the light of day. If your project is lucky enough to be acquired for distribution, there is typically an additional three-to-six month gap to put together all the pieces required to get the film to the market. On average you can assume
24 months before your project begins to generate income.
The next article in this series will cover how profits are actually distributed once your feature project reaches the mass market.
by an Emmy Award winning Producer and partner in the production company 180 Degrees