Investment in media is being looked up as a very viable and profitable alternative investment as compared to other traditional investments. Though film equity investors can be found but they are very rare and the competition for the investment is fierce. But as it is with any other investment, the same principle of profit and risk ratio applies- greater the profit, greater the risk. The maximum return on the investment leaves much to be desired financially. For an investment to be sound, it has to generate profits and that too, a sizeable one. A film needs to be thoroughly prepared, have an attractive script, have an excellent business plan, the right pitch and a knack of bringing out the best in its team.
Udi Droner, Director of Operations, Precise Real Estate solutions, says, ” It is imperative that the film makers and financiers analyze the movie investment as they would review any other financial investment”. He further elaborates,” investment in media is the same as investment in real estate and the benefits of the investment need to be studied well at every stage, right from the pitching of the location, budget, to the management of the development”.
Investment in cinema is treated as unpredictable or as a magic wand delivering unreasonable profits. It is essential to adopt a mature approach to the investment and reign the expectations within limits. Contrary to common belief film business does have an impressive history of stability like the real estate market. The demand for films never waivers and even when the markets face a financial crisis, film businesses have the ability to churn out profits, albeit lower ones. There are examples of films grossing in huge profits when major investments were hit by global recession. Investment in films have shown great resilience and stability.
Many venture capitalists like Roy Dekle, CEO and Partner at LAG Entertainment Group, review the investment prospects in the entertainment field and make sound investments. They have recognized the cinemas unparalleled ability to stir up cultural conversations and benefit the community at large. Though it is a profitable investment it is always advisable to pay attention and check whether:
there are legal disclaimers attached and what they say,
does it have a well organized business plan,
does it give a fair idea of the paucity of investments,
the contents of the project synopsis are clear,
the team details are mentioned,
does it state the hypothetical investment returns,
does it have a substantial plan detailing the project handling.
These and other necessary details can give one a fair and clear picture of the calculated risk one is about to take. These details also should be kept in mind if one is looking for investors. It is generally the individuals with high net worth and philanthropists who are ready to invest in such projects, looking for connections and referrals through them too can be very helpful. Usually non-profit organizations or communities linked to particular causes find such projects worth investing. Roy Dekel, charity forays, identify the films with subjects and stories that can help in the community building process and betterment of the society, it is such films that are thought worthy of investment according to him.
The initial investors of the film add the credibility factor for the potential investors. It’s very few films like ‘The Slum dog millionaire’ or ‘The King’s Speech’, which prove that there’s big bucks for the private investor in the movie market. Investing with partners or other instruments available in the market can be a good option. Investing in a prestigious production company mitigates the risk without having to do any leg work or production work. This often leads to partnership for next films too, if relationship formed is strong and profitable. Another way of investing in the media is through film funds, a number of which have emerged over the past few years.
In spite of the inherent risks and steps taken by investors to avoid the worst , many films however promising pre-release may never see the light of the day failing to deliver even reasonable profits. But if a film does flop it does have the potential to break even or show some profit in the overseas market, DVD rentals, video streaming or in the form of royalties. If the silver screen holds allure for you then it is the best to apply the standard rule which applies to all investments- never invest more than you can afford.