Movies like “My Big Fat Greek Wedding” and “Avatar” are proof that investing in films is not such a bad idea. “My Big Fat Greek Wedding”, for example, was a low budget film that only cost $5 million to create but which brought in $369 million. While this may not be the case for all movies and films, it shows the potential that lies in film financing. However, even with this potential, it is important to note that over 60% of films produced annually flop at the box office. But this should not be reason to not invest. In fact, not investing could be riskier than investing.
Some of the benefits you get from investing in films include:
High Return Potential
The potential of high returns from movies is worth the risk when investing. The returns from movies are not even pegged to famous celebrities or movie stars. Reviews may also play a role, but they are not the driving factor either. All it takes is a clever marketing and campaign strategy to get the audience interested. For example, “The Devil Inside” opened at $34.5 million and taken the number one spot in North America just because of the marketing campaign that stirred people towards watching the film. It even outranked “Mission Impossible: Ghost Protocol.”
Films are non-correlated assets. They are not affected by the happenings on Wall Street. This is one of the best characteristics when it comes to investing. It helps to diversify your portfolio which ultimately spreads your risk.
With films and movies, a flop at the box office does not automatically mean that you have lost your money. It could mean that you ended up breaking even or making profit but not in epic proportions. These films and movies could still make more money in other markets through the sale of DVD’s, rentals of the same and product licensing deals. Choosing not to invest in film denies you the opportunity to at least make a little profit. Instead, you are left with the assurance that your funds are safe, but they also remain the same in amount.
The film industry is by and large the most stable area of investment. Over the years, recessions and World Wars have not affected the film industry. Investors, therefore, make their profit regardless of the state of the economy or the world at large. There are enough moneyed individuals to still keep the industry running even when all other areas of investment are suffering.
The risk in investing in movies comes from the uncertainty about whether or not the movie will be a hit in the box office. While this cannot be ascertained beforehand, a clever or tactful marketing approach can push the odds to lean more in favour of the movie being a hit. Not investing in film, therefore, denies you the opportunity to take advantage of all the benefits. It is a safe route that has no returns. Investing in film, on the other hand, opens you up to all these possibilities.