Indie Film Investments
 Independent films present an alternative
investment opportunity. The Blair Witch Project or Clerks to The
Passion of the Christ all have one thing in common: They are
independent films, commonly known as indie films. Films such as
these present a unique opportunity for investors to get involved
with a creative project and see their names up on the big screen.
An indie film is produced independently from major Hollywood
studios. Because of their distance from Hollywood, indie films are
often seen as more artsy or edgy than major studio productions. They
are shown around the world at festivals such as the Sundance Film
Festival in Utah or the Cannes Film Festival in France. Particularly
buzz-worthy projects are sometimes purchased by major studios for
distribution. Indie films are funded with the producers' own money,
through loans, or with the help of private investors.
Investors do not necessarily have creative input despite
contributing money. There are several ways investors can find films
in which to invest. If contacted directly, most producers will be
happy to discuss projects they have in the works. Investors could
find producers through independent production company websites or
make a connection in person by attending a film festival and
striking up a conversation. Film trade journals such as Variety can
also provide valuable information. These publications often contain
lists of projects, and films listed as "in production" could still
be in need of investors. Websites that focus on film investment-such
as FilmInvestorsNetwork.com or MoviePartners.com-can help investors
select investment opportunities.
Most indie film investments are structured as limited partnerships
or limited liability companies, according to Eufemm� Films.
Investors are only responsible for the amount of money they decide
to invest, and are not accountable for other debts or obligations.
Investors are typically repaid their initial investment before
anyone else receives anything from the project.
"After the investors have recouped and received their premium, a
revenue-sharing mechanism is activated," according to Eufemm� Films.
These agreements can vary from project to project. For example, the
upcoming film Crawdaddy, produced by SKS Entertainment, offers two
investment packages from which investors can choose. In one package,
the investors' initial investment is not returned right away, but
they receive a higher percentage of all income generated by the
film. Another option is that the initial investment is repaid
immediately but the investor receives a significantly lower
percentage of the film's net income. The first option, which is
riskier, has the potential for greater returns overall, while the
second option offers a quicker recovery of funds with a lower chance
of profit.
But just because investors are contributing money, that does not
necessarily mean they have influence over the creative side of the
filmmaking process.
Meddling in the production process is frowned upon by most,investors
should expect updates and news as the various stages are completed
with the film." Investors should not invest thinking they will have
creative input, but for the thrill of being part of the filmmaking
process.
The cost of producing indie films varies widely depending on the
project, anywhere from a few thousand dollars to $20 million or
more.
In Hollywood terms, a low budget film is anything under $10 million.
Little Miss Sunshine's budget was $8 million, while The Blair Witch
Project cost a mere $60,000 to produce. At the other end of the
spectrum, Mel Gibson's The Passion of the Christ boasted a budget of
$30 million.
Returns on these projects can be all across the map. Although exact
returns on investment are unknown for the aforementioned films, the
worldwide gross net income can give a rough idea of range. Little
Miss Sunshine grossed $100,320,452 worldwide, The Blair Witch
Project grossed $248,639,099 and The Passion of the Christ grossed
$611,899,420. Budget and income statistics are from
BoxOfficeMojo.com.
Investors need to conduct proper due diligence on a film
investment just as they would for any other investment. Take the
time to research producers and production companies and see what
films they have produced in the past and how they did. This can give
an idea of the direction future projects could take.
As with any investment, due diligence and patience is required.
Investors can protect themselves by looking closely at projects,
making sure the filmmakers are qualified, finding out who the
filmmakers want to pursue actor-wise and seeing who they have that
can start knocking on doors of distributors and/or producer's
[representatives].
Something many investors may not realize is that there are tax
benefits in place for film production costs. According to Section
181 of the Internal Revenue Code, investors can deduct 100 percent
of funds invested in "qualified" films. A "qualified" film has a
budget below $15 million, with a minimum of 75 percent of the budget
going towards qualified compensation-compensation for services
performed in the U.S. by actors, producers, directors or other
production staff. This tax benefit expires Jan. 1, 2009. Many states
offer their own film investment tax incentives, so investors should
do some research in their area to learn what other benefits may
apply.
Film investment should not be looked at as a way to make a quick
buck. It's for investors looking to put their money into a fun and
creative project. Film investment can provide an experience like no
other, but investors should be sure never to invest more than they
can afford to lose.
Those who provide funds for a film's production will have their
names listed in the credits, typically as a producer. Investors can
also attend premiers and potentially brush shoulders with some of
the performing world's finest. While it is always possible that
one's investment will turn out to be a money-making hit, the main
appeal of film investments is the opportunity to be involved in
something unique.
Money is one thing, but the idea of being involved in a film-being
in and around something that's so creative and energizing-can be
just as big a motivation,Investors can leave a legacy...seeing their
name appear in the credits for many years to come." |
