How to invest in film
Investing in film can be a daunting endeavour. The glitz and glam of the big screen have long cemented film as a particularly alluring industry, but many are hesitant to invest in this potentially lucrative area.
There is a general conception that investing in film is always a risky business, with investors feeling intimidated if they aren’t very knowledgeable about the industry and how to exercise due diligence.
In fact, the film industry offers fantastic opportunities to investors and can provide generous returns to those who invest their money sensibly.
Investing in film should be an exciting prospect, but as always, it’s important to listen to professional advice if you want to make strategic financial decisions.
Why invest in film?
As an investment opportunity, film offers some key advantages to the wary investor. As an asset, film is relatively recession-proof. Despite periods of extreme market volatility and taking into account that no-one is completely immune, the media and entertainment sector has historically endured financial downturns much better than other industries.
It used to be claimed that even in tough economic times, going to the cinema would be an affordable form of entertainment and would not suffer in the same way that businesses such as boutique gift companies would do.
Funnily enough, it wasn’t anticipated that the next economic downturn would coincide with a global pandemic. But despite people being physically restricted from supporting film through visiting cinemas, the film industry is one of the few sectors that has proved resilient during our current period of economic uncertainty.
Film is a resilient industry
The coronavirus outbreak has led to increased media consumption in many countries around the world. When the world strips back and people are left to their own devices, people appear to turn on the TV (or their laptop, tablets and smartphones).
Although the worldwide lockdowns have resulted in serious financial predicaments for many arts hubs and cinemas, if there is one thing that coronavirus has shown us about the film industry, it’s that it’s not going anywhere anytime soon.
It turns out that when people are given more spare time to use as they please, an enormous amount of people turn to film for their entertainment.
The use of streaming services has exploded in the last few years, changing the way we watch films, and importantly, how much of our time we spend watching them. The use of these services by more and more people has created an ever-increasing demand for new films and TV shows to the industry’s benefit.
Unsurprisingly, streaming services are flourishing with Netflix seeing a pandemic-induced boost in their global subscriptions of 10 million new sign-ups. If good films are being made, people will watch them. Although it’s a simple statement, it really is true.
Why invest in UK film?
There’s no doubt about it, the UK boasts diverse creative talent, skilled technical professionals, and film producers that are global leaders in the industry. The UK’s long history of producing quality content extends into today and it’s easy to see why – we’re equipped with the talented workforce that the industry needs to flourish.
How to invest in film
Few people have a clear and thorough understanding of the film investment industry to be able to conduct satisfactory due diligence on their potential investment projects. With tens or hundreds of thousands of pounds on the line, consider calling in the expertise of the professionals.
Any simple guide to investing in film will probably give you advice along the lines of ‘avoid films that are intended for a niche audience’ and ‘go with big-name directors’. On paper these are sensible suggestions, but such general claims mask the importance of smaller details that can hugely impact a film’s success.
There are always exceptions to the rule, and nuances to broad claims. For example, The Blair Witch Project (1999) is a hugely successful contradiction to both of the guidelines mentioned above. This paranormal documentary-style horror film was directed by film students on an extremely small budget and shot on shaky hand-held cameras, yet grossed $248.6 million at the box office.
Success has to start somewhere. There are always going to be directors who turn their debut films into blockbuster hits and every A-list actress has her first breakthrough role. As frustrating as this can be to predict, it’s a characteristic of the turbulent world of cinema.
This isn’t to say that you should avoid big-name films and take large financial risks on the underdogs, but such examples help to demonstrate that the world of film (just like other areas within the arts) is highly unpredictable, especially for investors going into the industry blind.
What to think about before investing in film: Investment companies
It’s best not to make large investment decisions on your own, as you’ll find yourself guided by personal taste over facts. The world of film is wonderfully exciting, but if you get too wrapped up in the details it’s easy to lose sight of the aim of your investments – to maximise returns.
By using an investment company that has a strict film selection process, you can benefit from a structure that mitigates risk and maximises investment returns.
At Films4U we select films to fund through a thorough due diligence review process. We start by conducting an initial desktop review where we look at more than 500 films per annum. Our rigorous review procedures mean we reject 90% of films at this stage.
The films that make it through (usually less than 50 films at this stage) are put through a detailed in-depth review where we spend a minimum of three months looking into all aspects of the film/company’s business, financials, key management, competition, business plan, projections, market sector, exit strategy (we always aim for achieving exit within three to five years) and EIS compliance. The Investment Committee then undertakes the deal approval.
Protect your film investments with guaranteed distribution
Every film made needs to be sold twice. First, on a pre-sale basis to distributors, and second to the consumer. A successful project needs to fulfil this two-step challenge if it is going to provide a return on investment. As already mentioned, this can be extremely difficult for film-makers to pull off, and for investors to predict.
But this doesn’t mean that cinema is an investment no-go. This certainly isn’t the case. It just means that investors should choose an experienced film funding company to facilitate their investments. Investing with a company that produces films with guaranteed distribution such as Films4U means the films you fund have a greater chance of success, the extent of which will determine your returns.
Not many companies offer this guarantee yet it provides a huge benefit to investors – particularly those who are concerned that their film will never make it through the first hurdle.
Films4U is a specialised film funding, production, and distribution company with an excellent track record – we’ve been investing in the industry for over 30 years, and haven’t lost money on a film yet. Instead, we’ve consistently returned market-leading profits.
Unlike most EIS companies, we guarantee the distribution of every film that we have raised money for through your investments. As each film is guaranteed to be seen and generate a return, we’ve had over 600 films return profits.
The information contained on this website should not be taken as financial advice or as a personal recommendation by Films4U. Before investing you should always seek appropriate legal and financial advice from an authorised person specialising in investments of this kind.