How to Invest in Movies: Everything You Need to Know

When investing in movies, individuals can choose from various options such as financing a film project, investing in a production company, or even purchasing shares in a film fund. These investments can provide investors with a way to participate in the entertainment industry and potentially benefit from the success of a movie, whether it becomes a box office hit or gains popularity through streaming platforms.

Let's find out how to invest in movies.

What it Means to Invest in Movies

Investing in movies means helping fund the expense of production, staffing, marketing and getting a movie to market. Imagine that a new movie is like a startup business seeking crowdfunding or equity investments. You get an opportunity to place your money with the business — or in this case a movie production — and when it is successful, you get a cut of that success.

Generally, this comes in the form of private equity or hedge funds. Because of this, investing in movies is reserved for sophisticated investors. But the more complex the investment, the more upside it can potentially have.

When investing, you’ll likely be getting involved with a portfolio of films instead of just one. That helps spread the risk out to provide diversification. The portfolio of films will vary based on the production or distribution company.

For beginner investors, you can still get involved with up-and-coming movie producers through crowdfunding. Some new producers use a platform called Movie Investor to help raise capital for a new project. Just be sure you’re doing your due diligence on the production.

Investing in Movies: An Overview

Before you start looking into how to invest in movies, take some time to familiarize yourself with the industry. Here are a couple of key items to note.

1. The Movie Industry Overview

Making a movie requires many steps and people. It all starts with an idea. Then the idea moves to the scriptwriters who turn the idea into a linear form with dialogue, which gives greater context for what’s happening in the film.

The film then goes to the storyboard artists who help create the visuals and outline the camera angles. Casting the film comes next and is a crucial element in just how successful the film will likely be. Choosing filming locations is also important because it impacts both the movie’s visuals and its final budget.

You’re probably familiar with the next step. It’s filming where the actors say their lines and the film crew tries to capture just the right angles to build emotion and engage the viewer. The movie then moves to post-production where they add sound effects, edit the various pieces together and create what you’ll see on screen.

All that is the production process. But then comes the distribution phase. Getting the film in front of people is more complex than you might think. Picking up movie theaters that will show the film and planning out the marketing strategy is essential to the film’s success.

2. Box Office Performance Analysis

Films are art forms, but there are some major indicators of how they will perform at the box office. Some telling signs of box office performance include:

• Production budget
• Critical reviews
• Genre (horror and comedy tend to perform best)
• Star power
• Movie release date (summer and holiday films are higher grossing)
• Award nominations

Investors evaluating whether to place their money with a producer or film can review these factors to make an informed decision.

3. Trends and Forecasting

Consumer behavior can help you predict the success of a film. Movie types or production companies tend to see similar results to their competitors. Trends in moviemaking can help produce success, though of course all it takes is one successful film within a new category or type to set new trends and those are the hardest to predict.

Evaluating a movie’s genre, stars and audience can help in understanding its potential success and growth. There is still risk in investing in popular films because you never know when one that appears to have all the success factors will fall flat.

Benefits of Investing in Movies

Once you’ve answered the question of whether you can invest in movies, you’re ready to evaluate whether you should place your money in this industry. Here’s a look at some of the benefits you can reap.

Creative Expression and Artistic Endeavors

Movie investors are supporting an art form and get to be part of the creative process. With your money, you support the filmmaker’s vision and contribute to the art of storytelling. For those who love movies, it’s a chance to be a part of the complicated process of bringing a film to the screen.

Potential High Returns

Investments with high risks also have the highest potential upside. Movies are risky investments because you never know when something will go wrong impacting production, when a movie will get cut for some reason or when it won’t perform well at the box office despite having all the right indicators. But a successful movie can offer incredible returns, which makes this type of investment attractive to most people.

Diversification

Investors face big decisions about where to place their money. And while some investments are more tried and true than movies, you only want to put so much of your portfolio into any one investment strategy. Movies offer diversification into a new asset class to help you find success in all market conditions.

Passion and Entertainment

Some people just love the movies. Maybe it’s the theater experience or they know just enough about film angles, acting and making a movie successful. Investing in the industry makes it possible to get involved with something you enjoy as a form of further entertainment.

Ways to Invest in Movies

How can you build financial investments in the movie industry? Here’s a look at three vehicles for placing your money in the industry.

Equity Investment in Productions

Invest directly in companies that make TV shows or movies. Placing your money with a production company or studio helps you get involved with companies that license, produce and market movies.

Because most studios are publicly traded, you can invest in movie stocks, such as Warner Brothers Entertainment Inc. (NASDAQ: WBD) or The Walt Disney Co. (NYSE: DIS). Some stocks offer dividends while others will see an upside in the per-share price.

You can also invest in companies associated with bringing films to market. For example, companies that offer special effects or costumes can provide income in another form so all your money isn’t tied up in production companies.

Film Financing Platforms

Film financing platforms have made it possible for independent filmmakers to raise funds for their projects. While you’ll have little protection for your investment, crowdfunding can help you support wannabe producers and someday say you were a contributing factor in their success. And these projects can have good returns. Just be sure that the project you’re considering investing in provides financial returns to investors and not just the pride in knowing you were part of a movie’s production.

Film Funds and Investment Companies

Investing in film funds or investment companies can help up-and-coming filmmakers get started. The funds help support films but still have a rigorous evaluation process. It’s like crowdfunding but with experts who know how to spot a good film. One worldwide fund to consider is the TFI Sloan Filmmaker Fund, which supports writers, producers and filmmakers in their quest to bring a film to market.

Risks Involved in Movie Investments

While movie investments provide portfolio diversification and can have a great upside, they are risky investments. Before placing your money in any film vehicle, consider and evaluate these risks.

Box Office Performance Volatility

Even with all the right success factors, a movie can underperform its anticipated box office metrics. Movie success is unpredictable, and even well-funded productions may not resonate with audiences, resulting in lower returns.

Project Delays and Budget Overruns

Movie production can face unexpected delays and exceed the initial budget, impacting the profitability of the investment. When a movie goes over budget, it will reduce the net proceeds from the project at the box office. Or when a movie is delayed, it might mean it doesn’t come out during the best times of year for movies to succeed.

Distribution Challenges

Getting a movie to its target audience can be challenging, affecting its overall performance and revenue generation. Theaters or streaming services might not pick up the film as anticipated, which can limit the audience immensely.

Legal and Contractual Risks

Navigating legal and contractual agreements in the movie industry requires diligence to avoid potential disputes and financial losses. Review the investment language carefully to ensure you understand the potential rewards and structure of your investment.

Portfolio Diversity and Passion Projects

Getting started with movie investing can offer both portfolio diversity and help you get involved in a passion project. Many people find it fun to research the movie industry to find the best films for their money. Ultimately, balancing portfolio diversity with passion projects can lead to a more rewarding and sustainable movie investment strategy that combines financial success with personal satisfaction.

Frequently Asked Questions