Investing in an Independent Film Company is one of the Best Investments you can make in your Lifetime
PART I - FILM INVESTMENT INTRODUCTION
Since the late 1960s, there has been a fiercely resourceful “independent” sector (existing outside of the studio system) that has exploited a lucrative array of specialized market niches with smaller budget movies that require lower advertising expenses. On occasion, these independent films have become huge mass-market hits, generating spectacular returns on investment.
With few Hollywood exceptions, independent films represent the most effective way for individual investors to capitalize on the voracious global appetite for filmed entertainment. But only if certain conditions are met one being that the film will end up with commercial distribution.
A more immediate way to participate in these dynamics is through independent film. Independent films are those financed outside the major studio system. These lower-budgeted films not only have smaller budgets than Hollywood movies, but they can also offer investors a fairer and more logical recoupment position that will yield faster and higher returns.
Adding to the attraction of independent film is the possibility of outsized returns from unexpected places. This is where you will find the cinema's outliers since independent filmmakers operate outside the studio mainstream. There are parallels here with other business sectors. Harvard Business School studied eight executives whose firms outperformed the S&P 500 index by more than 20-fold over their business careers. All of them, it turns out, were outsiders who brought with them fresh perspectives on their respective industries as a result of looking at the world through a marginal lens.
You have the basis for an attractive asset class, one that offers the potential of impressive — and sometimes extraordinary — returns but without being tightly correlated to other investments such as stocks, bonds, and real estate. (Brown, 2016) Filmed entertainment as an attractive asset class
PART II - RESILIENCE & STABILITY
Independent Filmmaker Roger Corman has seen profits on 280 pictures out of the 300 he has made. (Corman 1998) How I Made a Hundred Movies in Hollywood & Never Lost a Dime.
The film business has an impressive history of stability. Even at the height of the last financial crisis, as stocks whipsawed, banks imploded, and real estate holdings cratered, demand for film remained stable.
Such resilience is magnified during downturns as film ends up outperforming other investment options. Some of the most profitable films of all time coincided with either major recessions or world wars.
This history of non-correlation makes film an ideal alternative asset to hold against seesawing fortunes from other sectors. (Brown, 2016) Filmed entertainment as an attractive asset class
PART III - HIGH RETURN POTENTIAL
One of cinema’s enduring appeals is that, like in venture capital, exponential returns can seemingly come out of nowhere. You don't need a celebrated cast for that to happen, you don't even need good reviews, and you most certainly don't need big budgets.
What can be a loss for a studio-financed film may even be a gain for an institutional investor. Every film is a standalone business.
A film’s effective revenue-generating shelf life may be up to ten years, but much of that revenue is produced during the first two or three years.
The answer is to turn to feature films financed outside those Hollywood studios and yet still able to secure distribution in the global marketplace.
Industry estimates suggest that, on average, roughly 60% of film "first cycle revenue" is generated within 12 months of release, and 80% is generated within 24 months.
“Comps” are the currency by which film projects are evaluated.
The film business is a non-correlated asset class. If a few investors follow the asset class, the chances are good that prices will be set inefficiently, and excess returns can be achieved. (Brown, 2016) Filmed entertainment as an attractive asset class
PART IV - FILM IS AN ALTERNATIVE ASSET
The view is very much that stocks and bonds are essential, while everything else is an optional extra or an unnecessary luxury. This has led to some dramatically undiversified portfolios.
Alternative assets, in general, are subject to a great deal of unconscious prejudice, and supporters are required to continually justify alternatives in detail in a way that is never demanded of quoted securities.
The Yale Endowment probably enjoys the highest profile of these, and in recent years alternative assets have totaled 65% of their total asset allocation. If alternative assets can make up about two-thirds of the portfolio of one of the best investors in the world, how can it be "alternative" at all?
Wall Street’s risk parity strategy when interest rates fly higher may be the riskiest strategy, not the least. If you want to avoid risk and have a truly diversified portfolio today, you must look at asset classes that are not correlated to one another. (Fraser-Sampson, 2010) Alternative assets: Investments for a post-crisis world
Best Investment Ever? Some Say Alternative Assets Carry the Day
Alternative investments are crucial for portfolio diversification — and in some cases, they may rank among the best investments you’ll ever make.
Savvy institutional investors and high net worth individuals are shifting their exposure away from stocks and into alternatives such as film to tap into new and diversified investment strategies. Alternatives offer both institutional and retail investors the potential for higher returns and provide exposure to assets that are uncorrelated to public markets, which can shelter your portfolio during times of market volatility.
Alternative Investments can be life-changing if you do hit that home run. (Yoshida, 2019) Best investment ever? Some say alternative assets carry the day
PART V - ROYALTIES, POINTS, UNITS, REVENUE WATERFALL
Alternative investments can be an essential part of a broader portfolio. Alternative investments offer the promise of low correlation to traditional investments like stocks and bonds. They often have the potential to generate income as well.
When you add alternatives to a portfolio, you receive a significant diversification benefit over time. Often, the result is better risk-adjusted returns.
When investors typically seek out alternative investments, they have very few options. The purest alternative investment available: royalty income derived from intellectual property. (Royalty Exchange)
- Can earn consistent cash flow
- Are long-term assets
- Potential for more tax-advantages or sheltered cash flows
- Protection of volatility in the stock market or elsewhere
- Liquid investments protect you against rapid falls in value and generate a higher ROI
- Access to different assets with higher return potentials
- Passive income, none of your time required
PART VI - FILM INVESTMENT VS. REAL ESTATE INVESTMENT
Proofs that show that being a film financier pays better than real estate investments.
When you invest in movies, there is unlimited potential for income. You can make as much money as the film can sell. Real estate is another story, with a fixed size property, there is only so much money you can make from it. So, with unlimited potential, investing in a movie is a better bet than real estate.
Research Can Be Easier
Any investment requires a lot of research because you want to know that you are getting the best options available. Real estate investments require a lot of time and research, from looking through public records, hiring people to look at the property, and more detailed work. All of the research into a movie investment can be done easily online, a good portion of it is already done for you by film financing companies and third party comparables.
Real estate investments require upkeep to keep them earning the maximum potential. From managing property managers to regular repairs for a rental property, or costs for flipping a property. These regular payments take money out of your earning potential.
Real estate investments may be risky when the markets crash like in 2006-2008. People always have money and time to watch movies.
More and more people are staying for the credits in movie theaters as more film companies place hidden scenes after the credits. Almost all film investment opportunities also come with the film finances option of putting a mention in the credits. This mention can also be in the form of a logo that makes your brand easy to recognize. Either way, this is an excellent opportunity for advertisement and your legacy.
Real estate investment may be a good investment for some people. Still, many people would see faster and larger returns by becoming a film financier with an independent film financing company.
I don’t know of any other alternative investment that can offer tax incentives, multiple exit strategies, an opportunity to guarantee up to 100% of capital. I am surprised how many accredited investors, family offices, asset managers, hedge funds, fund of funds, venture capitalists, private equity, angel investors, tax planners, CPA’s, tax attorneys, public and private companies have no clue about these benefits. (Movie Investor)
There is no business with manufacturing capital entry requirements as low as motion pictures where the potential return can be as unlimited over the short, medium, and long terms.
An independent film is one of the best investments one can make for the up-side potential vs. the risk. Independent film is better than real estate, blue-chip stocks, gold, silver, precious stones, income-producing rental properties, futures, and treasuries.
PART VII - FILM INVESTMENT OPTIONS AND NEXT STEPS
Pick your preferred investment entry points.
There are varying Investment entry points based on the amount of capital you want to invest.
• Seed-Development Stage
• Series A-Film Production Stage
• Series B-Prints & Advertising Distribution Stage
Pro Tip: Investment Checklist
You would dramatically increase your success rate, perhaps up to 20 times or more if these boxes are checked:
Has a High Valued Intellectual Property (Script)
Intellectual Property is Original
Script Genre has a Built-in Marketable Audience
Has a Private Placement Memorandum and Terms Set
Production Company and Investors are aligned
Production Company has a Distribution Plan or P&A Money Sourced
Production Company has a Valid Comparable Revenue Range Model from a Third-Party Source
Production Company Focuses on a Niche Genre
Production Company has Multiple Mitigation Strategies Available for Investors including up to a 100% Mitigated Pre-Revenue Option
Production Company Willing to Debt Finance
Domestic and Worldwide Potential
Fourth Man Films, Inc. Checks Every Box
You can also follow the Fourth Man Films Investor Flow Chart by clicking the link below https://www.fourthmanfilms.com/investor-flow-chart-2/
Corman, R (1998) How I Made a Hundred Movies in Hollywood & Never Lost a Dime
Fraser-Sampson, G (2010) Alternative assets: Investments for a post-crisis world
Brown, C (2016, May 24) Filmed entertainment as an attractive asset class (White Paper Part 1, 2, 3, 4) Filmonomics
Baratta, A (2018, August 14) Wealth building secrets wall street doesn’t want you to know – It’s time for a new strategy!
10 proofs to show that film financing pays better than real estate investment (n.d.) Movie Investor
Jaeger, J Why Invest in a Movie?
Yoshida, H (2019, Sep 3) Best investment ever? Some say alternative assets carry the day Forbes
Fourth Man Films, Inc.