With the movie industry being a multi-billion dollar business, investing in movies has become an attractive option for many investors looking to diversify their portfolios. There are several ways one can invest in movies, ranging from investing in major Hollywood studios to buying shares in production companies or film funds. While movie investing comes with high risks, it also presents opportunities for high rewards if done wisely. This article will explore 5 main ways investors can put their money into the lucrative movie business and tap into its growth potential. From investing in entertainment companies and movie futures to film funds and tax incentives, we will cover various investment vehicles that provide exposure to this unique asset class.
Invest in entertainment and media companies
One of the most direct ways to invest in movies is by buying stocks of major entertainment and media companies involved in movie production, distribution and exhibition. Companies like Disney, Netflix, AMC, Cinemark are big players in this space. While their business operations are diversified across various segments, a significant portion of their revenues and profits come from movies. By investing in these stocks, you get exposure to box office growth as well as new revenue streams like streaming and home entertainment. However, there are risks involved as revenues fluctuate depending on movie performance.
Invest in movie futures
Movie futures are exchange-traded derivatives contracts that allow you to speculate on the financial performance of upcoming movies. Launched by Cantor Exchange in 2010, these futures let you bet on whether a movie will overperform or underperform box office expectations. If your prediction is right, you can earn hefty profits. However, movie futures trading was halted after a year due to regulatory issues. But the idea remains appealing for sophisticated investors who want to capitalize on their analysis of a film’s earning potential.
Invest in a film fund
Film funds pool money from investors to finance a slate of movie productions in exchange for a share of revenues. They provide an easy route for non-industry investors to fund films. These funds are managed by experienced production companies and aim to reduce risks through portfolio diversification. However, many film funds require high minimum investments. They also take a portion of profits as fees. On the flip side, successful film funds can deliver 20-30%+ returns from box office and ancillary revenues.
Leverage tax incentives
Many states and countries offer tax credits, rebates and other incentives to attract film production locally. For instance, investors in British films benefit from tax relief of up to 25% of the investment. Several US states like Georgia, California, New York also offer tax credits on qualified film spend. Investors can leverage these incentives to offset their tax liability and earn higher risk-adjusted returns. However, navigating different regulations can be challenging for new investors.
Invest in film royalty streaming platforms
A newer way of investing in movies is via film royalty streaming platforms like Slated. They allow you to invest in a portfolio of films for a share of revenues. Investors get regular cash distributions as the films earn money from worldwide streaming. Top films on Slated have earned 30%+ annualized returns. However, royalty streaming remains a niche concept with limited deal flow currently.
In summary, investing in the movie industry opens up many exciting avenues from buying entertainment stock to participating in film funds. While risks are high, prudent investors can tap into the industry’s growth by picking the right vehicles aligned to their strategy, investment size and risk appetite. Proper due diligence and diversification remains key.