Are you a movie buff who’s been wondering how to invest in the entertainment industry? Well, you’re not alone! Movies and TV shows are big money makers, with a combined worth of hundreds of billions of dollars every year. And when it comes to the most successful products, profits can skyrocket to hundreds of millions of dollars in no time.
This is why movie stars such as Dwayne “The Rock” Johnson, Tom Cruise, and Leonardo DiCaprio command such high salaries. But let’s face it, investing in the entertainment industry can be a daunting task. After all, it’s a niche industry that can be difficult to research. However, fear not!
In this article, we’ll explore the main options that you can consider to invest in movies and TV shows. So, grab your popcorn and get ready to learn how to make money while enjoying your favorite movies and TV shows.
Table of Contents
Invest in Production Companies
The entertainment industry offers many investment opportunities, and one of the most direct ways to get involved is by investing in production companies.
Production companies, also known as studios, are the creative powerhouses behind some of your favorite films and TV shows. They license properties, write stories, film the production, and bring the final product to the screen. If you want to invest in a production company, you’ll be happy to know that many of the large movie and television studios are publicly traded. This means that you can buy and sell their stock freely, just like any other company. Some of the biggest names in the game include Paramount Studios, Warner Brothers, Lions Gate, and Disney.
But investing in a production company is just the beginning. It’s important to remember that studios rely on many specialty companies that provide essential services like special effects, costume design, and location scouting. Unfortunately, investing in these secondary markets is rarely an option in the entertainment industry. Why? Consolidation.
Consolidation is a big problem in the entertainment industry. Even in an era of increasingly large mergers, the industry has consolidated to an extraordinary degree. This means that it’s tough to find investment opportunities outside of the major studios. But don’t let that discourage you! Investing in a production company can still be a great way to get involved in the magic of Hollywood.
Invest in Distribution
While investing in production companies is one way to get involved in the entertainment industry, there’s another side to the coin: distribution.
Distribution companies own the channels, theaters, streaming sites, and other ways in which you can watch the products created by a studio.
But things weren’t always this way. The production and distribution of movies and television have followed different paths since the 1948 antitrust action called the Paramount Decree. This ruling held that the studios that produce films cannot own or have exclusivity rights with the theaters that produce those films. The purpose of this decree was to prevent a studio from capturing someone’s local cinema, fixing prices, and preventing viewers from seeing other movies. However, this rule has never been extended to television networks or streaming services.
As a result, we have the system we know today. Movie theaters and studios are separate entities, with theaters showing movies from many different studios and studios running their movies in many different theaters. Television studios, on the other hand, are not separate from their distribution channels. This is why a company like NBC is both a studio that produces shows and the channel that exclusively broadcasts them. The same is true of services like Netflix or Amazon Prime, which produce their own shows for streaming on their own services.
Investing purely in distribution can be tricky due to the overlap with production companies. However, companies like Netflix and AMC, which focus more on showing entertainment than producing it, offer investment opportunities in the entertainment industry’s distribution infrastructure.
Crowdfunding Small Projects
Crowdfunding offers an opportunity for anyone to invest in small projects and help finance a film or show directly.
Crowdfunding is a way for project owners to raise money by selling access to their products or projects. As a backer, you’re spending money to buy access to something you would like to see produced. However, there’s little protection for your investment, and you shouldn’t expect to see any financial returns. In fact, crowdfunding sites refer to participants as “backers,” not “investors.”
Occasionally, crowdfunding projects do offer financial returns to their backers. They may promise a portion of the film’s returns to those who put their money into the project. This can be a worthwhile investment if you’re passionate about the project and want to help finance it directly. However, it’s essential to be careful. Above-board projects rarely offer this kind of investment opportunity, and trustworthy crowdfunding sites don’t usually allow it.
Purchasing collectibles related to successful film properties can be a niche way to invest in movies and TV shows.
While this form of investment is typically considered high speculation, it can offer a potential return. From comic books that exploded in value after the Marvel universe took off to old Star Wars toys, merchandise related to a successful film property can accrue significant value.
It’s worth noting that this investment typically only works with new and not-yet-established properties. You’re not likely to make significant money buying an Iron Man action figure today, as the character is already popular. However, in 2005, Tony Stark was a B-list character that Marvel only owned because no other studios wanted to license him. Had you bought up collectibles before Robert Downey Jr. made Iron Man a hit, you might have some real value on your hands today.
Considerations Before Investing
If you’re thinking about investing in a movie or TV show, you’re about to enter an exciting world of creativity, imagination, and storytelling. But before you get too carried away, it’s essential to do your due diligence to ensure that your investment is well spent.
Here are some critical questions to ask yourself before putting your money on the line:
Who is behind the project?
Before investing, it’s important to know who is producing the project and what their reputation is. Look for producers with a track record of success and experience in the industry. Also, consider the talent involved in the project. Are they well-known, and do they have broad appeal? A talented cast and crew can make all the difference in a film’s success.
What is the quality of the script?
A good script is the foundation of any successful film or TV show. Read the script or screenplay and assess its quality. Is it well-written, engaging, and marketable? Look for red flags such as plot holes, weak characters, or dialogue that falls flat.
Who else is investing?
Consider who else is investing in the project. If other investors are on board, this can be a good sign that the project is well-vetted and has potential. On the other hand, if you’re the only one investing, it may be worth rethinking your decision.
Will it appeal to a broad market?
Consider the target audience for the project. Will it appeal to a broad market or just a niche audience? Blockbusters tend to have broad appeal, while smaller films may have a more limited audience. Keep in mind that some niche films can become cult classics, but it’s essential to weigh the risks carefully.
What about the talent involved?
A-list talent can be a draw for investors, but don’t overlook the potential of a film to be its own star. Look for directors with a clear vision and avoid those with outsized egos. Remember that a film’s success is not always dependent on big-name actors or directors.
Are the interests aligned?
Finally, ensure that the interests of the filmmaker, distributor, and investors are properly aligned. Make sure that the investment agreement is fair and that revenue is distributed equitably.
The Bottom Line
In conclusion, the entertainment industry, with its vast market value, offers exciting opportunities for investors looking to tap into the world of movies and TV shows.
By investing in production or distribution companies, or even carefully selecting independent projects, you can potentially reap significant rewards.
However, as not all movies turn out to be profitable, it’s essential to conduct thorough research before diving into this glamorous yet unpredictable industry.
Keep your eyes open and your wits about you, and you might just find yourself backing the next big blockbuster.