There is no dearth of investment options for those who have money. The majority of popular choices include real estate, stocks, gold, businesses and anything that has a direct correlation to the market of the economy. Yet, one investment option that escapes the attention of many a savvy investor is the business of movies.
According to Statista, the total revenue earned by India’s film industry in the year 2019 alone reached over 183 billion Indian rupees. Of this the highest earnings were from domestic theatrical revenue, amounting to almost 125 billion rupees. Year-on-year, the country’s film industry recorded a 15.3 percent growth.
But it is not just close at home that Indian films are doing well. The rising popularity of Indian movies, both Hindi films and regional cinema has generated an important revenue stream, that of overseas theatricals.
Dangal, for example, topped $300 million to become the fifth highest-grossing non-English film ever. Dangal’s popularity and box office record collection of Rs. 1106 crore in China is now the stuff of legends. Even Secret Superstar earned $119 million in 2017 topping the China total of Black Panther.
But flashback 10 years ago, and Bollywood was an industry that was largely confined to India and Indian investors. But everything changed as the Indian diaspora expanded. Overseas theatricals gradually became a strong revenue stream and the popularity of Bollywood extends far and wide from Canada, to the USA to Japan, Malaysia, Turkey, the UAE and so on.
Here’s why investing in films is a wise strategy for the long run:
Movie making, in general, is considered a lucrative and entrepreneurial profession. Historically, film investment is seen as uncorrelated to equity, property and bond markets and is resilient even during the most challenging times.
Perhaps, one of the best reasons to invest in films is that a movie doesn’t need to be qualified as a box office success for the investor to make money. With sound financial structuring and tax efficiencies, investors can make profits and continue to do so over a period of time.
Investing in movies might be considered a calculated risk but the rewards are plenty when it pays off. Where the bulk of a movie’s profits are realized in the initial years, the film continues to earn through various means such as royalties, pay-per-views, rentals etc.
Most investors choose film investment as part of a diversified investment portfolio, especially when the market is uncertain.
Considerations before Investment
Like any other investment option, ensure you do the due diligence before you select a project to invest in. What is the production house’s reputation? What films have they produced in the past? Find out if the film appeals to a broader market. Box office successes tend to have a wider, commercial appeal. One popular approach is slate financing, often taken by hedge funds. This means investing in a portfolio of films instead of a single production. The diversification brings in more balance of risk and return. Another option that has gained popularity in recent years is the crowdfunding of films. Many great films have seen the light of the day through crowdfunding and made profits too.
Besides the obvious financial rewards of film investment, film investors enjoy VIP status at film screenings, promotional events and red-carpet premieres. You don’t have to start big either. You can choose a small-scale indie movie that has commercial appeal, to begin with, test the water and then graduate to big-ticket films.
Finally, it is fair to say that investment in the film industry is never a dead investment.