film that movie and advertise it later. The investment that you make may only fund a small portion of that project. If a film has a $20 million budget and no studio behind it, producers will need to secure financing from multiple people. The more money you invest, the more money you may get back.
Distributing a Movie
Only a small number of films produced by Hollywood studios and independent studios actually play in theaters. Many of those films make the rounds at festivals and seek distribution deals. If a distributor likes the film, the company make an offer. The distributor can either buy the film outright or agree to distribute the movie and split any proceeds with those who made the film. Actors often have back end deals with those studios that gives the actors a portion of the film’s proceeds. Tom Cruise made millions of dollars in deals he created while filming the Mission Impossible franchise.
Where Your Money Comes From
The money you get back may come from several sources. During a distribution deal, the studio in charge of the film will use the profits that deal generates. The studio will determine how much each person who invested in the film will get based off the initial investment. If you worked with an investment company, the company make take a percentage of your profits. You may also make money once the film arrives in theaters and earn an amount based on how much revenue the film generates.
Depending on the deal or agreement you signed, you may make money for the lifetime of that film. Some agreements give investors residuals. A residual is a small amount of money that the movie makes every time it shows on television. Actors who worked on shows in the 1990s and beyond still earn a small amount every time a network airs a rerun of that show. While it won’t be a lot of money, you may get small checks every year for a few hundred dollars or more.
Things to Consider
Before making an investment in a film, make sure that the studio or company backing the production has a completion bond in place. This is a type of surety bond that acts as insurance against that production. You may hear about something called development hell, which is when a film has problems making it through the production process. If the director drops out, the star of the film quits the project and the film is never made, the studio can use that completion bond to ensure that all investors get paid. Make sure that the studio is responsible for all advertising costs as well and that the studio will not ask for additional money from you later.
The highest grossing films in history earned billions of dollars at the box office and made actors, directors and producers billionaires. Even if you have no connection to the film industry, you can still make money off new productions as a film investor.