What’s the HOTTEST investment of 2016? Hollywood
With eyes toward 2016, investors are looking for profitable ventures in which to infuse their hard earned cash. While some investors are contemplating laying their chips on emerging markets like Russia, China and Brazil, mutual funds, ADRs and ETFs, smart investors are betting on film.
Yes, I said it: the “F” word that has in the past made investors cringe.
However, in recent years, film has proven to be a lucrative and high yielding investment. And many savvy investors are cashing in on what seems to be an unconventional investment, namely, Hollywood.
Who is investing? Lets take for example the group of investors that entrusted Thomas Tull, CEO of Legendary Pictures with over $600 million in private equity when he traded his successful career on Wall St. for Hollywood. That $600 million was the launching pad for Tull’s highly successful venture, which infused capital into such blockbuster franchise movie productions such as Superman Returns, The Dark Knight, The Hangover I, II & III, the new rendition of Godzilla and the continuation of the highly successful Jurassic Park movie series, Jurassic World.
Still not convinced? Take a look at the career choice of billionaire Larry Ellison of Oracle corporation’s daughter, Megan Ellison. Starting off with investing in a small $2 million budgeted movie, she quickly grew her film investment portfolio, and launched Annapurna Pictures, and is now an Oscar nominated film producer. Indeed, TIME magazine listed her as one of the “100 Most Influential People in the World.” Her investment strategy in film generated her company large profits and was responsible for bringing moviegoers hits such as True Grit, Zero Dark Thirty, Her and American Hustle.
So why film? First of all, there are several ways that an investor receives his payouts. He receives an ROI which is about 10–20% on his principal investment, and he gets an executive producer salary if he wishes to set one for himself. Additionally, if the film is shot in a participating tax credit location, he receives tax benefits. Then he receives a 50% equity stake in the film. And after the recoupment of the initial investment to make the movie, the rest of the income generated is pure profit. This means foreign and domestic box office sales, international and domestic TV licensing, VOD sales, retail DVD sales, video games (if there are any made in the likeness of the movie’s theme), merchandise, and online downloads.
Typically the royalty pay cycle can last upto 18 years for a film — making investment in quality film vehicles a superb investment.
For all the foregoing reasons, the buzz on film investment is growing, and smart investors are moving towards cash cow film projects. It’s not any secret that the consumer’s appetite is insatiable when it comes to being entertained by Hollywood, and that it is the investor in film who will capitalize upon these ripe opportunities. — Gena Vazquez
