When it comes to investing in Hollywood films, there are a number of crucial questions that potential investors should ask in order to protect their investment. It is important to thoroughly research the track record of the producers, ensuring they have a history of selling films for a profit. Additionally, investors should verify any claims of “A-list” actors being attached to the project by speaking directly with their agents or lawyers. It is also important to assess the real status of the production and determine if it is truly a “go” or simply a hopeful strategy.
Another key consideration is the experience of the director, including whether their previous films have stayed on budget and been successful. Equally important is the presence of a strong line producer, who can provide adult supervision on set and ensure the film stays on budget. Investors should also inquire about the distribution plan for the film, including any pre-sales or plans to sell on the festival circuit.
In terms of budgeting, investors should carefully vet the budget of the film and consider what will happen if it goes over budget. It is crucial to determine how much of the budget is going directly or indirectly into the producer’s pocket, as well as ensuring that other financing for the film is secured. Questions about when the investor will need to fund, and whether distributors will pay into a third-party collection account, should also be considered.
Additionally, investors should be aware of any guild involvement in the film and what percentage of gross receipts they will be entitled to before any payments to the investor. It is important to understand where the investor stands in the financing stack and clarify the terms for calculating recoupment, preferred return, and share of profits. While certain perks like an Executive Producer credit or tickets to premieres may seem enticing, investors should focus on the financial aspects of the deal.
Finally, there are certain issues that investors may be concerned about but that ultimately do not hold as much weight. For example, the screenplay may not be worth reading as predictions in Hollywood are notoriously unpredictable. Similarly, the absence of a completion bond may not be a major concern, as completion guarantors may not have the film’s best interests at heart. By asking these important questions and focusing on the key financial aspects of the deal, investors can better protect themselves from potential losses in the volatile world of Hollywood investments.
