When most people think of alternative investments they think of gold, oil and gas pipelines or inverse market strategies. They don't often think of independently produced movies like Sex, Lies and Videotape, Reservoir Dogs or Sideways.
Indeed, it's rare that people think of independent movies as investments at all-because it's rare that they make any money. The vast majority of filmmakers outside the Hollywood orbit never find distribution for their work, and all that risk of hiring actors, scouting locations, doing the makeup and paying for the catering usually goes down the drain when the theatrical distributors say no to the finished work, which they do 95% of the time. Only a handful of indie movies make their investors whole. What most people don't realize is that the cost to shove a movie down the public's throats often costs more than the movies themselves. Just one reason scrappy maverick film artists don't get their work seen.
Add to that the current problem of the last couple of years-a huge glut of indie films coming to market with not enough places or public interest to show them-and the outlook for these investments gets even worse. It's a big risk that people usually do only as a labor of love, or folly.
Of course, some films such as My Big Fat Greek Wedding stroll out of left field and make all sorts of bank from a tiny investment, keeping hope alive. But that's the kind of gamble some liken to the slot machines, not the methodical, disciplined investment strategy of a conservative investor.
"Typically, the only people who make money in film deals are the promoters," says Larry Ginsburg, a CFP licensee with Ginsburg Financial Advisors in Oakland, Calif. He says that without Hollywood money and the backing of somebody like Tom Hanks or Steven Spielberg, these films are often money holes. "These are essentially vanity investments," he says. "People are investing in them for their ego."
"It's very much a field of dreams," acknowledges veteran venture capitalist Wade Bradley, who is making his own bid to be a player in the film business. "You have folks out there raising capital on a script and hope to raise at least enough to shoot part of the film or hopefully shoot all of the film. When the post-production is done [they feel] that it's going to be so special that everyone will want to distribute it. And the problem, we know, in the marketplace is that 95% of the time they won't."
Yet into this giddy firmament, Bradley has launched his own company, IndieVest Inc., a business that he says offers a better way for investors to get seed money to movie makers without necessarily taking a bath. Bradley is also the managing director of Empire Ventures, and in the past has worked with such start-up tech companies as Snap Names, Learning.com, Xora and Teseda. But he always had the movie bug, he says, and he thought he might be able to come up with a new model to make independent films not only viable, but even profitable.
The strategy he has come up with involves bringing the distribution in house so he can guarantee it. He also offers total transparency to investors, he says, something notoriously lacking in the murky mechanics of Hollywood accounting. The films are usually low budget, $10 million or less to produce, but bring into the fold top talent that the company thinks can get a return.
"With the advent of better and better technology, just about anyone can make a movie," says Bradley, who is IndieVest's CEO, as well as its founder. "You have such a fragmented, unstructured marketplace, you have investors who get excited about projects. And this is generally not their domain, so they don't know what they should be looking for in a project. More important, they don't know what the red flags are that should make them run away."
IndieVest's first feature, Saint John of Las Vegas, hit theaters in January 2010, first in the cinema hotbeds of New York and Los Angeles, then later in wider release. This buddy comedy stars independent film stalwart Steve Buscemi and follows insurance fraud investigators in Sin City. Indie-Vest currently has five projects and hopes to work on eight to ten pictures per year.
In a big coup, it has partnered with Vivendi Entertainment to handle its projects on DVD and pay-per-view, which can be the most important profit centers in the age of movies-on-demand and downloading. Vivendi has "direct relationships with all the big box stores-Wal-Mart, Kmart, Target, etc.," says Bradley.