Creative calculation: Why investing in films is not a bad idea

Onir admits that when he started his experimental film project he was unaware of the existence of formal crowdfunding platforms. But, he noticed that people would often send him e-mails and messages on Facebook, offering finance or their resources or skills for free. So once the scripts were in place he realised that subjects like child abuse, the humiliation of homosexuals, displacement of Kashmiri Pandits, did not fall under the ambit of formula films. As such, they were unlikely to be funded by members of the film industry. So, instead of knocking the familiar doors and face rejection, he decided to raise funds for each story separately by reaching out directly to the viewers. He put up an online post about the story of each short-film, inviting people to help financially. People identified with the different stories and sent in their contributions accordingly.

The first cheque Onir received from a Pune resident was for Rs 2,000 for the short film about child abuse. Having gone through a similar experience, the sender had withheld his/her identity but wanted the story to be told. Another gentleman wanted to make a contribution as a wedding gift to his wife — just to see her names in the film credits!

Supported by the Internet platforms, Onir was able to raise the entire budget of Rs 1 crore. I Am’s crowdfunding success story was special not just for the money it raised, but because it finally offered a template for crowdfunding films and the tangible or emotional returns it could offer to its financial contributors.

Crowdfunding, which essentially is making a donation, has so far has worked well for the smaller Indie films. In fact, it works well for all involved. For starters, investors don’t have to be millionaires to crowdfund a film. People can even fund an amount as small as Rs 500!

When it comes investing in films, donations with incentives attached are the most popular way to invest in India. Besides their name in the credits, there are other perks too depending on what the filmmakers are willing to offer. It could be an invite to the film’s shooting, a special screening or a chance to meet the stars. Sometimes it is an opportunity to support a creative cause.

The proliferation of formal Internet-based crowdfunding platforms like Wishberry, Ketto, and Crowdera, has helped this cause. In fact, now some crowdfunding platforms have been so successful that they have even started securing finance and actively producing the films that come to them for crowdfunding help.

Interest in films as investments has grown over 2017-2018 with the rise of streaming platforms like Netflix and Amazon Prime Video. Focusing on content over stars, these platforms have essentially democratised content consumption based on market preference. Besides high concept content, regional films too are great investments for HNIs as they are made on a fraction of the cost of a regular Bollywood film and still retain a good ROI.

One of India’s leading crowdfunding experts, Priyanka Agarwal, co-founder and CEO of Wishberry, has had an interesting journey in this field. After successfully running a small crowdfunding platform, Agarwal has now set up a new age film-financing studio, Wishberry Films. She is able to thereby balance the equation between art and commerce.

Agarwal makes a clear distinction between the two ways films are being funded by individual investors, "Crowdfunding and film financing have two different types of markets. Through crowdfunding, we help independent film-makers raise money for their projects below Rs 50 lakh by helping them leverage their own personal networks, including friends, family and patrons. While crowdfunding is for philanthropic purposes, film financing has HNIs treating films as a return-on-investment asset."

For HNIs, the film-finance or investment route is a lot more attractive. "As we live in a value-conscious country, film financing definitely has more scale. People care about a bang for a buck, so scoring investments for films is a lot easier as people are always looking for assets to invest in," avers Agarwal.

"It is the Indie films — the small-budget, high content films — that make for a better investment than big-budget films,” says Singapore based career banker Namita Lal. So far she has personally invested in four Indian Indie films. The yet to be released film, Bhonsle, starring Manoj Bajpayee which has been showcased at several international film festivals, was the first of her film investments. For most people investing in films is an extension of their interest in movies and, as in Lal’s own case, an avenue to explore their creativity. However, Lal too admits that there has been an interest in NRIs and Indian HNIs for investing in films for purely financial gains. Those interested in investing in films for merely financial returns by taking the investment route, Lal says, should look at the phase the project is in. The early stages are riskier, she cautions, as the small projects are notorious for not taking off. Also, according to her, smaller amounts spread across a bouquet of films rather than a big chunk in a single big-budget vehicle is a better way to go. Lal’s sentiments are echoed by Agarwal, “We encourage investors to adopt a portfolio approach and choose different types of films to invest in, together.”

Agarwal agrees that films are a riskier investment than say, mutual funds. She would rather compare film investments with investing in startups. “We target a 30 percent annual ROI. However, given a successful box-office run, you can expect a return of 50 percent to 75 percent as well. The key advantages of film investments over startups are shorter liquidity cycles - anywhere between 12 to 15 months. Whereas in a startup you have to wait for 4-6 years without a guarantee.”

Although investment in films is gaining ground, there is healthy cynicism around it given the unpredictable and risky nature of the movie business. The poor track record of film-funds like the Cinema Capital Venture Fund and others that were announced but never started, has not been good for investor confidence.

It is critical that companies and individuals getting into the film-finance business do the due diligence on their part. Films have many different revenue streams e.g. domestic box office, international sales, Internet and other digital rights, TV deals, music and so on. All films have different dependencies and different exploitation potential with regard to these revenue streams. Astute investors need to understand how the film-makers intend to leverage each of these streams for films they are investing in. The revenue sharing and exit-route for their funding should be clear before the individual even considers the film-investment opportunity.

Says Agarwal, “At Wishberry we also incorporate LLPs per film and transfer the IP rights of the film to this LLP. We act as the designated partner and the filmmakers along with investors are general partners in these LLPs. This gives complete accountability and transparency to the investors with regards to expenditure and revenue sharing.”

Given the keen interest that box-office collections generate nowadays among the general public, it is clear that interest in films now extends beyond entertainment. They are now also viewed as money-making propositions. Household discussions about whether a film will make it to the ‘100 Crore Club’ have become commonplace. Hopefully, adequate safeguards for investors in place in the future will make it easier for more film buffs to venture into investing in films and finally put their money where their mouth is.

(The author is Group Editor, Entertainment, Network18.)