Picture this: Investing in film

For money or glamour, there are many reasons to back a film û but consider yourself a patron of the arts, not an investor, that way youÆll be pleasantly surprised if you make a profit.

The film industry is a lot like the aviation business -- it absorbs money and more often than not, it gives very little in return. But people still flock to both because they possess a degree of glamour that is lacking in many more reliable money making options, such as real estate and mutual funds.

Independent films are a high-risk investment: the odds are against the investor. For every commercially viable film, there are dozens that barely cover the cost of production. The successful films however, offer a massive payback.

If you want to make money, you need to find a film that is being made with a producer who has a business background. A producer or director with an artistic bent, but who lacks the relevant business experience, might prove a disappointment to investors. Budgetary considerations are one of the main reasons that film projects end up in trouble -- so it is essential to feel confident that the money at the outset will last the duration.

In London and New York, there are people who make a living matching investors to films; in Asia, there is no comparable infrastructure. "The main problem is finding the people to invest in a project," says Charlotte Mikkelborg, who is now entering her first documentary, Building 173, into international film festivals. "Most filmmakers start pitching their idea as soon as they have it, and a lot of this happens via word of mouth," she says. This means that once filmmakers tap all the wealthy people they know for money, they have to look for alternative sources, such as product placement for feature films, or film funding organisations for documentaries.

One of the advantages of filming in Asia is that the production budget is significantly lower than it would be in the US. A movie starring professional, even slightly famous actors would cost between $6 million and $8 million in the US, but the same film in China, with the same actors, could be done for as little as $1 million. And when it comes to documentaries, the costs are a fraction, especially if the filmmaker already has access to equipment. An hour long documentary may only require tens of thousands of dollars -- a sum that one enthusiastic investor could foot entirely on his own.

"Documentaries are not a good way to make money. For this kind of project, you're going to be a patron of the arts -- the returns are very very small," says North Korea expert Nick Bonner, who already has three documentaries under his belt and is now working on his first feature film. For his first documentary he asked friends and family to put up around $10,000 each. Now that his previous projects have provided him with something of a reputation, people approach him asking to invest. He points out that people who support his projects, first and foremost, believe in him and the project he is working on. But another reason people sometimes invest in films is for the glitz. The sex appeal and allure of show biz parties can be a colourful addition to someone's social life. Film festivals offer a unique set of networking opportunities.

An investor might also want first-hand experience of how a film is made, or invest on the condition that the film carries a certain message. Whatever the motive, it's probably best to ignore the possibility of financial gain, and take pleasure in providing more art to the world.

The film-makers:

Charlotte Mikkelborg - Building 173
As a former Shanghai correspondent for the BBC, Mikkelborg is in a perfect position to tell the story of the city's chequered past. For her first film, she took as her subject Building 173. Built in the 1930s, it is one of Shanghai's first luxury apartment buildings and its history is brought to life through the recollections of seven families, spanning three generations, who have lived or still live there. Among the film's subjects is the son of Du Yue Sheng, Shanghai's most notorious gangster, now a resident of Vancouver; and a child who grew up in the building during the Japanese occupation, now a famous American chef. Mikkelborg decided not to wait for funding from other sources and financed the film herself. She is entering it into international film festivals.

Nick Bonner - Comrade Kim Goes Flying
With a unique level of access into one of the world's most isolated countries, Bonner has been able to show more of North Korea than anyone else. His current project, Comrade Kim Goes Flying, is his first feature film and also another first -- a romantic comedy filmed in Pyongyang. Still in its early stages, it will tell the story of a girl working in a coal mine who dreams of becoming a trapeze artist. Bonner has already released well-received documentaries that have followed off-the-wall topics. His first, Game of Their Lives, recounts how the North Korean football team caused a stir in the 1966 World Cup by knocking out the Italian favourites and brings the victors back to the English town of Middlesborough more than 30 years after the event.

This article was initially published in the Spring 2009 issue of Private Capital, which was published together with the March issue of FinanceAsia magazine.

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