I live and breathe film investment. As an investment class, it is often misunderstood and frankly mystified.

So, let’s delve behind the stars dazzle on the red carpet and talk business facts.

1. Film is a successful business.

The business of making, marketing and profiting from feature films has been around for just over a century. Cinema was the first industrialised form of mass entertainment, and even today, in the face of all other competing diversions that have evolved since, global filmed entertainment revenue is expected to reach US$105 billion in 2019 according to PwC calculations based on a consistent compound annual growth rate of 4.1%.

2. Film is a global business and enjoys steady growth.

The film industry is clearly a resilient industry with global reach. Box office revenue set to rise in every region of the world through to 2020 by 4.0% to reach US$ 49.32bn.


And average cinema admissions prices will also rise in every region during the five years to 2020. So despite rapid global increases in electronic home video revenue, the cinema is projected to retain its place as a key leisure activity in every market.

3. Film is an uncorrelated asset class.

An uncorrelated asset class provides a valuable diversification component to any portfolio – but especially for higher net worth investors. As a non-correlated asset class, movies and film finance have outperformed every non-correlated asset course around the globe.

Box office gross receipts rose during five of the last seven economic downturns including the 70’s oil crisis and the burst of the dot-com bubble, even with adjustment for inflation. While film investment actually varies project by project regarding the rate of return and market share; the industry as a whole has been consistently profitable for the past 100 years. 

Numerous pension funds, private banking institutions, hedge fund managers, private equity groups, and high net worth investors are entering the film business.

4. The rise of China as the world’s primary box office market is accelerating rapidly.

A momentous shift in the global cinema market’s balance of economic power is now looming. According to the projections in PwC’s Global Entertainment & Media Outlook 2016-2020, China could overtake the US as the world’s biggest box-office market in revenue terms as early as late 2017.


As the comparison between China and the US shows, this growth isn’t evenly spread. The whole of Asia Pacific, not just China, is galvanising the sector, with the Asia-Pacific region forecast to experience box office revenue growth at a 12.0% CAGR (compound annual growth rate), reaching US$24.11billion by 2020. That’s almost half of total forecast global box office.

Meanwhile, box office growth in Latin American will also outpace the global average, rising at a 6.4% CAGR to US$2.98bn in 2020. Yet while the mature Western European and North American cinema markets may lag behind regarding growth, they are expected to continue to expand.


On current projections, the rise of China as the world’s primary box-office market won’t end there. The country’s spending at the box office is forecast to continue to accelerate rapidly – to the extent that by the end the forecast period in 2020, China’s annual take from cinema admissions is expected to total US$ 15.24bn, some 28.4% ahead of the US’s US$ 11.87bn.

The widening gap between China and US of the respective compound annual growth rates in box office revenue in the two markets for 2015-2020 are forecast to be 18.96% for China and just 1.23% for the US.

5. Local content remains strong.

While the factors supporting revenue growth vary between mature and developing cinema markets, a uniting characteristic in many of them is a strong appeal for local content, often supported by government measures.

Every country wants its own film industry, with local-language films widely seen as acting as a counterweight to Hollywood’s cultural dominance.

The dichotomy of global and local content may be seen most clearly in markets that combine well-developed digital distribution infrastructure with strong local content industries. The preference for local content over “global” (often US-produced) content is evident in a mature, developed, country such as Australia.

2015 lived up to its promise of being the most successful year ever at the Australian cinema box office. A 14% increase from 2014 saw the 2015 box office CUME at $1.2 billion smashing the previous high of $1.1 billion in 2010.

Australian films also enjoyed their best-ever year at the box office in 2015, exceeding the 2001 record of $63.4 million and taking a remarkable $88 million in box office revenue (7.18% share).

6. Revenue growth continues in the digital era.

The good news for the movie theatre industry is that rising global video on demand (VoD) revenues are not incompatible with rising global box office, a fact that reflects the differing experience that each channel presents to audiences. The vast majority of markets and all regions will see cinema box office revenue rise during the forecast period, with all markets helped by increases in ticket prices, and Asia Pacific gaining an additional boost from soaring attendances. In the same period, total electronic home video revenue will also rise briskly at a CAGR of 11.5%.

The significant factor here is that box office, and VoD on demand are both prospering. The potential for both to succeed at the same time is underlined by the trends seen in the US in 2015 when total electronic home video revenue exceeded box office revenue for the first time, but both sectors saw strong year-on-year growth of 16.0% and 6.9% respectively.

Global electronic home video revenue by type 2011 - 2020.PNG

The message is clear: even in the digital era, the lure of the cinema theatre experience remains irresistible – pointing to bright future for cinema, as a digital disruption continues across the E&M industry.

The proliferation of streaming services and the thirst for unique, high-quality content does not show any signs of abating.

The expansion of digital technology, manifested in more ubiquitous fixed and wireless network connectivity enabling growing numbers of connected devices and new routes to the user, is altering the industry’s structure, driving new ways to produce, distribute, and monetise content across its landscape. Creators can more readily pursue opportunities outside traditional studios and distribution channels. Consumers have far more content to choose from, available to them at any time, in any mix, through many more delivery options and devices.

6. Film investment has the potential for significant upside.

One of the enduring appeals of film investment is that, like venture capital, exponential returns can seemingly come out of nowhere. You don’t even need a celebrated cast, 5-star review, nor the mega budget to achieve commercial success.In many ways, this is the secret story of film investment. For every spectacular box office success that is trumpeted in the media, some films return profits in far more discrete and sustainable ways.

From a producer’s point-of-view, sound budgeting, cost management, and vigilant risk mitigation can make a significant difference.

7. Film investment is exciting.

Financing a movie is probably the most exciting and tactile investment you can make. Let’s face it. The feeling of excitement to participate in the creation of a film is simply greater than stock, bonds, and real estate. It’s certainly a more giving experience.

The enjoyment of “cultural, personal and emotional upside’’ of being involved in a project is unique to every film investment.

In summary, today, it is widely believed that the industry has entered a “new golden era of film finance” – when high net worth individuals and institutional players alike are actively investing capital into the industry and magnetised by a compelling macro trend across the planet:

– accelerating global demand for content
– ever more distribution platforms competing for titles
– business efficiency enabled by low-cost technology
– the sudden arrival of China as a filmmaking superpower.

While the Hollywood studios have historically tapped into institutional sources, independent film producers have to patch together creative combinations of equity, debt finance and “soft money” from tax shelter funds and public subsidies to cover their budgets.

As an industry practitioner, I believe that there is a Darwinian upside to all the changes. I believe that only the fittest film producers will stay the course. Film producers must become more commercially minded – which bodes well for the marketplace and acknowledge the fundamental shift.

Smart investors around the world are beginning to see a greater degree of certainty, an attractive risk/reward profile, a low correlation with equity/bond markets and a recession resilient history of film returns. Informed investors can assess the favourable investment conditions and engage in a calculated risk, in other words, rather than a starry-eyed gamble.

Essential extended readings:

PwC Global entertainment and media outlook 2016-2020: Cinema

PwC Australia entertainment and media outlook: 2016 – 2020

PwC China entertainment and media outlook: 2016-2020 


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