Entertainment is big business. Together, movies and TV shows are worth hundreds of billions of dollars each year. The most successful products, like a new Marvel movie or live sports, can make hundreds of millions of dollars in profits on their own. These are the kind of numbers that any investor would notice. But at the same time, entertainment tends to be a niche industry and difficult to research so it can be difficult to invest into. There are four main options if you’re interested in profiting from the entertainment industry. You can also work with a financial advisor who can provide guidance for your whole investment portfolio.
Invest in Production Companies
The most direct way to invest in the entertainment industry is through the companies that work in it. An excellent place to start is with the companies that actually make TV shows and movies themselves. These are generally called production companies or studios. They’re the companies that license properties, write stories, film the production and create typically the final product that reaches the screen.
Many of the large movie and television studios are publicly traded, meaning that you can buy and sell their stock freely. This includes companies like Paramount Studios (PARA), Warner Brothers (WBD), Lions Gate (LGF.A) and Disney (DIS). If you’re looking to invest in direct production, you’re usually going to want to look for a major company as most others have already been acquired and consolidated.
As with any major product, the studios themselves only represent one piece of the work that goes into making a TV show or movie. A studio will typically produce and oversee the entire product, but it also relies on the work of many specialty companies that provide services ranging from high-end special effects and costume design all the way down to location scouts and craft services. With most other industries we would recommend looking at those secondary markets as a way of investing around the industry, for example buying stock in a company that sells batteries or steel as a way of side-investing in the auto industry.
But when it comes to the entertainment industry this is rarely an option. Secondary companies share a problem with studios when it comes to finding investment opportunities: consolidation. Even in an era of increasingly large mergers, the entertainment industry has consolidated to an extraordinary degree.
Invest in Distribution
The other side of the coin is film and TV distribution. Distribution companies are the firms that own the channels, theaters, streaming sites and other ways in which you can watch the products created by a studio.
Movies and television differ greatly in production and distribution due to a 1948 antitrust action called the Paramount Decree. This was a ruling which held that the studios which produce films cannot own or have exclusivity rights with the theaters that produce those films. The purpose of this decree was to make sure that no one studio captured someone’s local cinema, preventing them from seeing any other movies and letting the studio fix prices as it saw fit. No such rule has ever been extended to television networks or streaming services.
This led to the system we have now. Movie theaters and movie studios are separate entities, with companies like AMC theaters (AMC) showing movies from many different studios and studios like Disney running its movies in many different theaters. Television studios are not separate from their distribution channel, which is why a company like NBC (CMCSA) is both a studio that produces shows and the channel which exclusively broadcasts them. The same is true of services like Netflix (NFLX) or Amazon Prime (AMZN), which also produce their own shows for streaming on their own services.
The overlap makes it difficult to invest purely in distribution. However, the more a company focuses on showing vs. making entertainment, such as the model of Netflix or AMC, the more this is an investment in the entertainment industry’s distribution infrastructure rather than its production houses.
Crowdfunding Small Projects
Crowdfunding is an opportunity where just about anyone can invest in a project or product because the owner is raising money to fund their production. With crowdfunding, there is little to protect your money or guarantee that you will see any returns. You are spending money you should not expect back to buy, hopefully, access to something you would like to see produced. In fact, it’s one of the reasons that a crowdfunding site will specifically refer to participants as “backers” not “investors.”
That said, occasionally crowdfunding projects do offer financial returns to their backers. They may promise a portion of the film’s returns to people who put their money into the project. This can be worthwhile if you would like to help finance a film or TV show directly since otherwise that kind of investing is restricted to the pros. Just be careful. This is usually not handled by an above-board project and this is rarely allowed by trustworthy sites.
Finally, a niche way to invest in movies and TV shows is by purchasing collectibles. This is a small piece of the market and generally should be considered high speculation. However, it is a real form of potential return. From comic books that exploded in value after the Marvel universe took off to old Star Wars toys, merchandise related to a successful film property can accrue significant value.
This is a form of investment that typically only works with new and not-yet-established properties. You’re not likely to make significant money buying an Iron Man action figure today, because the character is already popular. But in 2005 Tony Stark was a B-list character that Marvel only owned because no other studios wanted to license him. Had you bought up collectibles before Robert Downey Jr. made Iron Man became a hit, you might have some real value on your hands today.
The Bottom Line
Investing in movies and TV shows can be a good way to access a market worth hundreds of billions of dollars. One of the best ways to do so is by investing in the companies that make these products or the ones that distribute them, but there are some opportunities to invest in independent movies if you can find the right opportunity. Not every movie makes money, though, so it’s not an industry you should get into without doing plenty of research.
Tips for Investing in Movies
- Do you love movies? While not much is better than making some money off your passions, it might also be great to collect those returns while living in one of America’s best cities for movie lovers.
- Investing in entertainment can be highly speculative and a big risk if you aren’t familiar with the industry. Consider enlisting the help of a financial advisor to help you with asset allocation or to better understand how entertainment investing might help you. Finding a financial advisor doesn’t have to be hard. SmartAsset’s matching tool matches you with up to three financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
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