How to Invest in Hollywood Movie Stocks

By: Jane Meggitt | Reviewed by: Ashley Donohoe, MBA | Updated May 10, 2019

It is easy to profit from Hollywood.

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Lights, camera, action! For well over a century, Hollywood has epitomized glamor and entertainment. It also means the average person pays more attention to the movie industry than other major U.S. industries. You can own a piece of Hollywood by investing in stocks relating to the film world.

Buying Hollywood Stocks

The simplest way to own a piece of the movie business is via purchasing shares in Hollywood stocks through your broker or online trading account. Disney, Netflix and similar companies have produced solid growth over the past few years. You also must decide on what areas of production to put your funds. Netflix, for example, distributes and produces films, while buying shares in a film studio such as Lionsgate means you are focusing on its TV and film slate.

Research companies within the film industry, especially those that aren’t making films themselves. Consider movie theater chains such as AMC Entertainment or Regal Entertainment Group, or media conglomerates operating cable TV channels and internet streaming services. Content is king in Hollywood, and you may make more profit with alternative revenue streams relating to film and TV production rather than invest in the productions or studios per se. While investing in Hollywood stocks poses risk, the fact remains that even in difficult economic times, people still want to escape their daily lives through watching movies or TV.

Direct Investment in Filmmaking

While buying shares of movie industry stocks might prove profitable, there’s not much excitement in these purchases. If you’re willing to take greater risks, with the good possibility of losing your investment, you can invest directly in film productions. Of course, this type of direct investment requires significant cash, ranging from several hundred thousand dollars or a million or more.

For that amount, you may not make any money, but you will gain perks not available if you’re just placing an order with your broker. These perks might include VIP tickets for screenings, invitations to Hollywood parties and the ability to attend premieres dressed to the nines on the red carpet. Invest enough money, and you can interact with the production’s stars, director and producers.

If a film makes money, the initial income goes to paying back investors and debts involved in the film’s production. After that, the remaining money is split between the producers and investors. Keep in mind that most films don’t make money or just break even. It’s the rare film that becomes a blockbuster, but those are the ones keeping the dream of fabulous Hollywood profits alive.

Hedge Funds and Private Equity

Hedge funds and private equity firms are the usual methods for direct investment in films, although there are some opportunities available through websites focusing on raising capital for film production. Slate financing somewhat mitigates the considerable risk of direct film investing, as such financing offered via hedge funds invests in a portfolio of films rather than one production.

Performing Due Diligence

No matter how you decide to invest in Hollywood films, performing your due diligence is imperative. When it comes to stock investments, that includes the company’s history and earnings outlook, its profitability, the stock’s price-to-earnings (PE) ratio and its management.

If you’re investing directly in films, you need to do even more research. Does the producer have a good track record? Are name actors and directors attached to the film?

You must also consider the film’s potential, although that is the trickiest item of all. Huge, blockbuster-type films are the costliest, although they also tend to make more money than smaller, more intimate movies. The successful movie investor develops a sixth sense about a project’s possible success because there really is no definitive way to tell whether a movie will end up an Oscar nominee or head straight to video.

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About the Author

A graduate of New York University, Jane Meggitt's work has appeared in dozens of publications, including PocketSense, Financial Advisor, Sapling, nj.com and The Nest.

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