When and How Film Investors Get Paid

"Film investing is too risky." I hear this daily from potential investors, usually followed by "When would I get my money back?"

After producing four feature films in four years, I've discovered something counterintuitive: Film investing isn't inherently risky; it's just poorly structured.

The infamous "Hollywood Accounting" stories aren't about the inherent risk of film. They're about intentionally complex structures designed to hide profits.

This supports the idea that film investments are high-risk, uncertain, complex investments that rarely pay out. 

Their personal experience may back that up. I’ve spoken with many investors who will never back a film again because they got burned on their first investment, usually due to a lack of distribution or repayment plan. 

This lack of transparency and structure has cost investors millions in potential returns. 

But here's what most investors never learn: When properly structured, film investments follow a clear, predictable path to returns. The difference between success and failure isn't the movie–it's the system behind it.

Let me show you how and when investors get paid in a properly structured film investment.

The first key to proper structure is understanding that film investments follow a clear, predictable timeline with specific milestones and deliverables that smart investors can track.

Film Investment Timeline

When you “greenlight” a film and wire the money to the producers, that starts the early stages of a film’s timeline. There are a few months of development, or that could have been done before the greenlight. 

Next, you enter pre-production, where the cast and crew are hired, budgets are assigned, and everyone plans the filming portion of the movie. This process takes a few weeks to a few months for an indie film. 

Then you move into production, or “principal photography,” where you film the movie. This lasts a few weeks to a few months on an indie film. Most features film between 15-35 days of principal photography, generally five or sometimes six days a week. 

Once you wrap principal photography, you enter post-production, where editing, sound, music, visual effects, and coloring happen. Assume a six- to eight-month timeline for post. 

The movie is ready for distribution, and this is where most films deviate in timeline. Smart and savvy producers will have lined up distribution, so it can go to that next step at this point, 12-18 months after it was greenlit. 

Others without a plan will enter the film into festivals and pursue distribution deals from those festivals and markets. 

Investors need distribution or sales of the movie to recoup their money. Proper structure is critical. Successful films follow a methodical release strategy through multiple "windows" where it can be released in different ways, generally in a "most-to-least-amount-of-revenue" sequence, rather than hoping on a big sale.

Understanding Revenue Windows

You start with a theatrical release, where an indie can make $3-4 for every $10 ticket sold. This requires a distributor anda marketing budget. Indie films often secure a secondary investment at this stage for “P&A,” the Prints and Advertising for the theatrical release. This includes the hard drive the movie is stored on and played from, the posters and shipping costs to get it in theaters, along with advertising to attract viewers. 

In this stage, investors take a “last in, first out” position, which benefits them but not the earliest investors in the film. 

A successful theatrical release recoups some or all of its production and P&A budget or sets the film up for bigger deals later. 

If you spend $1M making the movie and another $500K for P&A, making $500K-1M would be a good outcome. Making $1M+ would be great, and over $1.5M would be extraordinary. 

The distributor takes 20-35% of the net revenue (after the theater takes 50%+) from theatrical release revenue. To net $1.5m, you need to make $5-6m in box office. 

100% of the revenue is paid back to investors before the filmmakers see any split. Sometimes there’s a preferred interest (10-25%) on top of the initial investment as an upside and thank you for taking a risk. 

After the theatrical window, you have other windows with similar names: TVOD, AVOD, SVOD, broadcast, and international sales. Here’s what they stand for and the expected earnings per sale or stream:

Standard Video On Demand (VOD)

DVD purchases fall into this window and can net you $10-15 per purchase. There aren’t many rental options available. This window often begins at the same time as TVOD, below.

Transactional Video On Demand (TVOD)

TVOD is renting or purchasing a movie. That’s TVOD, wherever you build your digital movie library, whether it’s Apple TV, Amazon Prime, or YouTube.

You can expect 70% of every purchase. A $5 rental nets you $3.50, and a $19.99 purchase nets you $14 before any split with your distributor or sales agent. 

This window includes cable, satellite, telco, and internet channels. 

A typical length for this window is 30 days before opening the next one. 

Pay TV Window

Pay channels like HBO (or whatever they’re calling it these days), Showtime, and Starz fall into this window. This is where the movie is licensed to air on these paid TV and streaming channels, rather than being available for rent or purchase. Depending on the channel and strategy, there can be multiple pay TV windows in your release sequence. 

Subscription Video On Demand (SVOD)

Netflix, Apple TV, Amazon Prime, and any platform charging a monthly or annual subscription pay between $0.05 and $0.15 per stream. 

For AVOD and SVOD channels, you need a lot of volume to compensate for the decreased marketplace value. 

Ad-supported Video On Demand (AVOD)

Any ad-supported platform rather than a subscription, such as YouTube, Hulu, etc., is considered AVOD. There are also broadcast channels like Tubi that are FAST - Free Ad Supported Television channels. 

Expect $0.01 to $0.15 per stream. 

Broadcast TV Window

Since license fees for these channels can be smaller than the Pay TV window, it makes sense to move it later in the release strategy. These channels pay license fees rather than “per stream” like SVOD and AVOD, and the terms depend on factors like exclusivity, term length, cast, audience size, and performance within other windows. 

Non-Theatrical and Education

This window includes other screenings outside of theaters, and DVD and streaming licenses for libraries and other channels. It’s a great way to build a fan base without the advertising cost of earlier channels. 

A Real-World Example

During a film’s release, money is first paid back to investors, then any profit is split with the filmmakers. For example, let’s say a savvy producer had a great film with a decent marketing budget and exploited every window over three years.Here’s what that could look like:

(All revenue is after any split or fees with the distributor or sales agents.)

$1M production budget + $500k marketing = $1.5M invested.

—

Theatrical Window: $500,000

VOD: 20,000 DVDs x $10 = $200,000

TVOD: 50,000 rentals & purchases x $5 avg = $250,000

1st Pay TV Window: $150,000

2nd Pay TV Window: $100,000

SVOD: 1m streams x $0.12 = $120,000

SVOD: 500k streams x $0.08 = $40,000

AVOD: 5 channels x $40k each = $200,000

Broadcast: $50,000

Non-theatrical / Education: $25,000

International sales: $250,000

—

Total Revenue: $1,885,000

Investors Recoup: $1,500,000

Investors Preferred Interest: $300,000

Investors split the remaining $85,000 50/50: $42,500

Investor Profit: $342,000 in 3 years (7% IRR)

This basic example shows that films can make money. It also explains why some filmmakers sell a film at a festival or market - if they can sell it for more than they spent to make it. It also passes the marketing expense on to the acquirer. 

Most investors back films for the fun and excitement, not because the IRR (internal rate of return) beats their real estate oralternative investments. 

What Investors Should Look For And Avoid

When considering a film, investors should look for a few things:

• What is the release strategy?
• How many windows are the producers exploiting?
• What are the fees for those sales or distribution channels?
• Are they planning a theatrical release?
• What is the advertising budget?
• Will they sell the film internationally?
• What is the expected return timeline?

Red flags include high distributor fees with no expense cap (recoup before you get paid), secondary investors in a last-in, first-out position, and no distribution plan. 

Yes, the film industry has uncertainty, but only when you ignore the basics. It’s a business creating a product for a market.You need responsible budgets and timelines, and a large enough audience to support your go-to-market plan. Look for producers who understand those principles. 

The film industry isn't inherently risky; it just requires proper structure. With clear timelines, systematic distribution, and protected investor interests, film investing becomes a predictable path to returns. That's what allows us to keep making more movies!

At Craftsman Films, we're implementing these exact principles in Producer Fund I. We're creating transparent, structured film investments with clear return paths. I would love to walk you through our approach to protecting and maximizing investor interests.

Ready to explore film investing done right? Let's talk.