There is no getting around it, in general films are a bad investment. According to Arthur De Vany, Professor Emeritus of Economics at the University of California, 78% of studio movies lose money. And that’s studio movies, not even independent films where the odds are even worse. And many filmmakers will say they don’t care about the profitability of films, that are in it for the art, not the business. But filmmaking is an expensive art and money is needed to pay for talent, crews, equipment, and all of the other things that go into production. So, even if the filmmaker doesn’t care about the profitability of the project, the people who are going to be asked to invest will care.

The project may have a great pitch, and get an investor interested who shares the passion of the filmmakers, but at one point the investor or one of their financial advisors will ask about the risks and returns of the project. The filmmaker can try to point to small budget films that went on to make large sums of money, like Get Out and The Blair Witch Project. Most people know the chances of you having those same kind of results is akin to buying the winning lottery ticket. While it is possible, it isn’t very likely.

Even if you can’t show that your film will be wildly successful and make your investor rich, they may still be interested. Again, they may share your passion for the project, or they may just be interested in having their name on IMDb to brag about at cocktail parties. But they will want to minimize what money they stand to lose. In financial circles, this is referred to as Value at Risk (VaR) and is a measurement often used to determine the extent and possibility of losses in an investment. By lowering the VaR of the project, it will be easier to raise investment into the film project.

How does one lower the risk of an investment without being able to guarantee that your film will be a hit? There are some possible paths to lock-in revenue such as pre-sales and minimum guarantees, but these are not available to most filmmakers, and even if they are, often fall short. So, instead focus can be on a path that is open to all filmmakers: tax incentives and credits offered at the federal and state government levels. These incentives and credits, when properly handled, can lower an investor’s exposure by as much as 72%