There are several unique investment options being floated in recent times. Earlier CredMint was offering 9% returns through P2P lending. WintWealth platform offers various secured and senior secured bonds and offering 9% to 11% returns. Recently, I have seen one advertisement about an investment option offered by Betterinvest club where one can lend money to movies sold to OTTs and earn high returns up to 18%. In this article, we would details on How to earn up to 18% returns by lending to movies sold to OTTs?
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What is revenue based financing in movies?
Movie production houses receive payment from OTTs (Netflix, Amazon Prime and Zee5) only after 30 to 90 days post movie release.
To bridge capital requirement, movie houses sell their OTT invoices (future cash flows) to lenders.
Investors can lend money to movie production houses for their capital requirement based on their future cash flows.
OTTs would make the payment directly to lenders.
This is similar to invoice discounting, however the partners here are movie production houses and OTTs.
How does this exactly work?
Step-1 – Production house would sell movies to OTT’s confirmed with future cash flow via invoices.
Step-2 – Production house sells this invoice at a discounted price to investors.
Step-3 – Investors would receive the amount directly from OTTs in 1 to 6 months time frame.
Positive Factors in this alternative investment option
Here are some positive factors.
1) This investment option provides 12% to 18% returns in the short term.
2) The amount is paid directly by large OTTs to investors, hence considered as moderate to low risk investment option.
3) One can lend as low as Rs 1 Lakh, hence even small investors can afford to invest.
4) Since betterinvest club lists opportunities only which are selected by the OTT platforms like Amazon Prime, Netflix, Zee5 and Hotstar that are almost completed, the risk of movie completion is removed.
5) Investors also get access to attractive perks like move merchandise, exclusive events, movie tickets and vouchers.
6) The returns are paid only after deduction of tax, hence there is no further tax implications for investors.
Negative or Risk Factors in this investment option
Here are major risk factors.
1) There are several platforms which are now offering such alternative investment options. However, one need to carefully choose the genuine platforms. Betterinvest club is relatively new platform as of now.
2) These investments are used for movies which are completed and sold their internet rights to OTTs. However, in case for some reason, OTTs cancel their agreement with movie production houses, the amount invested would be at risk.
3) While the invoices are confirmed by OTTs, there could be a delay in payment to lenders.
How to invest in this plan?
You need to visit betterinvest club platform and register for early bird access. They would review and provide the access and list the opportunities as and when something arrives. You can select the opportunity and transfer money.
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Lending money to movies sold to OTTs – Is it safe investment option?
This investment option is currently offered on betterinvest club and soon would be available on other platforms too. While the money is paid to movie product houses, these are against confirmed invoices from large OTTs. This investment option provides high returns of 12% to 18%. There are few risks like delay in honouring the invoices, new platform (it could be riskier) etc., Investors should consider all these risk factors before investing in such investment option.
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Good Idea of alternative investment, worth exploring.
Hi Suresh, thanks for the article. Any idea why these production / movie houses aren’t able to source capital against the invoice from traditional lenders (Banks / NBFCs?). Why are they sourcing capital via retail investors? Is this because of higher risk or have banks not realised the opportunity yet?
Hello Kevin, The returns from such invoice discounting schemes would be 12% to 18%. While they can always get loans from banks or NBFCs but this comes with lot of documentation. If there are investors and there is tri-party agreement with OTTs that they would honor payments in next 6 months, it would be less documentation for movie production houses. Hence this approach could be another way to source funds.
If Movie / production house sells its invoice (at a discount rate) to the investors, then, how OTT would make payment to investors.
Is it a bi-partite or tri-partite agreement. Otherwise OTT can always refuse to make payment to investors.
Yes, I heard tri-party agreement would be there. This is enabled by the respective platforms.
I have my doubt whether a portal having an address as “betterinvest.club” , which means that the website is hosted at some “club” domain is of some integrity or not. It remains utterly doubtful whether these kind of activities/portals are approved by RBI or not. This is in view of recent crackdown by RBI on such unauthorised/unapproved website offering higher returns to investors.
Invoice discounting is not a new investment option. This is already prevailing. However this platform offers lending to movies sold to OTTs. Yes, I agree, one need to gain trust among platforms.