So you wanna be in pictures? Opportunities for investors abound, but many of them are far
less entertaining and far more likely to fail than their promoters let on. Indeed, according to the Federal
Trade Commission, investment opportunities in the entertainment industry may sound
glamorous, cutting edge and cant-miss, but films, infomercials and the Internet are
among the most risky of ventures.
"Potential investors need to be on the alert for
grifters who take their money and promise the gold, glitz and glitter we all associate
with the entertainment world," said Jodie Bernstein, Director of the FTCs
Bureau of Consumer Protection. "Unfortunately, titanic profits are reserved for very
few investors or groups of investors generally,
people who know the industry very well and who take a very cautious and studied approach
Promoters often invite consumers into the "lucrative
world of entertainment" with promises of projects that "have already generated
profits for industry insiders." But many films never make it to a theater, let alone
television or video distribution. Even if a film succeeds at the box office, financial
backers usually are the last to recoup their investment from the project. Pitchmen also
hawk the profits to be made in special interest television programming. But the success of
any new network venture requires a rare combination of creative programming, an ability to
get access to cable systems and an ability to draw viewers and advertisers.
In addition, fraudulent telemarketers are marketing
"opportunities" to invest in Internet gambling operations and the occasionally
profitable world of infomercials part of the
fast-growing direct response industry. Potential investors in cybercasinos should know
that Internet gambling is not legal in any state and that fraudulent promoters
traditionally overstate the profitability of casinos. As for infomercials, legitimate
industry members estimate that only one infomercial in 30 is successful in generating
enough sales of the featured product to make any money for investors.
Scamming telemarketers often recommend that consumers
transfer their self-directed IRAs (Individual Retirement Arrangements) to finance the
investment, claiming that the investment "has been approved for your IRA" and
suggesting that it has been evaluated and deemed a prudent, low risk savings instrument.
The fact is that the IRS does not approve or evaluate any investments for IRAs.
Whats the low down on investing in supposed
high-profit, low-risk entertainment-related offerings? According to the FTC, if you want
to invest in a movie, buy a ticket. If you want to invest in cable television, subscribe
to a service. And if you want to invest in the Internet, sign up with an Internet service
The FTC works for the consumer to
prevent fraudulent, deceptive and unfair business practices in the
marketplace and to provide information to help consumers spot, stop and
avoid them. To file a
complaint or to get free information
on consumer issues, visit
call toll-free, 1-877-FTC-HELP (1-877-382-4357); TTY: 1-866-653-4261. The
FTC enters Internet, telemarketing, identity theft and other fraud-related
Consumer Sentinel, a
secure, online database available to hundreds of civil and criminal law
enforcement agencies in the U.S. and abroad.
FEDERAL TRADE COMMISSION
FOR THE CONSUMER