I’m Alex Berman and you’re watching SELLING BREAKDOWNS
You’ve got an idea for a movie, right?
Everybody does; some story you’d like to capture on film.
But if you looked at movies as a pure investment, where the only thing you cared about was making
money, then what kind of movie would you make?
Well, it turns out there is only one sensible answer; horror.
Today, we’re going to look at an American production house called Blumhouse, who have
produced some of the highest grossing horror films of all time.
We’ll compare their model to that of other, non-horror studios and see why their genre
has such a shocking return on investment.
Horror films have a long history, dating back to the start of cinema itself.
Probably the earliest is this film called “Le manoir du diable” by George Melies.
A German film, The Golem, from 1915, was one of the first monster movies and was hugely
influential over the years.
The genre has always had trends over the decades.
The 30s had literary classics like Frankenstein, Dracula and The Invisible Man.
After the bombing of Hiroshima and Nagasaki, the 50s saw a theme of radiation fuelled giants
like Godzilla and The Beast From 20,000 Fathoms.
The 70s was demonic possession with The Exorcist, Carrie, The Omen.
The 90s was serial killers; Seven, Silence of the Lambs, Scream.
This year, the big horror hits were IT, Get Out, Split and Annabelle: Creation.
Some might include Alien: Covenant and the last Resident Evil film as well, which would
make horror six of the top thirty biggest grossing movies worldwide, in 2017.
IT was a pretty famous book and film before the remake, and Annabelle: Creation is actually
the 4th film in the popular series called The Conjuring.
But Get Out and Split are completely original screenplays, made by Blumhouse Productions.
Jason Blum started Blumhouse back in 2009 and it hit the scene with a bang, producing
Paranormal Activity.
The production budget was just $15,000 and it went on to gross $193 million, giving it
the best return on investment of any film ever made.
And you might think, “okay, they just got lucky.”
Well, they’ve done it again and again.
Paranormal Activity 2 upped the budget to 3 million and but still made 177 million.
Then there were hits like Insidious, The Purge, Unfriended; all these had an ROI of over 1,000
percent.
Split, despite having big star in James McAvoy and director M Night Shyamalan, only cost
$9 million and made 278 million.
Get Out was even more surprising.
It had no big names, it was a directing debut by Jordan Peele, who was known for his comedy
double act Key and Peele.
Again, a small budget of 4.5 million and a huge box office of $253 million.
Peele himself made an interesting comment about how comedy and horror are so close;
you build tension and then have a release, it’s all in the timing.
And though he might be right from a filmmaking perspective, the same isn’t true when it
comes to marketing.
Do you think an intelligent comedy that was a critique about race in America would make
quarter of a billion at the box office?
Not a hope.
Get Out needed the horror element to make it marketable.
And you know why?
Because horror is so much easier to sell.
Think about why each genre is popular - comedy makes you laugh, romantic comedies give people
that warm, emotional kick, action movies are exciting.
But try getting that in a trailer or a billboard.
Jokes need context, romance needs time, action is simple but you spoil the film if you show
all the best set pieces in a trailer.
But for a horror film trailer, get some dark lighting, throw in some screams and a couple
of jump scares and you have answered the only question anyone cares about; is it scary?
Marketing movies has become extremely expensive, maybe in part thanks to the aggregation site
Rotten Tomatoes - you can see a bit more about this in our video last week about review sites,
link below.
Unless a movie has universal glowing reviews, you need to really push to get people in the
doors.
We talk a lot about production budgets today but, as a rule of thumb, you can assume that
the marketing budget is equal to the production budget.
It’s almost impossible to get any figures on this though so we’re working on estimates.
Horror films still need promotion but since their market is smaller, thanks to being rated
R most of the time, they don’t need to cast their net as wide as say, Marvel Studios.
Let’s actually compare the two; Blumhouse and Marvel Studios.
You might think that although Blumhouse makes really high ROI, thanks to the low cost of
making a horror film, they’re still never going to make the kind of money the blockbuster
giant like Marvel does.
Since Blumhouse launched in 2009, they’ve made 64 films.
The highest budget has been 10 million, but the vast majority were 5 million or under.
In total, they’ve spent around 200 million on production.
Their total box office has been 4.5 billion.
So a return of 4.3 billion in just 8 years.
Obviously, there are marketing costs and they work with major distributors so actual profit
is way less than that.
What about Marvel Studios?
In the same time period, they’ve made 14 movies, costing 2.6 billion and grossing 11.8
billion.
So a 9.2 billion return.
But their marketing is astronomical, at least 100 million a movie and probably double that
so the two studios are actually on a pretty similar level.
If we bring in a third studio, Dreamworks Animation, for more context.
Their figures since 2009 are a 2.5 billion spend on production for 8.2 billion box office.
So, you see what we mean about Horror.
The risk is far far lower but the gains are almost the same.
They don’t need big names attached to them, they don’t even need good reviews.
Sure, the big hits like Get Out, Split and Paranormal Activity are well reviewed but
Blumhouse still averaged about $100 million for each of Ouija, The Purge and it’s sequels,
the Insidious sequels and many of the Paranormal sequels, despite a critical panning.
Here’s the thing.
Studios have realised that if you put together a good scary trailer and open as widely as
you can across the country, you will get an audience.
A non-Blumhouse film from 2012, The Devil Inside, was clearly made to copy Paranormal
Activity’s success, using an uncredited production house called Room 101, who had
actually worked on the Paranormal sequels.
Paramount distributed it and spent about $5 million promoting it, despite it being made
for under $1 million.
It opened in over 2,500 cinemas in the US and made over $50 million domestically, and
about the same overseas.
Audiences hated it, people routinely booed in the cinemas and it had terrible reviews
on every site.
It was a terrible film and was dead in the water by the second week but it didn’t matter,
one week had been enough.
It’s a total smash and grab.
The famous statistical analysis site fivethrityeight.com shows how year after year, the horror genre
has outperformed every other on ROI.
They make the interesting point that not only are they helped by cheap production but they
also work well across languages.
The scripts are often pretty basic, there’s very little nuance so you won’t lose much
in translation; a scream is pretty universal, right?
It works the other way too, with popular foreign horror often getting a like-for-like hollywood
remake, like The Grudge and The Ring.
So, you don’t need to be the next Paul Thomas Anderson or Charlie Kaufman if you want to
make money from the movies; grab a camcorder, a bucket of ketchup and remember, you only
need a great 90 second trailer, the other 90 minutes can go to hell.
Wanna learn more about business theory and history?
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