Rosemary’s Baby Saves Your Local Theater

Dan Borkin

At this year’s Code Conference, Ari Emanuel, CEO of Endeavor, was asked if he believed movie theaters will continue to exist. The interviewer echoed a popular sentiment, that the theater business had a terminal illness. Sooner or later, theaters, like tears in rain, [1] would become a memory, fully replaced by direct-to-consumer streaming services.

Emanuel responded with a question. “Do you cook at home? And you go out to dinner? So that will be the movie business…the minute you and I are comfortable sharing an arm-rest, the movie business is back.” [2] His statement, that streaming and theaters can coexist, much like a home meal and eating out, is emblematic of the other half of the theater debate: that content distribution has changed, but it’s a change that does not necessarily entail a full cannibalization of the theater system.

Believers commonly point to the emergence of film franchises as evidence of a healthy theatrical audience. Billion-dollar revenues, fifth and sixth film sequels, cinematic universes - one would only have to travel to their nearest theater to see the seats packed, elbow-to-elbow, for the newest James Bond iteration. There’s inertia in this type of culturally-relevant money-making; the lifespan of theaters will be prolonged, perhaps indefinitely, because of it.

Even so, there is a more subtle indicator of health in the theater business. A specter that has quietly become an extremely profitable part of the industry. Horror movies. Horror movies are thriving in this new era of content distribution, commonly generating a profit solely based off their theatrical revenues (something that is almost unheard of for films with budgets under $20-$30 million dollars).

Of the theatrically highest grossing films in 2018 and 2019 (the last years sans-pandemic), an unusual number of low-budget (~$5 million) horror movies were extremely profitable. Of the highest grossing films domestically in 2018, the 26th highest grossing was The Nun, #46: Breaking In (admittedly a horror/thriller), #47: Insidious: the Last Key, #70: Hereditary, #76: Truth or Dare. [3] In 2019, #12: Us, #48: Escape Room, #52: The Curse of La Llorona, #59: Ma. [4]. Take Ma, for instance, a film Blumhouse fans might know of, but foreign to others outside that sphere of influence. Ma is the lowest grossing film of this selection, but it made almost $50 million dollars domestically and an additional $61 million dollars worldwide (solely from theaters) off of an alleged $5 million production budget. [5] It is worth noting that only two of these films listed were thought by critics to have artistic merit (Us, Heriditary), the rest are disfavored critically. [6]

These films generate only a fraction of the revenue a Marvel movie would make, but when one compares profit margins, these horror movies made multiples of their budget solely from theater ticket sales. No merchandise, no $100 million publicity tours, just bare-bones marketing. Why does this matter? In an era of windowing-disruption [7] and panic from content creators about where to take their film, where to sell a film, whether to even make a film, there’s almost a guaranteed market for horror movies, theatrically, produced in the budget range of $5-20 million dollars. Not only is there a market, but it is a highly profitable market with a dedicated fanbase, an analog of superhero-franchise fans, horror fans.

Horror content, much like the franchises that studios are so keen on creating, has its own built-in audience. An audience that is independent of sequel or prequel, or even ‘quality’; because it is horror, they will come. Horror movies don’t need famous talent to draw an audience. They don’t need much more than one or two set pieces: some sort of house and some sort of fright. That makes for an extremely inexpensive movie and an appealing pitch for a risk-adverse production executive.

Universal Pictures has demonstrated proof of life of this concept in their deal with Blumhouse Productions. Blumhouse, and to an extent Universal, has become the face of low-budget, high-concept horror movies. This type of film has even been coined the “Jason Blum” model of film, after Jason Blum, founder of Blumhouse and producer of a slew of movies listed above. He is the newest iteration of what started with Roger Corman, Blum’s contemporary. [8]

Lower budget, high-concept horror films is certainly not a new concept, but it will be ever more relevant as the content shown in theaters narrows in today’s media ecosystem. With every superhero film and every sequel, keep a look out for the horror film playing in the shadows of its larger brothers. It might not look like it, but those goblins and ghouls make a small fortune for a select few.







Note that the theater company itself takes a percentage of ticket sales (35%-50%) and the money the financiers see from their $5 million dollar production budget is much less than the “box-office” numbers reported, but nonetheless quite profitable in this case.

[6] *not to imply that Rotten Tomatoes is the arbiter of all-things quality.