Intro: October is for Horror Films 

It's October, which means we're all supposed to watch horror movies (as if compelled by civic duty). It's not enough to celebrate Halloween's occurrence; we must commemorate its 30-day run-up through hay rides, haunted houses, pumpkin spice, and scary movies. If you are a fan of the horror genre, and view its consumption as a moral imperative during October, then there is no shortage of content for you.

• October movie releases: This year features numerous high-profile horror film releases, such as Pet Sematary: Bloodlines, The Exorcist: Believer, Five Nights at Freddy's, and The Nun II, among others. The average Rotten Tomatoes score of these movies is 31%, but who cares.    

• October TV movie marathons: If you are a cable subscriber and want to watch spooky films without changing the channel, you can indulge in horror marathons on Turner Classic Movies, Pluto TV, Syfy, Freeform, and AMC. Enjoy watching gruesome slasher films censored for cable audiences.     

• Year-round standalone streaming channels: Streaming services such as Shudder, Screambox, and Shout Factory are exclusively dedicated to horror film consumption, providing consumers with limitless scary movie content for $6.99 a month—a steep price for streamers that don’t have Suits, Bridgerton, or Law & Order: SVU.   

You may be reading this and wondering, "Who consumes all this stuff?" The answer is a dedicated fanbase whose affinity for fright allows horror to thrive as Hollywood's most profitable genre. 

Over the past decade, movie attendance has fallen as audiences stay home to indulge in a relentless slog of premium mediocre content like Ginny & Georgia, Too Hot to Handle, or a faux reality series about Rob Schnieder called Real Rob (I did not make this one up). Movie studios have responded to this shift in consumer preference by opting for a risk-averse approach to content development, betting on concepts with proven box office success, such as big-budget adaptations and, yes, horror movies.

So today, we'll explore entertainment's horror movie industrial complex. We'll examine the dynamics that make this market idiosyncratic yet wildly lucrative and study the works of an indie production company that has templatized an exceptionally profitable model of horror film development.  

Why Horror Films Are Hollywood's Greatest Investment  

The Exorcist premiered in the winter of 1973 to overwhelming public interest, captivating audiences with its harrowing story of demonic possession. The film smashed box office records, becoming one of the highest-grossing movies of all time and a critical darling nominated for 10 Academy Awards, including Best Picture. 

The movie was notable for inducing hysteria in its audiences, with news of intense viewer reactions further capturing the public's fascination. There were reports of viewers fainting, vomiting, and even suffering heart attacks during screenings, prompting some venues to request paramedics on standby. Some theaters even provided "Exorcist barf bags," a pop culture relic mocked in a 1974 edition of Mad Magazine. 

To date, The Exorcist has grossed over $441M worldwide on an initial budget of $12M—a remarkable accomplishment for a movie that necessitated barf bags. Before The Exorcist, horror films were considered niche or "B-movie" material, laden with cartoonish monsters and sophomoric scares. The film's immense box office success showcased the genre's artistic and economic promise, demonstrating its potential for high returns and, more importantly, its relatively inexpensive production costs.  

Unlike big-budget action franchises, horror films are produced on meager budgets in hopes of achieving modest returns. These low costs are a product of the horror format as much as they are a savvy financial strategy. Scary movies often eschew expensive special effects, A-list actors, grand sets, or expansive locations, instead maximizing the potential of limited settings, practical effects, and innovative camera techniques. The genre prioritizes concept and atmosphere ahead of fanciful visuals or well-known players.  

Compared to other genres, horror movies have significantly smaller budgets, with adventure and animation films typically allotted ~5.5 times the funding of scary movies.

As such, horror films don't have to achieve blockbuster grosses to turn a profit. When examining average ROI by genre, horror films stand out as a significant outlier, averaging a 173% return (i.e. profit) on production costs.

There is a tendency to assume horror films exist in their own distinct silo, catering to niche moviegoing tastes. Such a characterization is accurate, but only to a point. Of the 50 most profitable films in cinematic history, 16 are horror movies—most of any genre. The Blair Witch Project and Paranormal Activity, both horror classics, boast the highest percentage ROI of any films in movie history. 

A prototypical horror flick is both high-floor and high-ceiling—a rarity within the movie industry. Cheap production costs give the genre a favorable economic profile, yet this thriftiness inevitably begs questions regarding moviegoer demand. Who watches these inexpensive films? The answer lies in the uniqueness of horror fandom. Scary movies benefit from a steadfast and often quality-agnostic fanbase that guarantees enduring patronage—even when the movies are terrible.

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Why Bad Horror Movies Are Still Good Investments

In his 1981 review of the slasher flick Friday the 13th Part II, Roger Ebert, arguably America's most influential film critic, griped, "About two dozen movies a year feature a mad killer going berserk, and they're all about as bad as this one." Audiences did not care for Ebert's assessment, and the film grossed $22M on a budget of $1.25M.

In a 1980 review of that film's predecessor, Friday the 13th, Gene Siskel, Ebert's collaborator and arguably America's second-most influential film critic, dubbed the horror classic "a truly awful movie." But he didn't stop there. Siskel opened his review by purposefully spoiling the film's ending to dissuade potential viewers from seeing the movie. And if spoiling the finale weren't enough, the disgruntled reviewer ended his write-up by encouraging readers to contact the movie's producers and star to complain about its content (going so far as to provide their contact information, which qualifies as doxing).

Again, audiences did not care for this film critic’s opinion. Friday the 13th grossed $60M against a budget of $0.5M, eventually spawning twelve wildly profitable sequels—all hated by critics.  

When it comes to the horror genre, there is little correlation between a film's profitability and its box office performance. Horror devotees do not care about the opinions of film critics, film scholars, film theorists, Letterboxd reviewers, IMDB reviewers, or anyone else. Horror lovers want to see horror movies, plain and simple.

When we bucket movies by average user review, sorting films into quality quartiles, horror flicks enjoy strong returns for low-scoring projects and outstanding returns for acclaimed works—unparalleled performance relative to other formats.  

A bad horror movie makes for a good investment, while a decent drama will likely lose money for its producers. When we graph average user rating against median percent ROI, horror is, yet again, a significant outlier for its low viewer appraisals and absurdly high returns. 

Those who cherish horror movies do so for the visceral reaction they evoke and the communal experience of sharing terror in a controlled environment. Their appeal is primal, not intellectual—and there’s nothing wrong with that.

These films may not be glamorous, but scary movies are the entertainment industry's underpriced junk bonds (or blue chip stocks, depending on your feelings for the genre). The more I learned about horror's impervious economics, the more I was struck by one overwhelming question: If this formula works so well, why aren't there more horror movies? Well, one curious film studio also had this question, and they decided to do something about it.

The Story of Blumhouse Productions: Hollywood's Silent Juggernaut 

Made on a shoestring budget of approximately $15,000, Blumhouse Production’s Paranormal Activity employed found-footage filmmaking to craft a suspenseful tale of a demonic presence in a cookie-cutter suburban home. Word-of-mouth and a unique marketing campaign that included audience reaction shots in trailers helped fuel the film’s meteoric popularity. Paranormal Activity was a worldwide sensation, grossing over $194M and announcing a new wave of horror production spearheaded by one highly distinctive studio.

Founded by Jason Blum in 2000, Blumhouse Productions is renowned for its innovative filmmaking model—mainly its commitment to producing low-budget horror movies and virtually nothing else. This unique strategy has resulted in a slew of highly profitable films, including The Paranormal Activity series, M3GAN, Insidious, The Purge, and Get Out. 

The studio's approach bears philosophical similarity to Billy Beane’s team-building strategy cataloged in Michael Lewis' Moneyball. Like the Oakland Athletics (a baseball team), Blumhouse's business model bets on unglamorous, undervalued prospects—in this case, the horror genre. Over 70% of Blumhouse's filmography could be classified as horror, while its other works qualify as horror-adjacent.

To date, Blumhouse has enjoyed unprecedented success relative to other movie studios. In percentage terms, the company's average return on production cost dwarfs other Hollywood studios. 

Blumhouse's content strategy is unlikely to yield consistently seismic returns like that of Marvel, Star Wars, or Disney’s live-action remakes. That said, the average Blumhouse movie makes 45% of a typical Disney release, an incredible accomplishment for an independent studio.

Blum's remarkable success raises questions concerning the ceiling of both Blumhouse and the horror genre. Since 2019, scary movies rank as the seventh-highest-grossing format, capturing a meager ~6% of the overall box office. 

Can horror producers like Blumhouse grow the genre to rival the market size of action, animation, and comedy, or is there a local maximum to the format's potential? And why aren't mainstream studios producing more scary movies? Much of this analysis has focused on relative returns (i.e. percentages). However, major studios like Paramount, 20th Century Fox, and Disney require absolute grosses in the hundreds of millions of dollars to delight their shareholders. Can horror reliably achieve these returns, or will the genre remain forever niche? 

Final Thoughts: A Genre About Nothing

 In reviewing the found footage horror mega-hit The Blair Witch Project, Roger Ebert praised the film for manipulating its audience's imagination by what was left unseen.  

The horror genre thrives on anticipation—often terrifying viewers with the prospect of something dreadful. Unlike action or animation, scary movies do not depend on non-stop visual stimuli or new-fangled special effects. Harnessing fear through absence allows horror to deliver a memorable viewing experience while being cost-effective.

Furthermore, the format succeeds in fostering community during an era when moviegoing often feels solitary and transactional. Little compares to the shared suspense of an audience during a horror film. One of the first tense scenes in Jordan Peele's Get Out features a near-robotic groundskeeper inexplicably running wind sprint by moonlight as if possessed.

 There is nothing remarkable about how this action is shot—no CGI or crazy camera movements—but I remember thinking this was the most terrifying thing I had ever seen. The woman sitting behind me agreed, screaming, "Get out of there!" as the groundskeeper abruptly turned and sped toward our protagonist. I usually view fellow moviegoers as random bystanders—people to share a room with for two hours. Watching Get Out was one of the rare experiences where I felt part of an audience, unified in our collective fear. 

Moviegoing is experiencing a decline, as a move towards everything digital has left us with fewer outlets for community-building. Scary movies are not some sort of panacea; they’re currently a niche artform. Still, these films provide a rare venue for connecting with a room full of strangers, bonding viewers through shared imagination. So go see a horror film this October (there is no shortage of them) and enjoy the thrill of communal terror.

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