I'll be writing about some stories that are a couple of weeks old here over the next few days as I start to get caught up. At the top of that list today is Paranormal Activity. Not because I liked the movie -- I haven't even seen it, and based on user reviews collected by Metacritic, quite a few people who saw it and reviewed it weren't terribly happy with it anyway.
Quality being subjective, I'll leave that discussion for someone else on another day.
I want to talk a little bit (okay a lot) about how this film perfectly illustrates the intentional annual failure of the studio system to produce compelling original content, and how any studio with guts and money could run away with the industry if it intentionally stopped trying to make blockbusters. Paranormal Activity was originally shot as an independent film by its writer/director Oren Peli on a budget of about $15,000 in 2007 (perhaps 2006, the history on this is not entirely clear except that it was first screened in October of 2007 at the Screamfest Horror Film Festival.) It spent the better part of the next two years desperately searching for a distributor before landing at DreamWorks, where it was viewed, liked, and kicked up the ladder repeatedly before taking a trip home with and reportedly scaring the hell out of Steven Spielberg. DreamWorks spent $300,000 to re-shoot the film but decided to release the original after a test screening found people leaving the theater because they were frightened into leaving.
So far so good, and if you look at the $100m the film brought in for DreamWorks and Paramount then everything looks magical and wonderful - it's almost a Disney movie in the making.
But herein lay the problem: this movie should never had needed to be made independently. The studio system has become exceptionally good at shutting out original content in favor of billion-dollar gambles on blockbusters, sequels, reboots, and remakes. It's almost like studio execs are crack addicts, and every time one risky and probably excessively stupid gamble pays off, they get their fix. Everything is cool again, the shakes are gone, you stop puking in your $20,000 toilet, nobody is bothering you about your "problems" and everyone loves you again.
Then the cycle starts all over again. Take your blockbuster from this past summer and spend twice as much on its sequel next year. That's the formula for success now. Don't think, just do it. Doesn't matter if quality script exists from which to make a good sequel, and it doesn't matter if anyone actually wants to do it or even should do it.
That $400 million box office dragon has its hooks into you now, and believe me, you're going to start paying for it. Ask any drug addict about that. You always pay eventually.
While studios spend $150-250 million cranking out five more mind-numbing Transformers sequels, nobody is out there looking for talent that's thirsty to tell original stories on the cheap. And Paranormal Activity ought to be proof enough that original films can be even more profitable than endless action sequels if you stop gorging yourself on the fat. If you add what DreamWorks and Oren Peli together spent on PA, you're not even approaching half of one percent of the budget of Transformers. And while yes, Transformers made more money ($709 million worldwide), it had to in order to cover costs.
Consider the following numbers:
Transformers budget: $150,000,000 Worldwide gross: $709,709,780 After theater's cut: $390,340,379 After costs: $240,340,379
For $150 million (not including marketing), Paramount made $240m back in profit. For every dollar spent, they made back $1.60.
Paranormal Activity budget: $315,000 Worldwide gross: $103,690,184 After theater's cut: $57,029,601 After costs: $56,714,601
For $315,000 (or $15,000, if you only count what the released version cost to produce), Paramount/DreamWorks made $56,714,601 back in profit. For every dollar spent, they made back $180.
Those are just two films. Imagine if Paramount/DreamWorks had spent $150,000,000 on movies like Paranormal Activity instead of Transformers. Obviously a $150m investment in movies like PA isn't going to guarantee getting movies that perform as well as PA did, but to further illustrate the point:
Number of Paranormal Activity's you could make with the budget of Transformers: 476.
Profit if 1% of those movies finds the success of PA: $266,558,624. Profit if 10% of those movies finds the success of PA: $2,665,586,247.
I'm not basing these estimates on solid ground here but I trust I've made my point regardless. For what Paramount spent to make Transformers, it could conceivably had made nearly $2.6 billion in pure profit by making nearly 500 cheaper original movies. If you think PA is an outlier, consider the success of the SAW horror franchise. The original film made $103 million worldwide on a budget of just $1.3 million. The sequel (ugh) made $147 million on a budget of $4 million. Saw 3 made $164 million on a budget of $10 million.
Thus adjusted for theater cut:
SAW made $47 for every $1 spent on the budget. SAW 2: $20 SAW 3: $9
Obviously the law of diminishing returns has come into play with that franchise. Every sequel has cost more than the previous to make while the gross hasn't changed all that significantly. But even Saw 3 was far more profitable than Transformers was by a factor of five, if you're talking about a return on your investment.
Higher returns as a function of cost means more films can be produced every year. Not only does that increase the potential for more successful films produced cheaply (meaning business growth), it keeps more of the industry working, boosts the local economy, and gives people a far wider variety for viewing. More people working means more people writing means even more original material to choose from.
And to think, the studio system that wastes untold billions collectively on horrible sequels and faux blockbusters that become blockbusters due sometimes to audience sympathy and a lack of anything else to watch due to a dearth of production, actually managed to find the key to its future. And did so practically by accident. Paranormal Activity succeeded in spite of the studio system, not because of it. Given a choice, that system would rather stop making movies altogether than produce something like PA on purpose.
Nikki was right that Paranormal Activity is the entertainment story of the year. But not because of its success, but because of how powerfully it illustrates the intentional flaws of the studio system that did its best to make sure movies like Paranormal Activity never even get made.