How Is $400 Million like $100,000?

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I'm Matt Holzman with The Business Brief, a guide to what's happening in and around the business.

Avatar is finally coming out this week. At a cost of $300 or $400 million, James Cameron's sci-fi action epic is one of the most expensive movies ever made. At the same time, a studio is talking about starting up a new division to make movies with budgets of less than $100,000. Kind of makes Hollywood look like a cartoon character running towards a fork in the road and trying to go both ways at once. And yet Avatar has more in common with a tiny movie like Paranormal Activity than you might think.

I use Paranormal Activity as an example because it made a mint for Paramount, and Paramount is the studio not coincidentally considering going into the mini-movie business.

And why wouldn't they? The little horror flick that could managed to scare up more than $100 million for Paramount and cost a measly $15,000. It had no stars and no advertising budget to speak of.

The rumor is that paramount would make up to ten tiny movies a year in the hopes that maybe – just maybe – one of them will hit like Paranormal Activity. If not, they've only spent a drop in the bucket for the studios – they'll just order a few less shrimp for the Christmas party next year.

Aside from the myriad of practical problems with such an endeavor – like the fact that unions will never go for it – there's a flaw in the idea itself, and it's made obvious by precisely the thing that Paranormal Activity and Avatar have in common.

Consider this. Avatar: James Cameron, the mad scientist who brought to life the most successful movie ever tinkers for a decade in the lab to create the next monster hit. Paranormal Activity: a studio gets its hands on true footage of a horrible haunting. Cardiologists fear it may be too dangerous to release!

See what I mean? Back stories like that cut through the clutter and create incredible “buzz” and “must see.” And “must see” like that cannot be manufactured…not for all the money in the world, or even none at all. But even a massive ad-spend couldn't have guaranteed the success of a tiny movie like Paranormal Activity. People had to want to see it for reasons of their own and then talk it up after they left the theaters.

If you don't believe me, look at all the huge studio movies with even bigger ad budgets that didn't do well in the last year.

If buzz can't be reliably manufactured, it can't be a business model. So what are the studios to do? They can't just sit around another ten years until James Cameron decides to make another movie.

The answer is: I don't know. If I did, I'd have big house in the hills. But, especially when it comes to smaller movies, a lot of people who do have big houses in the hills don't know either…and they keep making the same mistakes.

The director of Paranormal Activity fought for years to get his movie released. Slumdog Millionaire almost went straight to video. District 9 would not have been made without Peter Jackson pushing it through. Tyler Perry got laughed out of the studios, and now he's had the last laugh with his gigantic Madea franchise and other films and TV. Shall I go on?

I believe that there certainly is another Paranormal Activity out there waiting to be discovered. The only thing I can say for sure is that it won't come from within the studio system, that budget and stars will have nothing to do with it and that the next Paranormal Activity will look and feel nothing like Paranormal Activity.

I'd love to know what you think. You can comment on today's Business Brief or subscribe to the podcast at For KCRW, I'm Matt Holzman.



Matt Holzman