Case Study: Blumhouse's Secret Formula For Making Hit Movies

Ever wonder why other producers haven't replicated Jason Blum's success?

I’ve been studying the entertainment industry, literally and figuratively, since college, so it should come as no surprise that my #1 piece of advice for people trying to break into the business has always been this:

Read as much as you possibly can - the trades, screenplays, books about the business, biographies and articles about its key players, podcasts about and by established industry folks, anything and everything you can get your hands on. Absorbing as much information as possible about how the industry works is essential¹, and it’s a habit every successful executive, agent, and producer I’ve ever met has cultivated throughout their careers.

When Deadline reported this morning that Jason Blum’s TV production company, Blumhouse Television, had signed yet another² output deal, it reminded me of a low-key case study I put together about Blumhouse for my colleagues at Slated pre-pandemic. Blum had been so successful so consistently over the previous 12 years, and was having such an incredible run in 2018 and 2019, that I wondered whether he and his team had developed some special method for…well, getting to greenlight, if you’ll indulge me. Not to mention creating franchises and generating hits year after year.

Turns out they had.

I listened to a dozen or so podcast interviews Blum did between 2015 and 2019 and teased out what seem to be the key elements that have contributed to his company’s remarkable track record. I’m pleased to be able to share what I learned with you here.

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Overview

After what would become a career-defining success with PARANORMAL ACTIVITY in 2007, Blum made a deal with Alliance, the Canadian film and TV studio, to do five $1M budget movies. Those turned out to be: INSIDIOUS, THE BAY, SINISTER, PLUSH, and BABY MAKERS. (The latter two were not horror movies.) INSIDIOUS and SINISTER both grossed over $85M theatrically worldwide and became Blum’s 2nd and 3rd horror franchises.

Alliance’s Charles Layton joined Blumhouse following the release of INSIDIOUS (in 2011-ish) and helped forge the company’s next output deal, with Universal, where they’ve been ever since. (Layton is currently President of the company.)

The initial Universal deal ran for 3 years, was “First Look,” and had a target of ten sub-$3M movies. (It’s unclear whether Universal financed all of them, but the conventional wisdom is that the company had outside financiers for some of them.)

In 2014, the Universal/Blumhouse deal was renewed for 10 years, made exclusive for film, and the business model was expanded to target 15 pictures per year, spread across three budget buckets: Five at $5M; five at $3M; and five at $1M. (Sequels to successful movies are not forced into the standard budget buckets; the rule of thumb is “up to $10M,” but it’s data- and project-driven. GLASS, for example, does not fit the model.)

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Current Deal Framework

Universal covers all production, marketing, and distribution costs (and, we can assume, company overhead, including executive salaries). Blumhouse gets a healthy chunk of first dollar gross from every movie, which affords them the cornerstone of their success: Tight production budgets.

Blum does not take up-front producer fees on movies, nor does the company itself take a fee or recoup company overhead out of production budgets as is the norm throughout the business. (It’s much easier to ask the cast and crew to take scale when the lead producer isn’t getting paid at all.)

Blum has said the release pattern of each movie is driven by pre-release audience test screenings, a standard marketing tool that Blum has fully embraced.

• Movies that screen well go wide on 3000 screens and get roughly $30M in P&A. (Blum claims that’s roughly 60% of their movies, and that appears true for some years, but is probably higher than their average).

• Mediocre screenings get roughly 1000 screens and approximately $10M in P&A.

• Movies that screen poorly essentially go straight to VOD, with just enough theaters and marketing dollars to trigger ancillary and international deals.

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The Formula

Forgive me for running with an outline-ish style, but from here it’ll be easier to absorb bullet points than blocks of text.

Low Budgets

• No fees for Blum or overhead for Blumhouse in production budgets

• Everyone works for their unions’ scale wages plus profit participation, including actors and directors; backend is generous but based on people’s precedents

• Budget caps are real - overages are not tolerated³

• Budgets are reverse engineered from sales projections

  For example, a $5M budget is justified if Domestic Theatrical Rental estimates are $2M and International Takes are $2M (with various Domestic ancillary deals covering the difference).

• Sequel budgets are also reverse engineered. (The rule of thumb seems to be 2X the original’s budget, but that’s just me doing the math.) Blum has said sequels’ budgets go up because Above The Line is higher than the original, while Below The Line stays relatively low.

Directors

Blumhouse prefers to hire known directors with something to prove, because:

• Generally, they’ll have a track record of both hits and misses

• Preferably, they’re currently in “Director Jail” (or as Blum put it in the podcast I pulled this from, they’ve “been kicked around by the studio system a bit”)

• An outsider mentality is key, even if they’ve been an insider for years (this goes for everyone on Blumhouse movies, really, not just directors)

• They’re hungry to prove they’re right, and willing to bet on themselves

• They can live without a guaranteed theatrical release of their film (though it’ll come out on VOD at least, for sure)

Creative Control

This is an extension of the “Directors” criteria above, but deserves its own section: Blumhouse guarantees total creative control for its filmmakers. Blum thinks it’s his single biggest advantage.

• Directors get final cut, which results in “auteur filmmaking for commercial movies”

• Directors can cast whoever they want, which is a luxury for most directors

Release Pattern

I wrote this above but it’s part of the formula and worth repeating:

• Each movie’s release pattern and marketing spend is preset, and determined by audience screenings (broadly speaking, the buckets are 1 screen, 1000 screens, and 3000 screens)

• If Universal and Blumhouse disagree on the release pattern, Blumhouse can shop to other domestic buyers. (Blum said this has happened once in 22 movies together…”and Universal was right.”)

  For what it’s worth, everyone at the top of Universal thought JEM & THE HOLOGRAMS (arguably Blum’s highest profile miss) was going to work.

Creative Development

• The creative team leans toward novelty; they’re mostly looking for things that feel different, or new, or just plain cool

• They still must be able to describe it via a logline; things that are too complicated to describe in a sentence are too difficult to market

• Sometimes, things that didn’t work in the past come back around and have their moment…such as GET OUT and THE PURGE, two of their biggest successes

Additional Blum Comments Worth Noting

Paradoxically, the business model’s budget constraints have created a number of advantages that Blum believes are responsible for his track record. Specifically, focusing on low budget movies minimizes the risk of failure, which means:

• No greenlight committee is necessary. Greenlight committees are primarily about people covering their asses in case something big fails. But for Blumhouse, even a string of several flops aren’t going to sink the business. One home run pays for the losses of dozens of misses. And they’re good at producing home runs.

• They can make bold, interesting, and cool choices without having to rely on projections and financial models to justify their decisions.

• The model inherently hedges every bet. Recoupment is very likely, even on movies that underperform.

• As noted above, they can afford to give directors total creative control, including final cut, which leads to great collaboration. Again, Blum thinks this is his single biggest advantage. And he notes it’s one reason the low-cost model doesn’t work in TV: Creative freedom exists in television at much higher budget levels.

• There’s far less second-guessing of decision-making, from beginning to end.

• They can make lots more movies, which gives them more chances for home runs.

Blum tries to keep the creative team together on sequels/franchises. Budgets go up, but the creative cohesion generally means quality stays high, which often leads to strong returns.

He believes casting for creative rather than business reasons is only possible in horror movies at this budget level. (He noted it can also work for giant sci-fi movies, since the effects are the stars.) To justify higher budgets you generally need to cast known, recognizable, valuable actors, whose fees inflate everyone else’s and blow the budget up even higher. (If the star is getting their full quote rather than scale, why should anyone else take scale?)

It’s sometimes possible to get a big star to work within the model, like Jennifer Lopez in THE BOY NEXT DOOR. It can work very well for some movies, but he thinks horror usually works better without stars.

Blum thinks comedies don’t work with the model, because in general they need scope, set pieces, and a star actor to outperform.

And finally, the answer to the question in the sub-title of this piece: The single biggest reason people don’t replicate the Blumhouse model is EGO. Most people have their ego tied to their projects’ budgets. And for most people, sub-$5M movies “aren’t cool,” so it’s very tempting to think that if you have a big hit, you should make a much bigger movie next time.

— End transmission. And thanks for listening to my TED Talk.

1. Information is power, after all. Plus, pattern recognition is key.

2. As the article notes, the company “…already has the ‘Welcome to the Blumhouse’ [series of movies] set up at Amazon and the ‘Into the Dark’ anthology series at Hulu.” This new one is with MGM-owned cable network Epix, for 8 standalone movies.

3. There’s a semi-famous story about the Jennifer Lopez movie THE BOY NEXT DOOR, which apparently received mediocre initial test screening scores. Director Rob Cohen swore he could fix them with reshoots. But since they would take the movie over the $5M budget cap, Blum refused on principle. Fortunately for the movie, Cohen was able to convince someone at Universal to spring for them (possibly out of the marketing budget, but that’s apocryphal). Ultimately, the movie was released on 2600 screens (so the eventual test screenings must have been good) and ended up grossing $52M theatrically worldwide.