Jason Blum's Crowded Movie Morgue: Downside of a Microbudget Empire

Illustration by: Matthew Woodson

The "Paranormal Activity" producer invented "microbudget" studio films with huge success, so why are so many of his projects not even going straight to video?

This story first appeared in the March 7 issue of The Hollywood Reporter magazine.

The Jason Blum business model boasts a very simple and alluring logic: Make movies fast and for a price -- $5 million or less -- and then spend the $20 million or $30 million needed to release them in theaters only if they have a shot at selling at least $25 million worth of tickets. With luck, you get an unusually profitable hit and otherwise -- boom -- straight to VOD, so even those that aren't multi­plex-worthy can cover their costs.

Since Blum, 45, hit big with Paranormal Activity in 2007, his "microbudget" model has upended the horror movie business. That film, which Blum discovered and pushed after filmmaker Oren Peli made it for $15,000, grossed $193 million worldwide and has spawned four sequels for Paramount. Studios, faced with increased pressure to cut bloat and release more profitable films, salivate over the three franchises Blum has launched in the past four years: Insidious (a $1.5 million price tag) grossed $97 million worldwide; Sinister ($3 million) grossed $77.7 million; and The Purge ($3 million) grossed $89.3 million.

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But Blum has become as polarizing as he is prosperous. Critics question the quantity and quality of his many films in production as well as the working conditions and rewards (or lack thereof) for talent. Far less noticed than the hits from Blum or his Blumhouse Productions is a sizable batch of finished movies that have not been released even on-demand, some featuring big-name talent who worked for rock-bottom rates in the hopes of being part of one of Blum's signature hits.

Consider the films that qualify as Jason Blum undead: Area 51, from Peli, has been in postproduction since 2009 at Paramount. At Universal, where Blum is in the final stretch of a three-year deal, only one film has been released to date, The Purge (a hit with a sequel due in June). Four films that long have finished shooting are not getting a theatrical release, and no plan is in place to release them on-demand. Four more films are in postproduction, two with release dates and two without.

In a statement to THR, Blum says: “Our model is completely transparent -- we keep budgets low to give directors creative freedom and let them take risks. We only make money when the films go wide, but we are proud of every film we do.”

Perhaps most surprising among the unreleased is Stretch, a Joe Carnahan-directed comedic thriller starring Patrick Wilson. The film was to hit theaters nationwide March 21 but, in an apparently unprecedented move, Universal pulled it weeks before release. Blum tried to sell it elsewhere without success.

Now Blum and his powerful reps at CAA are negotiating an extension to his Universal deal. Studio chairman Donna Langley says that while the majority of the films have not proved worthy of release, "We love Jason, and we love this business."

She cites, by way of example, Not Safe for Work, a long-finished film from director Joe Johnston starring Max Minghella as an office worker trapped with a killer. Universal won't put it in theaters but says it might get a VOD release. "Someday we believe there will be an opportunity to monetize that movie on a distribution platform or as a bundle [sold with other films]," says Langley. "It's theoretical, but we're assuming distribution is going to become more varied."

Meanwhile, as Blum has put films into production at lightning speed, there is disappointment from some who have worked on them for below-market prices. Many were well aware of Blum's successes but also knew that he runs no-frills productions. What they found, at least in some cases, were work conditions worse than they had anticipated and, when the films went unreleased, no worthwhile credit.

Still, Blum continues to attract directors -- many veterans -- with a promise of creative control. Blum takes pride in being straightforward with cast and crew: The productions are bare, the pay is low, and no movie is guaranteed a release.

Stressing thrift, he established unglamorous headquarters in Los Angeles' Koreatown and transformed an old Chevy Astro van into a mobile office in which he can conduct business and screen films as an assistant drives.

Under his deal with Universal, says Langley, Blum can put any movie that costs $4 million or less into production as long as its genre is horror, sci-fi or thriller. "When he comes through the door with one of those packages, it is a very easy yes for us," she says. The studio sees the script, is advised who the director is and can sign off on casting but has nothing to do with Blum's financial arrangements with talent. Then Universal stays out of the process until the film is ready to be previewed.

"This is what we consider our greenlight moment," Langley says. "A lot of the stuff he's doing is like beta testing. If the execution isn't great, if you don't have a star, you're really getting nothing."

Rather than taking producing fees on his films, Blum's unusual deal gives him 12.5 percent of first-dollar gross, a greater take than even A-list producers get. When his movies are successful, some of Blum's profit goes into a pool to be split with actors and a few key crewmembers. When the films hit, the top-billed actors can do very well. On Insidious: Chapter 2, for example, Wilson and Rose Byrne each made $7 million. Blum, too, stands to make millions -- many times over the amount the producer of a low-budget movie normally could command.

For others who slash their fees to work on Blum films, the cold reality is that the rewards never will be rich. One head of a department on a Blum film worked for $1,850 a week instead of his usual rate of as much as $6,000 a week on a studio movie. Had the film grossed at least $30 million, paperwork obtained by THR shows that the profit-participation pool would have started to fill in increments. When and if the movie grossed $50 million, the pool would have reached the maximum amount of $250,000. In that best-case scenario, this crewmember would have received 10 percent of the pool, or $25,000, for more than four months of work.

In this case, however, the film in question never will be released in theaters, and there is no plan to release it on-demand. And recently, the bar for reaping a share of profit appears to have gone up: On one project now in postproduction, the pool will not begin to fill unless the movie grosses $50 million. It will top out when and if the film grosses $70 million. The maximum that can go into the pool remains the same, $250,000.

Blumhouse movies nonetheless lure talent. Some just like the nontraditional model. Others have space in their schedule to accommodate a quick shoot in Los Angeles. Many simply need a job. One veteran crewmember who worked on the unreleased Mercy, a film starring Dylan McDermott that wrapped a year ago, says he'd never worked on a horror movie before. "It was so quick -- a four- or five-week proposition," he says. "I thought, 'It couldn't be that bad.'"

For some, it isn't bad at all. Director Rob Cohen (XXX), who is in postproduction on the $4 million Jennifer Lopez thriller The Boy Next Door for Blum, says he enjoyed creative control and found the pace of shooting in 24 days to be bracing. And Universal gave his movie a January 2015 release date while it still was in production based on the dailies.

"I really wanted to be part of this experiment," he says. "It's a lot of very young people, a lot of new people, and there's excitement in that for people like me who are looking for ways to be relevant." The project got him more work, making Kohl's commercials with Lopez and, he says, with luck, "the film could be in profit opening night." (Cohen notes that his pay is not capped.)

Director Catherine Hardwicke (Twilight) also says she enjoyed making her rock-music thriller Plush for Blumhouse, even though the film only had a desultory opening in theaters in October and took in a paltry $3,000. Still, writes Hardwicke in an email, she found Blum to be "super-enthusiastic and supportive" and takes the film's disappointing performance in stride: "I'm interested in exploring new release models in the future … new ways to reach an audience."

But the crewmember who worked on Mercy says the experience turned out to be worse than he had imagined. This crewmember, who has numerous big movies under his belt, says many of those involved with the production were inexperienced, leading to a chaotic shoot. And he found the working conditions appalling.

"I'm not trying to whine and complain, but I was shocked -- and I don't get shocked very easily," he says. At the time, several films were in production in Blum's Koreatown offices, which were under renovation. "It was disgusting," says this person. "The bathrooms were never cleaned, the toilets were backed up, dirty, broken literally every single day for four weeks straight. One toilet actually exploded." When Mercy shot on location at Big Sky Ranch in Simi Valley, he continues, "It was freezing cold, pouring rain, tons of mud. There was really no shelter. We were shooting in a house that wasn't insulated. There were windows missing."

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Cohen acknowledges that making a Blum movie is "being flung into the deep" but adds, "Jason shoots in L.A. and uses [a union] crew. They're getting what's legally allowed by their own unions. If they have a problem, they should talk to their union."

Lyle Trachtenberg of below-the-line guild IATSE says he's not aware of member complaints but that the union addresses any that arise. "I can tell you he's been prolific, and it's all been union," he says of Blum. "To qualify for our health and pension plans, you need X amount of hours. You work one of these movies, you're close to qualifying for coverage for the next six months."

Mercy, directed by Peter Cornwell, finished shooting a year ago and is among the Blumhouse films on Universal's shelf -- but Langley says the studio still is not counting it out. The same goes for director Bryan Bertino's Mockingbird, which wrapped in May 2012; Langley confirms there are conversations about doing reshoots to see whether the film can be salvaged. Blum "goes into complete hiatus" on some films, she says, "and he'll go back into production when he has time and cracked the idea or execution."

Two more Universal films are in postproduction and still undated: Brad Peyton's Incarnate with Aaron Eckhart and Curve from Iain Softley, starring Julianne Hough. Another two Blumhouse films are in postproduction and have release dates: the Lopez movie and Ouija, from first-time director Stiles White, set for October. (The studio's Focus label is set to release Insidious: Chapter 3 in April 2015.)

By all accounts, Universal's new chairman of filmed entertainment, Jeff Shell, personally likes and is impressed with Blum, who was the only producer invited by NBCUniversal to spend a week at the Olympics in Sochi. And sources say Universal does not want Blum to make a deal elsewhere. But at the same time, some high-level executives question whether the studio is seeking a way to pick and choose among Blum's projects more effectively, given the spotty track record.

"Jason's made a lot of money and done well," says one. "But making so many of these movies -- is that now biting [Universal] in the ass?" He adds that Shell, who has been devising a strategy for the studio since taking the job in September, "wants to make sure the pipes are full" with movies that can play in the lucrative overseas market. "They are looking for movies to release around the world, that will work in all media," says this person. "These movies don't fill the pipes" in that way.

A source with knowledge of the situation says Blum would like more of his movies to get at least some theatrical release, bolstering their chances of making money in home video. But this executive and others say a major studio is not motivated to invest time and money to release movies deemed to have very limited potential. For a major studio, even sorting through this volume of low-cost films to figure out how to release them takes up time that might be spent on bigger moneymakers, say these observers. Universal "probably never believed [Blum] would make so many pictures so quickly," adds one.

Universal could put some of Blum's movies through existing output deals, but that creates problems with buyers who are hoping to get high-profile films. "Not everything is Fast & Furious, and clients understand that every once in a while, you have a miss," says a top executive at a rival studio. "But when you have too many, you're going to have an unhappy client." Adds an executive with ties to Universal, "If you say you need to push three shitty Jason Blum movies through [existing] deals, your own executives say: 'Why me? My customers are going to get pissed off.' It creates tension."

But Langley says Universal wants to renew Blum's deal, though she declines to address how the terms might be altered (if at all). Universal and its parent, Comcast, see great potential in digital distribution, she says, and if that happens, "having some product that we believe could potentially work very well" might pay off. "If there is a pot of gold at the end of this rainbow, fantastic," she says. "If not, we experimented and we tried."