Blumhouse principal Jason Blum has turned low-cost, high-gross genre films into such a reliable hit formula that Universal staked him to a decade-long deal to serve as a silo offsetting the studio’s blockbusters and Illumination Entertainment family films. The payoff: since last fall, the blockbusters Get Out, Split, The Purge: Election Year and a Ouija sequel, which collectively grossed $664 million worldwide on a budget of $27.5 million.

Even though the first indelible image in Blum’s office is a pile of chopped logs topped by a severed leg, with an axe buried in a tree stump next to it—the appendage from a screenwriter who botched a draft, he jokes—Blum didn’t initially set out to become a modern-day Roger Corman. While the display might qualify as art now to Blum, his mother is an art professor and his father a successful art dealer, and Blum was once on a course to join them in the highbrow family business.

“Growing up in the  ’70s and ’80s when my dad had an art gallery, one of the things that frustrated me was the world seemed so tiny, and to appreciate contemporary art, you needed a history of art, a formal education,” Blum says. “I was more interested in the people, and that’s why I went into the movie business in the first place. I think the scary movie part of the business is connected to that. How can you touch a ton of people? In a way, I suppose it’s a reaction to what I grew up with.”

Blumhouse Productions/REX/Shutterstock

If dealing in art is sifting through the detritus to find gems, Blum’s job is similar. His first big find? “Paranormal Activity, 100 percent,” he says. “I was doing studio stuff, some independent, a foot in each, and Paranormal just fused everything. It was a totally independently-made movie distributed by a very traditional studio, and after that huge success, the only person who approached me and said, ‘Maybe you can do that again,’ is sitting right here.”

That would be Charles Layton, who ran Alliance when he first worked with Blum on Paranormal and subsequent genre hits, and now Blum’s sole voice of encouragement is Blumhouse president.

“We had this big hit, and Paramount’s response was to throw us off the lot,” Blum recalls. “Ellen Goldsmith-Vein was kind enough to give me a couple of offices. You think if you get a big hit it opens every door, but no door opened, except Charles’s, who said, ‘You might be onto something here; why don’t you do five movies for us, for a million bucks?’ And that’s how all this started. Oren [Peli], Steven [Schneider] and I had a short-lived company, and we did Insidious with Charles, Sinister, The Bay, The Babymakers, a Rob Zombie movie, and Dark Skies.”

“It looked like low-risk movie-making,” says Layton. “I was running a company that was acquisition-based, and we needed to own content. I knew Jason, from my Miramax days, and I found him to be appealing and trustworthy. I’m not joking.”

Insidious moved them beyond the found-footage movies like Paranormal that dominated the genre, and Blum and Layton continued to hone what became the Blumhouse foundation—even if the atom-splitting moment when they found the formula wasn’t the kind of historic moment that would be indelibly stamped in their memories.

FilmDistrict

“We were at Paramount,” Blum reminds Layton. “Do you remember that? In a conference, sitting with a director who had just left the room, and you said, ‘If this works, it’s going to reinvent low-budget filmmaking.’ Do you remember that meeting?”

“No,” replies Layton.

“A little conference room,” Blum continues. “Paramount ended my deal; we were there making Paranormal Activity sequels. We were sitting with this filmmaker, I don’t remember who, but we said, ‘If we pull this off, it’s really going to change stuff.’”

OK, so it’s not as dramatic as the invention of the telephone, but both men believed it. “What I remember is that the process, which is now semi-institutionalized, of how we incentivized people with box-office bonuses and other things, we invented gradually,” Layton says. “It came out over two, three, four movies in that period. That’s where how we share with them, and what the upside looks like, and how does that all work, was invented.”

The core of the formula remains intact: directors and talent get scale upfront, and creative control if they come in on micro-budgets around $5 million for originals, more for sequels. Blumhouse will give notes to guide filmmakers toward more commercially appealing results, but the filmmaker has final say, incentivized by profiting in success and sequels.

Universal Studios

Some $2.8 billion in Blumhouse box office grosses, TV studio and book imprint later, Blumhouse has soared as it learned hard lessons that mostly went unnoticed because they were acquiring films nobody else wanted, and risking so little in the grand scheme. The hits ranged from James DeMonaco’s The Purge, Jordan Peele’s Get Out, M. Night Shyamalan’s Split, and Joel Edgerton’s The Gift. Also Whiplash, the film that launched Oscar-winning La La Land director Damien Chazelle.

There have been other low-cost films that disappeared quietly because the finished product didn’t warrant big P&A spends, a decision Blumhouse makes upon seeing the finished film. The low-cost discipline behind the model allowed them to take on many projects nobody else wanted when originally envisioned at higher budgets. Even an established filmmaker like The Sixth Sense director M. Night Shyamalan stayed on point with The Visit ($5 million budget, $98 million worldwide gross), and that led to Split ($9 million budget, $275 million worldwide gross). Shyamalan financed most of the latter movie himself, but Blumhouse and Universal got behind it. It is easy to marginalize genre, but it is also possible that Peele could be in the awards mix for his Get Out script, and James McAvoy, for playing a character with 23 personalities in Split.

“You mentioned Get Out, and honestly, no one else wanted to make that movie,” Blum says. “It’s the great thing about the movie business. Most of the successful movies we’ve done, no one else wanted to do. Nobody wanted to make The Purge, which was floating around three years. No one wanted to make The Gift, when it was a script called Weirdo. Nobody wanted Paranormal Activity, even after it was finished. Almost all our success stories are like that.”

Here, they will take some credit, seeing past the reservations others had about Jordan Peele’s provocative Black Lives Matter-tinged thriller Get Out. Peele’s identity as a performer and writer was squarely tied to comedy, even though he is a genre freak with an encyclopedic knowledge of horror films. “It had to do with his comedy track record, but also that the script was so unordinary, and so out of the box,” Blum said in explaining why the year’s most celebrated script so far went unclaimed.

Said Blum: “I love scary movies and respect the filmmakers of scary movies, and it’s just as hard to make a great scary movie as it is to make a great comedy or drama or anything else. You shoot yourself in the foot when you think, ‘We have to get a good scary movie director to do a script by another scary movie writer.’ Jordan was clearly talented, and we thought he would be a good director, and it wasn’t as much of a leap for us to have him do a scary movie as it would have been at other places.”

Universal

Why? “We said, ‘Boom, we’re making it,’ because there wasn’t a huge amount of risk involved. That allows us not to have to choose movies by using comps, which is a great thing. People complain about Hollywood movies being similar. That goes right down to the fundamental green light process, because the process involves having to compare it to three other movies. It’s not because we’re geniuses, but because we do low-budget movies, we can use the opposite process.”

Says Layton, “The humor you see in Get Out that everybody responded to, that wasn’t evident on the page. It wasn’t clear there was going to be that borderline stuff. It was a wacky movie you’d never read before that was clearly a scary movie, but was completely different. But it wasn’t clear it was going to be funny. That was all Jordan. Nobody steered him. This was what he said he wanted to do, and he did it.”

Which is not to say that Blumhouse hasn’t learned hard lessons when it veered from the formula—as with Jem and the Holograms, which ranks right up there for the worst-ever wide release opening. And then there is Stretch, the Joe Carnahan film that came in on the $5 million budget line but didn’t work, and never got a theatrical release. Trouble was, it had been dated way in advance, missed that date, and created a suspicion—which still haunts Blumhouse—that flops are disappeared.

“One of the fundamental things we came up with in the model, which I can’t imagine we would change, is that with low-budget originals, not sequels, we make the movie without a release date,” Blum says. “We finish the movie, we screen it, and then we decide what lane the movie’s taking. Is it a Universal wide release, a BH Tilt movie, CryptTV, Netflix? We dated that movie before we saw it; the relationship with Universal was young, and I made a mistake and got too far out over my skis. We shouldn’t have done it, and we’ll never do it again. We were crucified for it by the media.”

Universal Pictures

Blum says that filmmakers understand going in that he and Layton have a business to run. “That is why it is a low-risk model, so when the movies don’t go wide, and live the life of an independent film, they break even, or we might lose a couple bucks, but it’s not significant. Now, what I tell the directors who take scale is that the only way Blumhouse makes money is if the movies go wide. If they don’t, we don’t take a fee, and you’re not going to make more than scale and residuals. We’re not getting paid at all, but the movie will be seen, and that’s that. Mockingbird, Stretch, The Bay, those are movies [that] didn’t make us anything. Luckily, whether we financed them or someone else did, no one loses too much. Charles did The Bay at Alliance. Did you come up short?”

“We broke even,” says Layton, “because of how we sold it. Of the six movies Alliance did with Jason, we only lost money on one, and that was Dark Skies.” “A wide release,” Blum notes.

“The whole point of the budget number is if it doesn’t get a wide release, you can come close to making it up on VOD and streaming. That’s why you can take risks and someone like Jordan can make Get Out for $4.5 million.”

“Because if the movie came out too much like a feathered fish, you could find a way to get about $4.5 million back,” Blum says.

Both agree that the low budget permitted the casting decisions that wouldn’t be possible if the films cost $15 million and required stars.

So what went wrong with Jem and the Holograms? “Jon Chu made a terrific movie,” says Blum, “and we had a brand, but we made a fatal mistake. The creator of Jem and the Holograms had a real relationship with its fans, and wasn’t involved in the movie. From day one, we got off to the wrong start.”

Blum had learned the lesson when approached to do a new version of John Carpenter’s Halloween, as revered a horror film as you can find.

ITV/REX/Shutterstock

“I said I’d love to, but I’m not doing Halloween without John,” Blum recalls. “I was told that legally, that didn’t have to be the case, but I said, ‘It doesn’t matter. The fans have a connection to John Carpenter, and he has to be invested in what we’re doing, or we shouldn’t do it.’ And he is.”

Blum’s insistence on this got him Five Nights at Freddy’s, when the movie rights to the video game—featuring a security guard in a Chuck E. Cheese-like venue battling the animatronic robots that come to life—was put in turnaround by New Line. Every genre filmmaker wanted it, but Blumhouse got it, because Blum won the allegiance of creator Scott Cawthon.

“Scott is a super smart guy I’ve gotten to know really well,” he recalls, “ who created a universe out of nothing and is connected to the DNA of that. He’s the lead creative force on this movie, and that, to me, is the only way we will succeed, and has a lot to do with how we got the movie. Another lesson learned the hard way.”

The model allows for big paydays in success, but the real money comes with repeat success.

“It depends on the quote of the creator,” Blum says. “If they’ve never done the job before, it’s a small piece. If they’re established, it can be a very big piece. One of the misconceptions people walk in the door with is, Blumhouse makes a lot of money, so when I make a movie with them, I’m going to make a lot of money. If you are Ethan Hawke, and you have a $3 million quote and are taking $10,000, and you make Sinister or The Purge and it succeeds, you’re going to have a big participation. But if you have people, or an actor, who has never made more than scale, you’re not going to get back end on one of our movies.”

Says Layton: “Well, you’re going to get back end, but it’s not going to be a big deal.”

Sony Pictures Classics

Blumhouse expanded its grasp into TV when ITV spent $80 million for a 45% stake in a TV studio that starts with a series version of The Purge and a limited series for Showtime by Spotlight director Tom McCarthy that focuses on Roger Ailes, who built the billion-dollar Fox News empire and was recently toppled because of sordid sexual harassment allegations. While that and Whiplash seem like anomalies to branded Blumhouse fare, Blum says that there is a clear connection. “It is about things that scare you, and scary is a broad umbrella. The Roger Ailes story is extremely scary, so it falls under the umbrella.”

Same with Whiplash, a film that won Blum respect from the parents who wanted him to follow in the family footsteps. They might not spark to the ‘put another leg on the fire’ exhibit that is the signature display in his office, but they respect the path their son has carved. “That was a big turning point in establishing that sentiment for them,” he says. “That was our version of the Sundance independent scary movie.”