Jason Blum Built a Hit-Making Movie Machine. Does It Still Work?

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1:54Peter Kafka:From the Vox Media Podcast Network, this is Channels with Peter Kafka. That is me. I'm also chief correspondent at Business Insider. Today we are talking about movies and how to make them in a world where it's hard to get people to watch movies. That is the challenge facing producer Jason Blum, who has a very good track record when it comes to getting people into theaters. He is best known for low-budget horror movies like Paranormal Activities, Insidious, The Purge. Even if you never see horror movies, you definitely saw Get Out from 2017. That was his breakthrough, once-in-a-lifetime crossover hit.

2:31Peter Kafka:I've talked to Blum a few times over the years, starting about a decade ago, when he had a really good formula for keeping costs low and returns, at least on a mega Super Smash, super high. But over that time, it has gotten harder and harder to get people off the couch and into theaters, and I wanted to ask him how he's adapting, or not, to the new realities. As you'll hear, Blum is an optimist. He cannot really make movies unless you are an optimist. But he's also pretty clear-eyed about what's really changing and what isn't in this industry. We recorded this one live in San Francisco as part of Business Insider's Long Play event in April.

3:09Peter Kafka:Pretty sure we will have more of these to come, perhaps in a city near you. In the meantime, here's me talking to Blumhouse Productions, Jason Blum. We did one of these 10 years ago. Right. You were crushing it. You were doing so well, you became a Harvard Business Review case study. Yes, Anita. For those of you who let your Harvard Business Review subscription lapse, can you sum up very briefly what your amazing formula was? The formula you had for making ultra successful movies for very little money. So different than the case. That's slightly different than what the case study was. The formula was I saw an under exploited part of the movie business.

3:53I did it. I did paranormal activity. That was like the first big hit I had. And I was in my mid 30s. I was old enough to not when you're younger or in your 20s, you have directors who will make a movie and it'll be a big hit and the movie will be a romantic comedy. And then they want to make like a action movie, which is a big mistake because what Hollywood wants is more of the same from what you've done successfully. So after, and getting, making hits is one of the hardest things in the world to do. So after Paranormal Activity, I did only low budget horror. I did a movie called The Insidious, which is a franchise and The Purge and Sinister.

4:30Those were the four movies that I did. And my formula was making independent films that were released by studios. So we made these movies. They cost a million dollars. We didn't pay ourselves. So it was easy to negotiate with the directors and the actors who also didn't get paid or got paid scale or as little as you're allowed to pay them. We shared a much bigger part of the profits of the movies with the people that then the studios shared typically. So in the early years, we made a handful of people, an enormous amount of money very quickly. And, um, and it took off from there.

5:03Peter Kafka:If you got movie and you didn't even put movie, you didn't put every one of your movies into theaters. You had this sort of rigorous testing because not every movie was good enough to be in a theater. Well, that was also very different and new. It's not so new now, but, but the notion that a studio, this is not independent movies. These are studios that were Universal, Sony, Paramount was Paranormal Activity. That a studio before we started would never start production on a movie and not have a date for when the movie was going to come out. And I insisted on my contract with Universal. It's still with Universal, but we work everywhere, but primarily with Universal that when we, and it's no longer like this by the way, but that when we would make the movie, they would not date the film.

5:47And it was a great, it was a great winning strategy because when we made bad movies, which it's impossible not to make lots of movies and some of them be bad. and about half of them, bad is a harsh word, but half of them weren't terribly commercial or weren't as commercial as we hoped and anticipated they would be. But instead of losing money, we would just put them on TV. And so they kind of disappeared. We would make our money back and we would keep taking little bets. And it was compared in the early days to the pharmaceutical business where you take many, many, many, many little bets and then the ones that would pay off, you would lean into.

6:25So when you got a purge or you got an insidious, you'd have a franchise, you'd spend more money on the sequels and you'd lean into the IP that worked and the IP that didn't work, you didn't get hurt. You got your money back. And I focused in the early days a lot on making sure that the movies that weren't, that didn't get big releases got the money back. And that's how we got the volume. Because as long as we never lost money on a movie, Universal said, make as many movies as you want. we would make eight, 10 movies a year, have four released and four go to TV. So you have this winning strategy.

6:58But that doesn't happen. And now, sorry to interrupt, but now everybody does that. Amazon makes a movie, they watch it, and they decide if it's going to be theatrical or like Hail Mary, or if it's going to go straight to streaming. And now that's kind of a norm in the business.

7:11Peter Kafka:This is where I was going. You're doing a lot of stuff that was unique, and now it's not. Lots of folks do horror. At the time, it was an underexploited niche. And the idea of theaters itself, right? is a question mark, right? Movie going. Movie going shrinks every year. And there's always a debate about why is this happening? Is it going to come back? But it's shrinking every year. People go to fewer movies than they did in the past. This year it's up. Yeah. This year it's up 20%. Attendance is probably up 10 % because it's a cheat. Because when they say the box office is up 20%, they raise ticket prices and attendance goes down.

7:47But attendance is up a little bit this year. But since, to your point, since the pandemic, theater-going attendance has not recovered. And even pre-pandemic, attendance was on a general decline, but they were raising ticket prices. So box office was going up, attendance was going down.

8:01Peter Kafka:That's no longer true. In decline since 2002. You say it's back this year. We'll see at the end of the year. It's not back to what it was. It's just a little better than last year. What I want to get to is, how have you adapted your model to comport with the world, right? People are, it's harder to get people into theaters. Horror is not a unique thing anymore. where lots of people are doing it. How have you adapted your model to that? Yeah, we've changed our business. So the movies that we made in the old days were really, they were programmers, which means there was a lot of walk-up business to movie theaters.

8:36So kids would go to the movies, they would not know what movie they were going to see. They would get to the thing, they would look at the choices, like, I'm going to go see this horror movie. Those were usually movies that we made. Those movies don't exist anymore. There really aren't programmers anymore. Almost everyone going to the movie is going to, it's too expensive, I think in my mind. And so it's like, it's taken that part of the business out. And I think as an entrepreneur, I think the hardest thing to do is when you first start a business and, or if I didn't go to business school, but what they teach in business school is all of you guys know.

9:09And what they, what they first tell you is you got to focus, focus, focus, focus, focus. And that's what we did. We had paranormal activity. It was a low budget horror movie. everyone said, you should make World War Z. Now you had a hit movie in Hollywood. And the general religion of Hollywood is if you make a movie for$5 million and it's a big hit, you should make a $50 million movie. And if you make a$50 million, it's a big hit, you should make a$200 million movie. And I threw that out and I just said, I'm just going to make low budget horror movies. So I did focus, focus, focus, repeat, repeat, repeat, stay in horror, stay in horror, stay in horror.

9:44But then to just finish my point, I think you also, as an entrepreneur have to like, be aware of what's happening in the world around you and be able to pivot. And I think it's very tricky to know how much to focus and how much to pivot. And, and so the way we, we, we had to pivot because post pandemic, a programming movies have disappeared and horror has become much more event-driven. The movies are bigger and they have to feel... You have to give people a reason to want to go see a horror movie two weeks in advance of it coming out. So we pivoted in two ways. We make movies that are relatively inexpensive, but nowhere near as inexpensive as they used to be.

10:30So we're spending more money on the movies. And we had the number two competitor to Blumhouse was a company called Atomic Monster. Atomic Monster is most famous for all the Conjuring movies and The Nun and all the spinoffs of the Conjuring movies. And so three years ago, we merged with them and that was a way to increase our output without decreasing the quality of what we do. And so far, it's been very successful. So I'm glad that we did it.

11:02Peter Kafka:You've got a new movie coming out Friday. I have a new movie coming out called The Mummy, which is a Warner Brothers movie, which opens Friday, which is an Atomic Monster movie, actually. So how is that different than a movie you would have made 10 years? So The Mummy costs$22 million and not$4 million. Again, by studio standards, still inexpensive, but not as inexpensive. The other big component to our model, and I took advantage of the fact that if you're an executive at a studio and you're hiring a director, it's you're very incentivized to hire a director whose last movie was a hit. Because if you make a movie as an executive and the movie doesn't work and your boss says, what the hell were you doing?

11:45You could point to the director and say, well, look, the last movie they made was a hit. So I assume this one would be too. So the result of that is that directors who made a hit one movie ago, but their most recent movie is not a hit, almost never get out, almost, almost never would almost never get hired. And certainly in the movies, they would go to TV or whatever they were really prejudiced against. So we would go to those people and it was like an arbitrage opportunity. We'd go to them and say, I'm not going to pay you, but, but, uh, but I'll give you a final cut. So I'll let you do what you want to do.

12:15And they always had something to prove. And we would say, and if the movie works, I'll share a big piece of it with you. And you could make more money than you've ever made if the movie works. And that, that was very successful. That worked for that kind of programmer type of movie. But now to make event horror, you need, it's harder to bet on that person. You can't take a flyer. You can't really take a flyer. So Lee Cronin directed it. He's never missed. And so - His name is in the title. It's Lee Cronin's the moment. Yeah. So in that way, it's not quite as fun as it used to be because you can't really take flyers like you could.

12:49So we're working with more in-demand people. We used to work with people who were less in demand. In fact, amazing story, James Wan, who is my partner, who runs Atomic Monster, who's the company that we merged with. I met James because he famously wrote and directed and conceived of Saw, which is one of the biggest horror franchises ever. As everyone here knows, we actually just acquired it for him to kind of, he did one movie for Saw and then they made it eight without him and he's going to just kind to reboot it. But regardless, that's not the story. The story is he did Saw, and then he did two movies for Universal that didn't work at all.

13:29And he came to my office in 2008 or something, when the company started. And he said, I have an idea for a horror movie. I can make it for$900 ,000. He said, I'm known for making Saw. And it's like this R-rated movie. And I just want to make a PG-13 horror movie. It's called Insidious. And it's 900 grand. And Insidious now that we're on our seventh one. It comes out in August. It's an$800 million franchise. And that was the greatest example of the guy could not get arrested. We gave him 900 grand and it turned into$800 million.

14:00Peter Kafka:You've talked about in this era, the importance of IP, that people need to know what the thing is generally. And that's usually what works. People have to know what the brand is. That's part of the no walk up, that they want something familiar. It's the mummy. Is it Lee Cronin or are they responding to that? No, they're responding to the mummy. They're responding to the mummy. I mean, the hope is they're responding to the mummy. We'll see if they respond. But the idea is we did The Invisible Man, which as a horror movie. But literally, I've heard of this character. I'm vaguely familiar with what it is.

14:33Yeah, yeah, exactly. Or we're doing the Dead by Daylight video game as a movie so that there's something out there. And that's different. You know, it didn't used to be like that. We'll be right back with Jason Blum,

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15:29Peter Kafka:Switch now at T-Mobile. Savings based on Harris X billing snapshots from Q3 2021 to Q4 2025 among accounts with three plus voice lines compared to AT &T and Verizon. Excluding discounts, credits, and optional charges. See harrisx.com slash T-Mobile. Price guarantee on talk, text, and data. Exclusions like taxes and fees apply. See T-Mobile.com. Support for the show comes from Amazon. There are the things you can plan for. A first birthday party, a movie marathon, a renter-friendly bathroom reno. And then there are the things you can never plan for. A surprise rainstorm, a Blu-ray player calling it quits, stick on tiles that looked way better on the package, For all things planned and unplanned, Amazon has you covered.

16:17Peter Kafka:You'll find low prices on everyday essentials and last-minute lifesavers. Shop Amazon and save on essentials. Save the everyday.

16:29Peter Kafka:Adobe Acrobat, your new foundation. Use PDF spaces to generate a presentation. Grab your docs, your permits, your moves. AI levels up your pitch, gets it in a groove. Choose a template with your timeless cool. Come on now, let's flex those tools. Draft design, deliver, make it sing. AI builds the deck so you can build that thing. Do that, do that, do that with Acrobat. Learn more at adobe.com slash do that with Acrobat.

17:03Peter Kafka:And we're back. Another thing that's changing in Hollywood is there's contraction, right? There was a content boom. Streamers are pulling back. And the studios themselves are going to consolidate, right? Paramount is just about to buy Warner Brothers. That deal will probably go through later this year. What does that mean for you if the studios are consolidating? There's less buying? I think that's definitely there's more on TV and less in movie theaters, for sure. So I think it's more transitioning than actually shrinking, although it is true of movies. I think there's, consolidation is not good for our business for sure.

17:36So it's ideally, there would not, there would be less of it. I do think it's not quite, there are three new massive players in our business that weren't there 10 years ago. So Amazon, and now Amazon has had this big hit with Hail Mary. So I think they're very squarely in the theatrical business. Apple was in it. They went back in it with F1. There's a chance they'll come back in it. And if Ted is so believed, he talked how much he's changed his mind about theatrical. So obviously they're a huge player on TV, which there wasn't, there was no Netflix 15 years ago, but if they come into movies too.

18:14So I do think there are new players in the space as well, which doesn't get enough attention when people are talking about consolidation. But that said, the consolidation is not good. So what will that mean for you

18:23Peter Kafka:as you're thinking about how you're gonna make your next slate, knowing that there used to be, that there was Paramount Warners and now they're going to consolidate. And in theory, they're going to keep making as many movies as they were before, but realistically, they're probably not. It means working with different partners. We made a movie called Lost Bus that Matthew McConaughey starred in for Apple. I don't know if anyone saw that it was on Apple, but it was a successful movie for them. Has anyone seen Lost Bus? So sad. It's a great movie. Two hands. It's a Northern Californian story. It's about paradise, the fire in paradise.

18:52And this bus driver, Matthew McConaughey, he saved 30 people. Maybe Apple can figure out marketing at some point. Yeah, Apple really got it. Exactly. So we're working with new partners. That's one of the ways. And we're making event. We're not making programmers anymore. We're making event horror movies. That's how we're dealing with it in the theatrical space. But then we're also very, very squarely in the television. We made Scarpetta. Anyone see that on Amazon? It's the Scarpetta based on the Patricia Cornwall. Okay, a little more people. I know some of the people. So we did that show. And you know some, you know, one person.

19:25So we're branching out into television. into games, into live events, but the core business is still the theatrical movie business.

19:31Peter Kafka:There's a letter that went out yesterday from a thousand influential people, including some of them who work at Paramount and Warner, saying this deal should not go through. Do you think they're misguided to express that concern? No, I think they're right. I just don't think it's going to stop the deal from going through. It's gravity, it's happening. The deal's happening, yeah. The deal's 95 % chance happening. So you wake up in the morning and go, all right, there's less studios there used to be. That's just the way of the world. Nothing I could do about it. Less studios, same amount of buyers.

19:59Because of the new buyers. Less studios. But Amazon, Apple, yeah, there's a new buyer. So the same amount of buyers. I want Apple and Netflix to get as excited about theatrical releases as Amazon, which is a small task I'm working on. But I have hope that that could happen.

20:19Peter Kafka:This town is gripped with excitement and a little bit of fear about AI. I'm supposed to ask you about it? My guess is you're not very interested in talking about AI. Oh, I'm extremely interested in AI. I think, and I know this is probably not a popular thing to say here, and just for this little thing, I'm not talking about medicine or the environment or coding or anything else. For making of the movies and TV show, if I could wave a wand and make AI disappear, I would. I don't think it's going to be...