Why Invest In An Indie Horror Film?

Financing is the most crucial aspect of any film project because the production team needs funding to pay for every step of the filmmaking process. Securing funding for a film project can be an arduous task for filmmakers, but there are many viable financing options available to pursue.

Most films are financed through a combination of investors, tax credits, grants, and other sources. This funding must be secured (usually by film producers and sales agents) at the beginning of a motion picture’s development, in order to pay for all the costs that accrue during the making of a film. There are two main ways that this funding can be secured:

Through a studio. The film studio handles most of the financing when a feature-length film is being made under the umbrella of a major film studio (often called a “Hollywood film”). The company producing the film is usually tasked with doing the legwork to gather enough investors to fund the film.
Independently. A film project made without the help of a major studio is called an “independent film” or “indie film.” When a film is being produced independently of a studio, it’s up to the film’s producers to secure financing for their project. Independent filmmakers use their personal networks, tax credits, and grants to patch together funding to make their film.

Smart, data-driven decisions can help independent producers succeed. We have crunched the numbers on what to make and how to make it.

We have boiled down all our data, statistics and modelling to two quick takeaways on the horror genre.

HORROR MOVIES ARE THE MOST PROFITABLE GENRE

Using real-world data and statistical modelling, we are able to estimate the profitability of most major horror movies. This takes into account all income streams (from theatrical through to television syndication) and offsets all costs (including advertising, distribution and fees). We are left with a fairly accurate estimation of the Producers Net Profit for each movie.

At the top of the pile is Saw, which was hugely successful, with a likely profit of well over $130 million on a $1.2 million production budget.

In the table below, profitability is expressed as a percentage return on the reported production budget. i.e. a film which cost $2 million to make and made a Producers Net Profit of $4 million would show up as having profitability of 200%.

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QUALITY DOESN’T MATTER ALL THAT MUCH

Given the necessity for clever marketing and a good opening, it isn’t a huge surprise that, more than any other genre, the quality of a horror movie doesn’t matter all that much.

When we look at the ratings given by film audiences and film critics to the most profitable horror movies we can see that they range across the spectrum. A similar chart for, say, drama, would show a bunching of dots in the top right, showing that the quality of a drama is heavily correlated to its financial success.

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That blue dot (6.4 IMDb users score and 55 Metascore) represents the average for all movies released in US cinemas. This shows that more than half of the profitable horror movies in this study are worse than the average of all movies, further underlining how weak the correlation is between quality and profitability for horror movies. Even profitable horror movies were considered, on average, to be mediocre by critics and audiences alike.

Horror Is The Best Deal In Hollywood

Imagine this scenario: you're a big movie producer with a little bit of cash in your pocket, ready to invest. What kind of film are you going to back? What movie would be the best deal for you?

Horror, hands down. It is the best deal in Hollywood.

A key metric for any investment is return on investment (ROI). It's a measure of the amount of profit from an investment relative to the cost of the investment. The higher ROI, the better the investment.

Using data from Studio System, a company that collects entertainment industry data, we looked at what kind of films have had the best return on investment over the last five years.

Horror films are at the top of the list, with 13 of the top 30 films by ROI since 2010.

And within the horror category, profits can be huge on small investments. The top five films in horror all had an ROI around 2,000 percent (translation: for every $10 put into a movie, an investor would get $200 in profit). By comparison the top films in comedy had an ROI around 1,200 percent.

The key thing about horror is that it's relatively inexpensive to produce, and as our recent radio story shows, marketing can have a tremendous impact.

Obviously if you're looking for the biggest payoff in total dollar amounts, the most profitable films in Hollywood will still be the traditional action and drama blockbusters. Look at this year's big summer flick, Jurassic World. It has made $1.6 billion in profit worldwide, but it cost an estimated $300 million to produce and market. That's an ROI of roughly 533 percent. By contrast, the horror hit Paranormal Activity 2 made $236 million but only cost $9.4 million to produce and market. That's an ROI of 2,510 percent.