Director Oren Peli at the Future of Film confab

“Paranormal Activity” had plenty of offers to go direct to video, but helmer Oren Peli held out for a theatrical release after seeing how well the pic played to auds on the festival circuit.

Peli decided “not to settle for anything less than a theatrical release” because he knew he always would have wondered what might have been at the B.O. if he went the VOD or direct-to-vid route. (It’s earned more than $107 million in North America since its release Sept. 25.) Peli spoke on the “Game Changers” panel, which also included Morgan Creek Prods. co-chairman Rick Nicita and IFC exec veep Lisa Schwartz, at Variety’s Future of Film confab in Santa Monica Tuesday.

Peli said he was inspired by maverick filmmakers like Robert Rodriguez and the success of low-budget pics like “The Blair Witch Project.” He was working as a vidgame programmer in San Diego about four years ago when he decided to go for it with “Paranormal.”

“I didn’t know if it was going to be good or going to be crap,” he said. “Just on the chance it turned out good I went for the extra expense and got a high-def camera.”

Peli said he intends to stay as indie as possible on his future projects, which include “Area 51.” But he acknowledged that in the end, all filmmakers need the help of a studio or some distrib to get the pic in theaters.

“No one can have the resources to do that on their own without the infrastructure and the funds” of a studio, he said.

Peli credited Paramount with taking a creative gamble on marketing and distribbing the film, which had been turned down by numerous other majors. Studio execs kept telling Peli and his partners, “We love the movie – it’s very scary. But we don’t know how to market it. … To Paramount’s credit they figured out a very creative outside the box way to market it.”

Initially, Par put “negligible” coin into marketing, choosing to promote it through festival plays and other alternative methods. Until the movie went wide, “the entire goal was to encourage fans to tell their friends about it. That allowed the fan base to become our marketers.”

Peli kept mum about his plans for “Area 51″ when pressed by moderator Steve Gaydos, Variety’s exec editor of features. “We’re trying not to talk about it until the movie’s done,” Peli said – but he did allow that the pic is in production (“that’s what the rumors say”) now in the U.S.

Of course the question of just how small “Paranormal’s” micro-budget was came up early on in the sesh. Gaydos threw out the figure of $11,000. Peli said it was more like $15,000. “But it looked like $30,000,” quipped Nicita. Peli noted that he’s intended to make it for $10,000.

Retorted Gaydos, “So you went over budget.”

Among other topics, panelists discussed the merits of alternative distribution options for features. Schwartz noted that IFC has recently had five titles that surpassed $5 million gross through a combination of limited theatrical and VOD distribution: “Che,” “Gommorah,” “Summer Hours,” “Paris” and “In the Loop.”

But Nicita noted that there was still no getting around the stigma of a film not getting a theatrical release. “The words ‘straight to DVD’ is still looked on like you’ve done something wrong, or that there’s a certain lack of quality,” he said.

Gaydos observed that few have been able to harness the potential of Internet distribution to make real money.

But Schwartz said IFC’s ongoing push for day-and-date VOD releases came from the realization that the business model for smaller pics “was a little bit broken.” She emphasized that VOD is often the only option for indie film buffs who live outside of urban areas.

“Our overarching goal is that (a film) reach as many independent film fans as possible,” and filmmakers are warming up to all kinds of alternative distribution, from streaming on Netflix to downloads via Xbox or PlayStation devices, she said.

Nicita said Morgan Creek was heavily focused on making movies with mid-range budgets of $25 million-$60 million. The biggest challenge is that marketing costs are so high because distribs are afraid that by not spending the money they’ll doom their entire investment in the movie. “It’s the CYA aspect,” he said.

But overall, Nicita said he remains an “optimist” about the biz’s future.

“I’m betting a lot will change” in the coming years, he said. “My game is so old-fashioned that it’s new. I’m looking to make the middle-range movies with stars and mid-level budgets that adults might go to.”

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