Film proves micro-budget pics can be mega-profitable

For “The Blair Witch Project” sequel, lightning couldn’t strike twice. Ten years later, however, Paramount is proving it’s possible to go from micro-budget to mega-profitable with “Paranormal Activity 2″ looking to stretch its legs in its second frame.

This weekend should be telling as the film goes up against the last planned sequel of Lionsgate’s highly successful “Saw” series — raising speculation that “Paranormal” could become the next boffo horror franchise.

Studios have long invested in big-budget franchises, both on the live-action and animated fronts, to boost overall profitability by appealing to audiences on a worldwide scale.

But the success of “Paranormal 2″ shows that pics in the low- to mid-budget range can be just as important to the bottom line.

Par’s sequel, budgeted at just $3 million, opened to a record-setting $40.7 million, narrowly beating another horror installment “Friday the 13th,” which last year earned $40.6 million for Warner Bros. during its opening weekend.

For years, franchises like “Friday the 13th” and “A Nightmare on Elm Street” have been inexpensive windfalls for the industry, with the “Saw” franchise the most recent mainstay with horror fans.

But after only two installments, it’s hard to predict whether “Paranormal” has the staying power to take its place for six or more installments.

Even at this point, the success of “Paranormal 2″ should be welcome news for Par, as one studio distrib exec noted: “It’s not a franchise until after the second one works.”

For Warner’s “Sisterhood of the Traveling Pants” two-peat series and Fox’s “Diary of a Wimpy Kid,” (which has a sequel on the way) bestselling books help propel the pics, much like built-in fan bases for genre films.

Artisan called it quits after the “Blair Witch” sequel grossed a disappointing $26.4 million in 2000. Some B.O. observers said the film was too drastic a departure from its original black-and-white horror phenom. That pic, however, raised the bar for micro-budgeted filmmaking — costing about $25,000 and earning $140.5 million in domestic grosses.

In the case of “Paranormal 2,” Par benefited from not having a star-driven cast, which allowed production costs to stay low, though $3 million was up several notches from the first pic’s original $15,000 pricetag. “Paranormal 2″ also benefited from relatively strong critical response, and even more glowing reviews from genre bloggers.

The first “Paranormal” was unprecedented in its ability to target young moviegoers through online promotions; Par partnered for the second time with marketing firm Eventful, which introduced the online Demand It campaign for the first pic.

“Demand It is unique in connecting fans around a live event,” said Eventful CEO Jordan Glazier.

Fans voted online to bring free screenings the day before the pic opened to the top 20 cities in North America. Par said the screenings were a thank-you to its fans, but also hoped they would help build word of mouth in anticipation of the wide release. Not coincidentally, the showings prompted photos of excited fans waiting in long lines to see the movie just before its official opening.

While Par relied on more traditional tools for “Paranormal 2″ like TV spots and print advertising, the studio also used interactive ploys aimed at baiting fanboy participation. Along with tie-ins at Fantastic Fest, Par sent unmarked flash drives to blogs and media outlets that featured fragmented clips from the film.

Par has not yet committed to a third “Paranormal,” but it seems likely given the already profitable second installment.

And while low-budget franchises can point to a much higher profitability quotient, most insiders agree that the possibility of future “Paranormal” installments may depend on creative execution.

“It’s much more difficult to make low-level franchises than it is the big ones.” a B.O. pundit said.

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