(Welcome to the Entertainment Strategy Guy, a newsletter on the entertainment industry and business strategy. I write a weekly Streaming Ratings Report and a bi-weekly strategy column, along with occasional mini-dives into other topics, like today’s article. Please subscribe.)
Let’s kick this mini-dive off with a crazy stat:
Inside Out 2 made more money than every horror film that came out this year. Combined.
And this holds across the last few years. In fact, the top three animated films of the last three years grossed just $78 million less than the last three years of horror films at the global box office, combined:
Don’t worry, I’ve got tons of nuance to heap on top of this simple factoid, but let me first offer one reason why this matters:
Return on Investment (ROI) does not equal customer interest.
Driven a lot by Terrifier 3’s success at the box office, many news outlets are once again touting the horror genre as Hollywood’s hottest, most sure-fire, can’t-miss genre (ignoring most of 2024’s horror film misses). Even worse, a lot of folks also point to its terrific return on investment as a sign that “customers want horror”; one analysis I saw looked at horror films’ ROI and concluded that American audiences are hungry for “dark” material.
But two things can be true:
- Horror films are an excellent genre in a production company or studio’s portfolio because of their ROI potential. (And filmmaking is a portfolio game.)
- Hit horror films (alone) make way less than other genres like animation or superhero.
Six More Takeaways
Thought 1: Don’t confuse “direction” with “velocity”.
I see reporters make this mistake all the time: if something is “number one” at the box office or on the streaming charts, it must be a hit, even if the actual box office returns or streaming ratings were magnitudes lower than other films.
This happened last December with Godzilla Minus One and Boy and the Heron (both films I like), leading to headlines about foreign cinema “saving” the US box office when they topped the US box office charts, but they actually had fairly modest box office returns. It just happened again with Terrifier 3. But compare Terrifier 3 to Maxxxine. Both are the third film in their horror franchise, both had crazy high ROI (20X versus 40X and counting), and both had similar budgets (about $1 million), but Maxxxine came out in July and could never squeeze past mega-hits like Inside Out 2, Despicable Me 4, and Twisters to garner breathless headlines.
Thought 2: Theaters need horror…and animation and superheroes and romcoms and…
Horror films can’t save theaters by themselves. Take Scott Mendelson’s recent article title: “Box Office: Theaters Cannot Survive on ‘Joker 2’ and ‘Venom 3’ Alone” I agree…but you could write the same headline and replace “Joker 2” and “Venom 3” with Terrifier 3 and Smile 2. Or animated films. Or superhero films. The horror genre’s glowing press coverage often makes it seem like another savior, but Hollywood needs multiple genres to succeed. (To clarify, I agree with and like Scott’s take in this article; we’re making the same case.)
Theaters need more films, in general, but also a wider spectrum of successful genres. Both animation and horror, being very profitable in two different ways, give studios that leeway to take bets on other genres. If I ran a studio, I’d lean on successful genres to experiment with other genres. You never know when audiences’ tastes will change.
Thought 3: Horror films need theaters.
Last year, I wrote about the horror genre multiple times, most notably here.
In general, horror films are sort of “meh” on streaming at best. Or at least they’re “meh” compared to the ROI hype, since their streaming ratings don’t match their overall box office performance. First, here’s every film that has ever made a Nielsen top ten list:
Now compare that to three of the biggest films on streaming in just the last year:
Oddly enough, “horror” adjacent titles like Haunted Mansion, Hocus Pocus 2 or Army of the Dead tend to do way better than anything that’s actually horror horror. Haunted Mansion was widely considered a flop, and it had more viewership than any horror film on streaming ever.
If theaters “die”, fewer horror films are going to get made, especially in the mid-budget range, because that killer ROI won’t be there and neither will the streaming ratings to justify those budgets. Sure, low budget and ultra-low budget horror films will still get made, but overall, the genre will suffer. (Imagine if all holiday films were made on Hallmark films’ budgets…)
Thought 4: Horror films don’t travel globally.
Animated films travel really, really well overseas; horror films don’t. Here’s another ranking of the top animated/horror films of the last three years, but with global box office, and you can see that while animated hits keep growing their box office, horror films don’t:
The reverse is also true. I couldn’t find any foreign horror films that made over $5 million in the US but did most of their box office overseas, but I found a few animated films that made some money in the US but did crazy box office overseas. Like Suzume, which made $10 million in the US but made over $300 million overseas. Or One Piece: Red and Gekijouban Jujutsu Kaisen 0. But it’s not just anime. Mummies (from Spain) made $53 million globally but made less than $5 mil in the US.
This fact also explains why the major studios may neglect horror, as they focus on global returns, not just the US.
Thought 5: Most indie horror films fail.
The fail rate for horror films is very, very high, especially for low and ultra-low budget horror films. As Stephen Follows told Ted Hope recently, “Horror now accounts for over 1,500 films a year…” Many indie filmmakers want to make the next Terrifier or Long Legs, but you have a 1 in 750 of doing that. When the media focuses on low-budget breakout hits, that’s survivorship bias at its finest.
This is why we need more accurate media coverage of the actual hit rates for certain genres. One break out hit generates lots of press, but the hundreds of misses do not. (If you’re a young filmmaker, don’t go broke making that indie horror film.)
Thought 6: “Kids these days”…are going to the movies. So make more animated movies!
Again, compare the news coverage about how all “kids these days” are phone-obsessed zombies to the bonkers box office up above. There’s a segment of the audience that wants to go out and do things. And that includes parents taking their kids to the movies.
As I wrote recently, Hollywood shouldn’t have dry spells between kids films, and Netflix should be sending its kids films to theaters.
