How New Line Cinema Is Making a Killing in Horror

A 'Conjuring' cinematic universe?! It's happening as low-budget scares return to The House That Freddy Built.

On Stage 6 at Warner Bros.' Burbank lot, where the new horror film Annabelle 2 is filming, Father David Guffey was brought in to offer a blessing. "Evil hates to be exposed," he announced as he made the sign of the cross and sprinkled holy water. "We declare the hexes and wards null and void. We ask you to protect us." But it doesn't appear the studio behind the tale of a demonically possessed doll will need much divine intervention when it comes to selling tickets.

New Line Cinema, which will release the sequel in May, has been returning to its horror roots with much success. Other studios tend to outsource scary movies to such specialized outfits as Jason Blum's Blumhouse. But Warners' New Line division is doing the heavy lifting itself and is in the midst of a full-fledged horror revival — among its projects are several Conjuring spinoffs and an adaptation of Stephen King's It, slated for September 2017 — as it bets on a genre often ignored by other studios and viewed as low-rent by execs and filmmakers alike. "At New Line, they don't treat these kinds of movies as a red-headed stepchild, as other studios do," says Peter Safran, who produces the Conjuring and Annabelle movies. Conjuring, based on the experiences of real-life paranormal investigators Ed and Lorraine Warren, cost $20 million and grossed $318 million worldwide in 2013. The sequel, produced for $40 million, has grossed $301 million since its June 10 bow. Toss in the 2014 spin-off Annabelle ($257 million), and New Line has a potential $1 billion-plus franchise, which has helped to offset losses on Warners' recent big-budget movies Pan and Jupiter Ascending.

Adds Barbara Muschietti, who is producing It, "New Line has been able to do a progression in the genre that other studios have not. I'm not fond of the 'elevated genre' term, but these films have emotional elements as well as horror, and people love watching them. Women love watching them."

Horror always has been part of New Line's DNA. The studio, owned by Time Warner but operated independently under founders Bob Shaye and Michael Lynne until 2008, was nicknamed "The House That Freddy Built" after 1984's A Nightmare on Elm Street spawned many sequels.

Now run by Toby Emmerich and based on the Warners lot, New Line for years turned out reboots of Nightmare, Friday the 13th and The Texas Chainsaw Massacre until fan excitement began to wane and the studio instead focused on comedies like We're the Millers and Peter Jackson's Hobbit trilogy.

"The fans spoke and said, 'We're tired of reboots,' " says New Line production exec Walter Hamada, who along with Dave Neustadter oversees New Line's horror line. "We looked at the marketplace and saw a shift. We could either go on finding more and more elaborate ways of killing people or find a different path."

Projects based on true events offered one path. New Line made a bid for The Exorcism of Emily Rose, but that 2005 film ended up at Sony's Screen Gems. Then along came The Conjuring, which the studio developed with James Wan, director of 2004's Saw. It was initially scheduled for release in January 2013, a period when studios often unload their B-movies, but when Warners' marketing execs saw its high test scores, they moved it a summer slot, rare for a non-tentpole, rarer still for a horror movie.

But The Conjuring opened at No. 1 with a $41 million debut weekend and is now spawning its own, spooky cinematic universe. In addition to the Annabelle spinoffs, another Conjuring 2 spinoff featuring that movie's demon nun is in the works and possibly another one built around a character called the Crooked Man.

Although such movies have seen big returns on small budgets, Safran says, "A lot of studios don’t look at them as worthwhile ventures. Horror is hard for most people to make them because they don’t have stars and they are not director-driven. And you have to build interest in them from absolutely scratch." Finding directors with an affinity for the genre is another challenging since, says New Line's president of production Richard Brener, directors of low-budget horror movies, "leave the genre the minute they can. They see it as a stepping stone."

Fortunately for New Line, that hasn't been the case with James Wan, the filmmaker who launched the Saw, Insidious and Conjuring franchises and continues to be involved with Conjuring even though he's become an in-demand director. (He next tackles Aquaman.) David F. Sandberg, who directed Lights Out, a $6 million New Line horror pic opening July 22, is helming Annabelle 2.

"You can bet on people who can build suspense, tease a scare, with the idea that you can surround them with a great script and good producers," says Hamada. "We'd make more if there were more good horror filmmakers."

This story first appeared in the Aug. 5 issue of The Hollywood Reporter magazine. To receive the magazine, click here to subscribe.