A decade ago, the primary focus of independent horror moviemakers was making a good horror movie, knowing that if they did their job well, they were virtually guaranteed to find an audience and make their money back (and then some). Horror was the Teflon genre—or so it seemed.

“In the last decade it’s gotten cheaper to make movies, and harder to make money off of them,” says J.T. Petty, writer-director of horror features The Burrowers (2008) and Hellbenders (2012). “The ‘guarantee’ most people took for granted was the DVD market, and that’s all but gone.” Today, the business of independent horror moviemaking has changed dramatically, and while making a good movie is still paramount, the moviemaker of 2014 must wear other hats just as well in order to survive: branding expert, distributor, producer, publicist, sales agent. “And,” as Eduardo Sanchez, director of 1999’s game-changing The Blair Witch Project and the upcoming Exists, says, “most of us didn’t get into this to become distributors.”

Even so, low-budget horror has never been more popular in Hollywood—specifically, the contained, microbudget, supernatural-based model masterminded by producer Jason Blum of the Paranormal Activity, The Purge and Insidious franchises, which together have generated more than a billion dollars in box-office revenues. Has Blum’s success created any residual effect for independents?

According to Larry Fessenden, director of Wendigo (2001) and producer of Stake Land (2010), “Executives often say, ‘Do you have anything in the Blumhouse model?’ The thing to understand is: Blum’s films have name actors (Ethan Hawke, Patrick Wilson) who work at scale, the films are made relatively cheaply, and there is a distribution scheme that gets the movies onto 3,000 screens on opening weekend. This is not the same as making an independent haunted house movie on the Canon 5D and hoping it makes a lot of money. You can’t guarantee your investors that your $15,000 movie will earn $200 million at the box office.”

Stevan Mena, director of Malevolence (2003) and Bereavement (2010), agrees: “Saying I can make a successful independent horror film because Jason Blum is doing it over and over is like saying I can make money in the stock market because Warren Buffet is doing it. There’s a lot of intelligence and talent behind that success.”

Blum operates within a rigid low-budget model, capping production costs at $5 million per film (with rare exceptions), and insisting that above-the-line talent work for union scale and a share of profits in lieu of negotiated salaries. But Blum has a first look production deal with Universal Pictures. Effectively, this means he produces low-budget studio horror films. While for decades studios acquired some of their most iconic horror titles (The Texas Chainsaw Massacre, Halloween, Friday the 13th, The Blair Witch Project) and directors (James Cameron, Peter Jackson, Sam Raimi) from the off-the -radar reaches of independent horror, now they’ve taken production on themselves.

What effect will this direct relationship between Hollywood and low-budget horror have on independent horror moviemakers, the future Peter Jacksons and Sam Raimis? “This is destroying the fabric of independent filmmaking,” says Brad Miska, owner of the website Bloody Disgusting and producer of 2012’s V/H/S. “Instead of a studio buying an independent film out of a festival or film market, they’re using all of their release slots and resources to help an established brand get movies made. It becomes a case of cherry-picking that leaves a lot of indie filmmakers in the dust, cannibalizing the talent pool and making it harder and harder for films to get made, directors to get jobs. It’s a negative domino effect down the line. Studios are working diligently at creating franchises through branding and remakes, and aren’t willing to take risks as they used to. Now they’ll grab a surefire thing, while a potential indie blockbuster sits on a shelf until it dies.”

“Horror used to have that whiff of danger and discovery,” says Fessenden. “That is why the remakes don’t excite the fans, because there is no discovery there, just studios cashing in. Blum’s films are original stories, even as he franchises them, and that alone makes his approach more compelling than the studio approach.”

The marketing-success ratio

A big reason for Blum’s success: the average marketing cost of his theatrical releases is $20 million, a figure that’s significantly less than the $40 million studio average, but is a dream to independent horror moviemakers who must begin the marketing process at the screenplay level. “Marketing’s classically the hardest part for an independent filmmaker to control,” says Petty. “It’s tempting to take the Upstream Color route [i.e. entirely DIY], but there are obvious advantages to having a big distributor.”

“The film has to have strong marketing potential from the moment it pops into the writer-director’s head,” says Kevin Greutert, the director of the upcoming Jessabelle and Visions, both produced by Blum. “The concept and the images associated with the story have to excite the marketing department, or else no one will be interested in distributing your movie.”

Horror distribution—either self-distribution or through a distribution company—has left many moviemakers battle-hardened. Sometimes it seems like independent moviemakers need a PhD in economics. “One film I produced certainly opened my eyes to the realities of distribution economics,” says Travis Stevens, owner of production company Snowfort Pictures, Inc., and producer of the Adam Wingard-directed A Horrible Way to Die. “We made the film for $96,000. It played the festival circuit, had a great sales agent, and secured distribution around the world. The advances from those distribution deals brought in roughly $250,000, of which the sales agent kept $50,000, leaving about $200,000 to the producers. The investors recouped their $96,000, leaving $104,000 of profit. On this deal, the investors were entitled to 50 percent of the profits, leaving about $52,000 to be split between the three filmmakers. We made about $17,000 each for a movie we worked on for free about three years. You could probably make more buying or selling shoelaces on eBay!”

When it comes to revenue, Stevens says, the numbers are “more confusing than Andy Dick on a coke binge.” He elaborates: “The same film had over $1 million in sales to retailers, but $350,000 in discs never sold and they were returned to the distributor by the stores,” says Stevens. “The distributor charged a distribution fee ($200,000), their manufacturing costs ($109,000), the cost of mastering the film for the different formats ($72,000), their marketing costs ($68,000), the cost of storing all of those Blu-rays and transporting them to the stores, the costs of creating the menu interface for the discs, the costs of shipping review screeners to critics around the country ($68,000). It went on and on, tallying up $733,000 of costs, not factoring in their advance. So while the top of the report showed over $1 million coming in, the bottom of the report showed they were in the hole. A movie we had made for just under $100,000 had generated over a million dollars in the U.S., and it still wasn’t profitable.”

Generic benefits

Still, horror has retained some of its tremendous systemic advantages over other genres. An enduringly passionate community continues to be the genre’s central pillar, judging by the sheer number of influential websites and online communities devoted to the genre, and the ever-swelling pool of genre-themed film festivals. “There’s nothing better than having made something truly special that you can take to Bloody Disgusting, Dread Central, Fangoria, Shock ‘Til You Drop, Rue Morgue, Horror.net, and all of the other horror sites who help you spread the word,” says Mick Garris, creator of the cable television series Masters of Horror. “If the horror elite get behind you, that’s the best train you can ride. But increasingly important is getting your film screened at the horror festivals all around the world. I’ve been to most of them—Fantastic Fest in Austin, Fright Fest in London, Fantasporto in Portugal, just to name a few. When an audience gets on board with your movie at one of those, the word spreads like wildfire.”

Another built-in benefit of the genre is that, unlike heavily star-driven comedies and dramas, horror movies have never relied on name actors or stars to reach an audience. In fact, many writers exploit an opposite strategy. “Having a big star can make the movie less scary, because the star’s character will almost always triumph and live at the end, while a film with an ensemble of unknowns could die in any order,” says Greutert, who directed the final two installments in the Saw film series. “It’s virtually impossible to sell a comedy without a mainstream star, which makes it a much tougher genre for a first-timer to break into.”

Digital distribution’s gray dawn

With the rise of digital distribution, horror moviemakers need to study each platform in order to find the demographic that will be most receptive to their movie. “Know the audience on the platform to whom you are selling,” advises Chela Johnson, vice-president of home entertainment and specialty releasing marketing at Lionsgate. “We are seeing more creative windowing with certain platforms—early digital, day-and-date and On Demand, etc. Certain platforms perform better in some demographics than others, so it’s becoming a way to strategize the release. For On Demand, the audience is typically more female-skewed and a bit older, so films that can be marketed as more of a thriller than a hardcore horror film will perform better. As will films that have at least one name cast member, and films that are part of an established franchise. Digital HD skews younger and is more likely to do a lot better with R-rated horror—especially platforms such as Xbox.”