How Much Revenue Is in the Horror Movie Business?

While horror as a category may be the seventh highest grossing genre in the movie business, the films of the horror genre are sometimes the most profitable. Horror films made over $413 million in the United States in 2012, while comedy films ranked as the biggest grossers with $1.64 billion the same year. But horror films often cost a fraction of what competing movies in the comedy genre cost, which makes the genre ideal for small risks with huge rewards. For example, "Paranormal Activity 4" cost $5 million and made $54 million domestically as well as another $86 million overseas. That's a $135 million profit, not including marketing expenses, on a single film.

Horror has been an ideal genre for films with smaller budgets because a lot of scares can be produced with a minimum of expensive effects. The original "The Texas Chainsaw Massacre" terrified audiences with the simple visual of a man with a murderous power tool. This economical horror film cost only $140,000 to make and grossed $26 million, a significant box office number in 1974. New filmmakers and producers flock to the horror genre to make money and gain a successful reputation. The low production costs of making a film with handheld cameras for a "found footage" type of horror movie can make a cheap film budget even cheaper. While there are plenty of horror films that under-perform, this genre often produces the biggest success stories.

The biggest money to be made in the horror business is with material with which audiences are already familiar. A franchise is a series of movies based on an original successful film. A successful film is a brand name that can be used for sequels, remakes and other profit-making ventures like action figures. The recognizability of a horror title like "Saw" or "Paranormal Activity," leads to reliable profits. What many franchises have in common is a memorable villain character. Victims are replaced with every sequel, but a striking, sympathetic and chilling villain is who the audiences return to see. When analyzing the potentiality for a project to be a bankable franchise, it is best to select one with a charismatic or extremely creative killer. Those are the projects that can spawn profitable ventures in multiple media.

The success of a horror film can largely depend upon its release. In the autumn months, as Halloween nears, audiences become rabid for horrors and thrillers. Releasing scary fare at this time of year has been a successful practice for many horror franchises. But this also makes October extremely competitive, and gambling to instead release a horror film at a less obvious time of year can pay off big. Horror films, "Texas Chainsaw 3D" and "The Devil Inside" did well opening in January of 2013 and 2012, respectively, against Oscar contenders and big, family holiday movies. For companies that do not have the big marketing bucks of a studio, or are starting out with an original film, programming a release that is in direct contradiction to every other movie in theaters can mean bigger profits.

The most notable horror film success stories have been those concerning micro-budgeted movies that made huge profits. These include "The Blair Witch Project," which was made by unknown directors and actors for $60,000 and grossed nearly $250 million worldwide. This is a perfect example of how horror films pique audiences' interest because of the scares, rather than the recognizability of the actors. This film also used clever viral advertising that took advantage of the actors' anonymity, including creating a fake website with falsified accounts of Blair Witch sightings to make the documentary style of the film seem real. While there is no clear cut way to guess which films will be a surprise hit -- Paramount held on to "Paranormal Activity" for several months before deciding to release it -- originality in marketing can greatly increase the chances of success. With the right concept and intriguing execution, a small-budgeted horror film can perform beyond all expectations.