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Patrick Goldstein and James Rainey
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Why is the 'Paranormal' follow-up getting a Hollywood cold shoulder?


UPDATE: In my original post, I mistakenly wrote that "Area 51" filmmakers couldn't find a backer for their new film. What I meant to say was that the film hasn't yet found a US distributor. "Area 51" is fully financed by the Aramid Film Fund and Incentive Filmed Entertainment.

Back in the mid-1980s, Major League Baseball owners decided that player salaries were so out of control that they had the bright idea of engaging in collusion. The result? A vast number of top stars--including Kirk Gibson, Andre Dawson, Carlton Fisk and Tommy John -- found themselves without any respectable contract offers, despite being unrestricted free agents. (The baseball owners eventually had to pay $280 million to the players in damages.) 

I'm not saying the same thing could happen in the movie business. But you have to scratch your head in wonder at the news that the filmmaker behind "Paranormal Activity," which could end up being one of the year's most profitable movies, can't find a backer for his new picture.

That's the way I read Michael Cieply's recent insider account in the New York Times about Oren Peli, who's been getting the cold shoulder from studios around town when it comes to financing "Area 51," his new thriller currently filming in Utah. According to the piece, no one has made an offer on the U.S. rights for the film, even though Peli's "Paranormal Activity" is well on its way to making $100 million domestically, a pretty nice return on investment for a film that cost $15,000 to make.

Paramount, the studio that released "Paranormal," isn't interested in the picture. Nor is DreamWorks, the studio that brought it to Paramount after being dazzled by an early screening of the picture. Other studios have shown little interest, even though Peli has CAA in his corner, trying to make a deal. According to the Times story, "Area 51" cost roughly $5 million to make and Peli's reps are asking for bids of $10 million for domestic rights to the new film.

So why wouldn't someone be willing to take a $10-million gamble on a filmmaker who's got a mega-hit in the theaters right now? Cieply shrewdly notes that the studios may be worried that "Area 51" wouldn't have the same sleeper hit status as "Paranormal Activity," which had the feel of an underground sensation, something a follow-up picture couldn't possibly duplicate. The studio execs I spoke to today were also worried that Peli could be as much of a flash in the pan as the filmmakers who made "The Blair Witch Project," which turned out to be a one-shot novelty hit.

But other execs acknowledge that Hollywood is as cautious and conservative about making investments in new films as it has ever been. Studios are buying a few highly touted script pitches, but the bets they are making on films -- especially in the genre category -- are being made at bottom-feeder prices. One veteran acquisition exec predicted that "Area 51" will sell, but not for anything close to $10 million. 

"It's a stare-down that's all about the asking price," he said. "With today's economic realities, everyone is willing to walk away from anything that feels at all risky. If the price goes down to $4 or $5 million, someone will probably bite. Or the filmmakers could arrange for enough gap financing to finish the film and bet on themselves by taking it out to distributors, or go the festival route when it's finished."

It's a safe bet that "Area 51" will sell, but what it sells for will tell us a lot about how much of a real free market exists in Hollywood today. 

Photo of Oren Peli by Myung J. Chun / Los Angeles Times

Comments () | Archives (4)

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Poorly written 'article', only because the opening scenario of collusion is completely eradicated by the realities presented in the remainder. Writing "I'm not saying the same thing could happen in the movie business" doesn't discount the fact that you certainly were trying to point readers in that direction.

Other than that, I haven't seen Paranormal Activity, but I do with luck to the filmmaker(s) with Area 51.

So I'm assuming at $15, 000 Peli did this on his own and owns the film. So, if it makes $100 million plus he's a very rich man right? In much the same why that Mel Gibson made "Beating of the Christ" on his own and pocketed $260 million. So why does he need backing so badly? I think he needs a new agent.

Shaun, you obviously don't know much about distribution deals. Peli made "Paranormal Activity" for $15,000 and sold the U.S distribution rights to DreamWorks/Paramount for a few million bucks. He might get residuals or a percentage of the gross depending on his deal, but he does not get millions of dollars in box office dough. Paramount is making all that money.

Mel Gibson ("Passion of the Christ") and George Lucas ("Star Wars") financed their own films and simply hired distribution companies to put their movies in theaters, allowing them to take home the profits. Peli never had the money to do such a thing, and neither did the Blair Witch guys, so they get to watch a big studio make gazillions instead.

Speaking of BLAIR WITCH, if you want to see a great little scifi film that you've never heard of, check out ALTERED, about a group of hunters who are captured and probed by aliens, and then try to live with it. Film has *much* in common with DELIVERANCE... and was directed by one of the BLAIR WITCH guys.

I have no idea why they wouldn't jump at paying $10m for a movie - they couldn't make one for that. Even if the film just did okay, it would make money back. Genre films in the $15m range tend to make between $50-$60m theatrical.

The difference between that $15m studio film and this guy's $5m film? Studio overhead (and probably unions).

- Bill


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