On Sunday, the Film Independent Forum began with an executive conversation with Blumhouse Productions.  Founder and CEO Jason Blum was onhand, as was President of Motion Pictures Couper Samuelson and Head of Casting Terri Taylor. Like director Jon M. Chu on Saturday, they were feeling the sting of their most recent release, Jem and the Holograms, underperforming at the box office.

“It is odd being here imparting wisdom, having produced this movie that is just crashing and burning at the box office,” said Blum, who still had nail polish on from being Jem at a Halloween party the night before. “Anything that any of us say should be taken with a grain of salt.”

But thanks to their successes—primarily with modestly-budgeted horror franchises like Paranormal Activity, Insidious and Sinister but also with the Oscar-nominated Whiplash and the critically acclaimed HBO series The Jinx—Blumhouse Productions is still alive and well and making waves for their revolutionary model of mixing independent production with studio distribution. Here are five principles that have led to their success.

Resist the temptation to move into bigger budget films
Jason Blum has seen a lot in his last 25 years as a producer. He spent several years as an executive at Miramax before striking out on his own and making several independent features. While he liked the freedom of making films independently, he didn’t like that no one ever saw them.

So when he was offered the opportunity to do a big studio movie—Tooth Fairy at Fox—he took it.

“It was a very big movie for me, a $65 million movie, and I had this amazing window into how a studio movie was distributed and produced,” said Blum. “I was frustrated with the production process of the studio movie and very impressed with the distribution process of the studio movie.”

By the time Tooth Fairy was released, Blum already had another movie ready to go out into the world, a micro-budget horror film being released by the studio system called Paranormal Activity.

Blum said Blumhouse was born when he asked himself how they could reproduce the success of Paranormal Activity. “I thought, ‘What if you could make low budget, commercial movies, which is another way to say independent movies released by a studio?’”

Blum said the key to the model has been keeping the budgets small. “I think when you have a big success, it’s very tempting—and Hollywood dictates this—to make more expensive movies. So after Paranormal Activity, a lot of people said, ‘You should make World War Z, or like big, expensive genre movies. And I had done it long enough and I was lucky enough to have made Tooth Fairy and had that experience making an expensive movie. I thought, ‘I want to try and repeat this model and try to be disciplined about not spending a lot of money.’”

While that plan has helped ensure the movies are profitable, Blum said the Blumhouse model is about more than that. “The reason that we do low budget movies is because when you have less budget, you have less risk and you have more fun.”

“It’s much easier to take risks when there’s less money on the line,” he added. “Not all of our movies work, obviously, but we take shots and we try different things and we’re able to do that because we really stick to low budgets.”

High expectations, but no guarantees up front
Blum said practical producing considerations like limiting locations and speaking parts help keep budgets low, but that their real success comes from finding projects where if they bring 90 percent of what is on the page to the screen, a studio will make it a wide release.

But while Blum does run his projects by studio marketing department heads, he doesn’t get a guarantee of distribution up front.

“What I always say to the filmmakers is that we don’t guarantee a wide release when we embark on making your movie, but that’s the goal that we all want to have in mind.”

Blum said not having distribution or any guaranteed money up front makes conversations with investors, talent and directors easier. “I fundamentally believe that your words have so much credibility if you’re not taking money up front,” he said. “I don’t know how to look someone in the eye, get paid some large amount of money as a fee on a movie…and then tell them what I want to do with my movie,” he said. “I don’t feel comfortable in that position. I feel really comfortable pushing actors and pushing executives and pushing marketing people when we’re not going to benefit financially unless the movie works. It makes the playing field so much more level.”

Work with directors with studio experience
Samuelson said that Blumhouse prefers to hire directors who, like Blum himself, started in the independent film world, went to the studios and now are ready for something in between.

“We have this sort of crazy idea that someone who has made a lot of movies—that experience is incredibly valuable—is probably good at making movies, especially if they’ve made a lot of movies and some of them have been really good.”

So while Hollywood would rather risk it on a first-time Sundance director in an effort to find the next Tarantino or Nolan, Blum and his team have found success working with filmmakers like James Wan (Saw) and Scott Derrickson (The Exorcism of Emily Rose), who had early success, then a few studio flops, and now are hungry for another shot.

“They have a lot to prove,” said Samuelson. “And they also really value that fact that they have creative freedom a lot more than an independent filmmaker who’s coming out from NYU.”

Pay the actors on the back end and keep them coming back
Blum said the most important component of keeping budgets low is that actors work for scale. Opportunities to share in the profits come after you’ve worked on at least one successful Blumhouse production.

“If you’re in one of our movies for the first time, you don’t get any back end,” said Blum. “If you have a quote where you’ve made a six or seven figure sum, we try to get you to that quote. And in great success, we try to get people beyond that quote. And in many cases, we have.”

And the word is spreading. Taylor said she used to have a hard time convincing agents that their clients should work for scale.

“Now, every time I pick up the phone to talk to a representative, an agent or a manager, everyone is very aware of our model and that I’m calling about a movie that will likely only result in a scale offer for their client,” she said. “But they also know that in success, there’s a real upside and they’re anxious to put their actors in our movies.”

And sometimes those actors even help them articulate what they’re trying to do as a company. Blum said that when he asked Ethan Hawke to star in Sinister, the actor had never done a horror movie before. But when he read the script, he saw a story of a man sacrificing his family to his career. And he was interested.

“He agreed to do the movie and he just really loved the experience,” said Blum. “We did The Purge five months later. But he has really helped us articulate what the company does: we take great, dramatic stories and inject genre into them, which propels them out there into 3,000 theaters.”

Learn from failure
At several points, the conversation returned to Jem.

“People in Hollywood have a tendency to retreat from financial failure,” said Blum. “I think it is important to separate financial failure [from movies that don’t come out well]… Jem came out terrifically well and just was a complete failure, but I still stand behind the movie.”

Blum said it might be a little too early for he and his team to assess what went wrong, but they will discuss it. Samuelson said that’s not how it works at the studios. He told the story of a friend who was an executive at Fox when they released The A-Team. Samuelson called him to tell him how much he loved the movie, and wanted to hear why they thought it didn’t perform up to expectations.

“I said, ‘What was the post-mortem? What do you guys all think about why that movie didn’t work?’ And he said, ‘What are you talking about? Like wallowing in it?’ He was a fairly senior executive. There was no analysis of it, and I think the challenge of it is it’s so expensive that jobs are on the line.”

“But when you have low budget,” added Samuelson, “we don’t have to worry that we’re going to get fired if one of them fails. So we can talk about mistakes.”

Blum wanted to make it clear that it wasn’t all sunshine and rainbows at Blumhouse. “We sound like we’re running this utopian company up here, but we have a ton of people who are unhappy,” he said. “But we try to not react defensively, but listen and improve… I feel like people are very scared to do that here and I think it’s really important.”

Watch the entire conversation here:

Tom Sveen / Film Independent Blogger