Hollywood's Paranormal Break With Costly Film Reality

More than $7 million in ticket sales has vaulted Paramount’s low-budget Paranormal Activity to fifth at the box office on the free digital buzz of Twitter and other social networks.

But don’t expect Hollywood studios to entrust their film fortunes to virtual marketing campaigns and the wisdom of crowds. The film establishment is too entrenched in $100 million-plus budgets, more than one-third of which can be earmarked for promotion.

Paranormal Activity, an independent horror film that cost $15,000 to produce with a camcorder, is enjoying word-of-mouth success on the Internet that is far more potent than a decade ago when it lifted The Blair Witch Project from a $60,0000 homegrown flick to a virally promoted $248.6 million global hit. Since then, mainstream films have been testing the waters, perhaps none more successfully than Warner Bros.’ 2008 Batman sequel The Dark Knight, which benefited from a 12-month virtual grassroots campaign leading up to its premier.

The quantifiable online buzz around Paranormal Activity stems from more than one million fans voting on the film’s official web site to bring it to local movie screens. Initial select midnight showings — mostly in college towns last month — have morphed into the film’s full-fledged national opening Oct. 16.

Consumer demand came in response to a movie trailer focused on the horrified response of theater audiences that showed up online in select TV spots. The film’s gritty appearance mimics the efforts of the protagonists, a young couple, trying to videotape the comings and goings of ghosts in their apartment.

But it was the fact that the move became a recurring trend topic on Twitter (at the sponsored account @TweetYourScream) and on a branded Facebook page that made Paranormal Activity a certifiable hit.

Despite the effectiveness of viral marketing for Paranormal Activity, movie studios are expected to only spend about $1.2 billion this year on digital promotions — including social network profiles, recommendations and widgets. Although that amount will more than double to $2.7 billion by 2013, that’s still just a fraction of the $16 billion in advertising and marketing studios will collectively spend this year, according to eMarketer.

An appreciable change in traditional movie marketing would spell more trouble for devastated television and newspapers that rely on those sales to boost their weekend ad revenues. Thirty-second primetime spots can run $3 million each, but studios generally consider them the most potent form of mass marketing.

The major studios spent a combined $1 billion on global marketing of summer sequels including Harry Potter, The Da Vinci Code, Transformers and Star Trek.

Increased marketing and production costs and declining DVD sales have caused movie ticket prices to double over the past decade despite generally flat attendance — at least until recently — according to the Motion Picture Association of America.

The  cost-effective, viral marketing lessons of Paranormal Activity may be more readily embraced by new studio management at Walt Disney Co. and NBC Universal as the film industry seeks  to use digital technology to retain distribution control and reduce expenses in order to avoid yet another round of extreme cost cuts. Rich Ross, the president of Disney Channels Worldwide, recently succeeded Dick Cook at Disney film. Marc Shmuger and David Linde are in the process of being replaced as co-chairmen of Universal Pictures. Hollywood will increasingly turn to consumers and grassroots creators to embellish production to promotion.

Network television, which is battling its own fiscal demons, may already be dabbling in that approach. The new ABC series Flash Forward smacks of the same kind of paranormal, super natural storytelling that makes for good creative collaboration. In the pilot, the entire world’s population falls unconscious for two minutes and 17 seconds, at which point they each have a vision of what they’ll be doing on April 29, 2010. The possibility for untold visions has blossomed into at least eight places online and on social networks like Facebook where unique experiences are shared by viewers in order to break the code and the series’ mystery. While the time-travel drama based on Robert Sawyer’s novel of the same name is in the Blair Witch tradition, the use of social media is intriguing and new.

Tapping the magic of social networks, digital technology and grassroots creativity is something  Israeli-born writer-director Oren Peli understood when he  gave up video-game designing to create the psychological thriller Paranormal Activity. His next film project is titled Area 51.