M Night Shyamalan scares up profit with 'The Visit'

M. Night Shyamalan
Adam Jeffery | CNBC

M. Night Shyamalan's last feature film put the director at the helm of a $130 million epic set in a computer-generated future world called "After Earth."

For his follow-up, "The Visit," he told a horror story that takes place at a farmhouse and cost about $5 million to produce.

While "After Earth" earned just $60.5 million at the U.S. box office and about $244 million around the world, "The Visit" earned back its production budget about five times over when it opened this weekend to $25.7 million in North America.

Shyamalan is the latest—and highest-profile—director to team up with producer Jason Blum, who has made a name for himself with micro-budget horror and suspense films that turn fantastic profits. The partnership is just one more sign that the Blumhouse Productions small-budget model is gaining traction, even as many studios make big bets on franchise films.

Another sign: Blumhouse signed a 10-year deal with Universal Studios last year that gives it first crack at distributing its films.

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"A lot of what you see is because we don't have a lot of money to make the movies, but because of that, certain aspects of the storytelling in our movies improves," he told CNBC in a recent interview. "It pushes directors to really focus on story and performance and character."

Blum garnered major attention in 2007 for producing "Paranormal Activity," a found-footage ghost movie with a $15,000 production budget. It went on to earn $108 million at the U.S. box office and spawn five sequels, the last of which is due in theaters next month. In the last eight years, Blumhouse has followed suit with the "Insidious," "Sinister" and "The Purge" franchises, most of which earned more than $50 million each at the box office.

Many of those films share common themes—a small cast and stories that revolve around a single residence—a trend that is both born of necessity and the creative process, Blum told CNBC.

Indeed, many of Blumhouse's productions have received higher critical praise than the typical, bigger-budget horror film. Shyamalan's "The Visit" currently has a 63 percent rating on Rotten Tomatoes, based on 39 reviews.

"The Blumhouse films generally take it to a different level," said Paul Dergarabedian, senior media analyst at Rentrak. "They've really keyed into the zeitgeist in a way that few production companies can."

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"The Visit" should be another "profit machine" for Blumhouse, he said ahead of the debut, in part because it signals a return to form for Shyamalan. The film follows two children whose visit to their grandparents' country home goes wrong when the old folks start demonstrating disturbing behavior.

Dergarabedian also thinks audiences enraptured by Shyamalan's early films like "The Sixth Sense" and "Signs," are still rooting for the director. Shyamalan is widely perceived to have stumbled critically and commercially at the box office, after venturing into big-budget films that flopped, such as "After Earth" and "The Last Airbender."

Said Dergarabedian: "There's genius in there. It's just a matter of getting it to come out in a way that resonates with audiences."

'Distribution revolution'

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Blum said he sees himself as a curator who is fostering a community of storytellers. While Blumhouse offers feedback throughout the filmmaking process, directors and writers remain securely at the helm.

Despite its success, Blum said his model hasn't taken hold as much as he thought it might just a few years ago, in part because Hollywood still finds it difficult to get over the idea that more money yields more success.

Doing things the Blumhouse way also demands an entrepreneurial attitude, Blum said. The films are made independently, and creators and actors can accept less pay than they typically take in exchange for a cut of the profits.

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More filmmakers may adopt the Blumhouse model as the industry undergoes a "distribution revolution," said Blum.

Studios are now releasing films through streaming platforms soon after they premiere in theaters, or even simultaneously. Blum believes that this will allow filmmakers to make movies more relevant to demand.

"When windows start collapsing, it's inevitably going to happen," he said. "What kind of movies get made will change radically when that distribution shift happens."

The economics of shorter windows may not pan out for big tent-pole movies, which need a longer theatrical release to recoup massive production costs, Dergarabedian said. However, that model is ideal for horror films, which often turn a profit in their first weekend before falling off sharply at the box office, he said.

"The Blumhouse movie is the kind of movie that could shepherd in this revolution," Dergarabedian said.

—This story has been updated to reflect the box office performance of "The Visit." An earlier version was published on Saturday, Sept. 14, 2015.

Disclosure: CNBC and are owned by NBCUniversal, the parent company of Universal Studios.