Imagine this scenario: you're a big movie producer with a little bit of cash in your pocket, ready to invest. What kind of film are you going to back? What movie would be the best deal for you?
Horror, hands down. It is the best deal in Hollywood.
A key metric for any investment is return on investment (ROI). It's a measure of the amount of profit from an investment relative to the cost of the investment. The higher ROI, the better the investment.
Using data from Studio System, a company that collects entertainment industry data, we looked at what kind of films have had the best return on investment over the last five years.
Horror films are at the top of the list with 13 of the top 30 films by ROI since 2010.
And within the horror category, profits can be huge on small investments. The top five films in horror all had an ROI around 2,000 percent (translation: for every $10 dollars put into a movie, an investor would get 200 dollars in profit). By comparison the top five in comedy had an ROI between 1,200 percent.
The key thing about horror is that it's relatively inexpensive to produce, and as our recent radio story shows, marketing can have a tremendous impact.
Obviously if you're looking for the biggest payoff in total dollar amounts, the most profitable films in Hollywood will still be the traditional action and drama blockbusters. Look at this year's big summer flick, Jurassic World. It has made $1.6 billion in profit worldwide, but it cost an estimated $300 million to produce and market. That's an ROI of roughly 533 percent. By contrast, the horror hit Paranormal Activity 2 made $236 million but only cost $9.4 million to produce and market. That's an ROI of 2,510 percent.
From a strictly business point of view, the smart money will invest in cheap horror.
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