"Paranormal Activity," starring Katie Featherston and Micha… (Paramount Pictures )
Fresh off the stunning success of "Paranormal Activity" -- a $15,000 thriller that has grossed more than $107 million in domestic release despite little paid advertising -- Paramount Pictures is set to launch a new production business for movies budgeted at less than $100,000.
The as-yet-unnamed division's initial plan is to finance as many as 20 "micro-budget" movies annually starting in 2010, Adam Goodman, president of Paramount's film group, said Thursday.
Funds for the movies -- about $1 million annually -- will be part of Paramount's existing production budget. The division does not plan to acquire completed movies at film festivals and markets, as traditionally has been the case with studios' specialized film divisions.
The move comes as studios wrestle with spiraling production budgets -- Dec. 18's "Avatar," made at a cost of at least $310 million, is Hollywood's costliest movie ever -- and escalating marketing expenses just as DVD income is plummeting.
Some of 2009's most profitable movies have been modestly budgeted works that grossed huge multiples of their costs, including "Paranormal Activity," "The Hangover," "District 9" and "The Blind Side."
Moviegoers, having grown accustomed to viewing YouTube videos, are no longer put off by the shaky camera work and low production values typically associated with inexpensive films. January's Sundance Film Festival is launching a programming category, called Next, dedicated to movies made for less than $500,000.
"I feel very strongly we need to be contrary in our thinking," Goodman said. "Everybody has the ability to create content right now."
Not all the micro-budgeted movies will be released theatrically.
Instead, the division will operate much like a studio's development slate, where screenplays are purchased, rewritten and in some cases turned into movies. Paramount plans to target both established filmmakers and newcomers with its micro-budget pitch. A current Paramount executive will run the business, but the selection has not been revealed publicly.
Some of the movies may end up serving as "calling cards" -- a showcase of a novice director's storytelling talent for a future project. A handful of films may contain enough good ideas to merit a bigger-budget remake. And another group may rise to the top of the heap, getting a theatrical release. While some of the movies will be horror and thriller titles, there is no specific genre directive, Goodman said.
Because thousands of theaters are now equipped to show digital movies, the micro-budget productions can be distributed without the added expense of striking film prints, which can cost more than $1,000 apiece. Paramount also believes the films can be marketed without costly television commercials, print advertisements and billboards, instead relying on the grass-roots word-of-mouth that helped propel "Paranormal Activity" to its huge profit.
Some of Paramount's micro-budget movies could be released in just a handful of midnight screenings to gauge audience interest before a wider (and costlier) national release.
Paramount is not the first big studio to try to play in a smaller sandbox. 20th Century Fox launched (and recently closed) Fox Atomic, a division dedicated to genre films that struggled with such releases as "Turistas" and "Jennifer's Body." Universal Studios also just exited the business, selling its Rogue Pictures ("Doomsday," "The Return") to Ryan Kavanaugh's Relativity Media.
"Paranormal Activity" has spawned other movies inside Paramount. The studio is developing a sequel to the spectral demon movie from director Oren Peli and producer Jason Blum. The Viacom-owned studio recently bought Peli and Blum's next movie, "Area 51," a drama about three kids who sneak into a government-run alien storage facility, for about $7.5 million.