The Logic Behind a Horror Movie Megamerger

Jason Blum’s horror production house, Blumhouse, is closing a deal to acquire filmmaker James Wan’s Atomic Monster. Photo: Rodin Eckenroth/WireImage, Lisa O’Connor/AFP
Matthew Belloni
November 21, 2022

A question floating among showbiz dealmakers this week: How much is Blumhouse Productions worth now? That’s a fascinating exercise after the Times revealed the horror production house, purveyor of everything from Get Out to The Purge to the Halloween and Exorcist reboots to this year’s The Black Phone and January’s Me3an, is closing a deal to acquire filmmaker James Wan’s Atomic Monster, producer of The Conjuring movies, as well as Insidious and many more. It will create a behemoth in a booming space with arguably the two most successful horror producers of all time, both with first-look deals at Universal Pictures. What would be the price, a billion? $2 billion? More?   

Jason Blum wants very much for it to be “more.” It’s no secret the producer has long coveted a massive sale of the company he founded as a microbudget factory in 2000. Blum is ultra-competitive—he goes nuts every time a rival launches a new franchise, like Wan has done with Saw and Conjuring—and he’s a student of Hollywood history. He wants nothing more than a Pixar or Norman Lear or David Geffen-style transaction to separate him from the regular producers and add his name to the tiny list of those who came to Hollywood, thoroughly kicked its ass, and cashed out as a billionaire.  

That’s the real rationale behind the Wan deal. Blum knows he shouldn’t sell now, when the financial markets are so challenged. But in two or three years? Maybe after his Universal deal comes up for renewal in June 2024? He’s got some time, and horror is one of the few genres that still works in theaters, so he benefits by trying to both bulk up and maintain his high hit ratio.

So, how can he do that? Currently, Blumhouse releases about three or so movies a year in theaters (plus some straight-to-streaming projects, docs and a smaller television operation). He could have just hired more executives like Couper Samuelson, who runs the film group, to make five or six a year, maybe expand his streaming operation, bring in private equity to supercharge the company or make investments elsewhere.

But as Netflix and many other film upstarts have learned the hard way, it’s relatively easy to scale, but it’s really hard to scale and keep the quality up. That’s why most traditional studios employ the silo model, or multiple creative engines (Marvel, Fox, Searchlight, etc. at Disney; or the pod system in TV) contributing to an overall assembly line of higher-quality content. It’s curious; the tech companies don’t really subscribe to that model. Netflix has its different groupings of movies, run by different executives, but they’re not as siloed creatively. Same with Apple and Amazon (though who knows what’s going on with its new asset, MGM). And while Netflix and the other streamers have always overvalued actors and certain writers, they consistently under-value producers, to the point where Netflix attempts to cut out non-writing producers whenever it can.

That’s the pitfall Blum likely wants to avoid as he grows, and in Wan, he gets a producer who can also write, direct and serve as a creative engine. At Warner Bros.’ New Line label, the 45-year old Australian was known to join the edit room on films and lift the test scores significantly after only a few tinkers. He just knows the right timing of scares and how to play comedic moments to lift tension—an invaluable commodity in horror. Blumhouse and Atomic Monster will stay as separate divisions in separate buildings, all feeding one assembly line.      

For Wan, this deal is a no-brainer. His previous arrangement at Warner Bros. expired in April and, while I’m told his reps at CAA and attorney David Fox (they brought in the Venable firm for the deal) had some cordial conversations about renewal, Warners kinda dropped the thread. I suppose it’s understandable, given the upheaval at the studio under new owner Warner Bros. Discovery. But it wasn’t just that; the studio had slowed its buying of projects for him, and development seemed to lag. This is one that got away.

Also, and this is key, the Atomic Monster acquisition doesn’t include Wan’s services as a director. He’s got Aquaman 2 in the can and is now free to take other big gigs, even as he grows his horror enterprise with Blum. The challenge there is just operating within the Blumhouse infrastructure, and with Blum as a partner. They’ll need to work out when to date their movies so both divisions can succeed, for instance. But the upside of being hitched to the Blumhouse wagon now is pretty significant.

Same for Universal. It owns a stake in Blumhouse, which it was required to dilute to make this deal happen. (Blum also diluted his share, though he’s still got a majority stake in the company.) And remember, Universal controls the movies they make. With the exception of some TV projects, Blumhouse doesn’t actually own its content—beyond the infrastructure, its participation stakes, its people, its expertise, and the brand.

And how much is that brand worth? When I wrote about A24’s recent $2.5 billion valuation, I was skeptical about the value of any movie company brand beyond Pixar and Disney. But in the horror space, Blumhouse is one of the few companies with a consumer brand association. People know it. Maybe not as much as Marvel, or Stephen King in the horror space, but certainly more than A24. It’s a populist association, helped by an experiential business (like the Purge traveling experience at Halloween and merch).   

That stuff is all fine, but in the end, Blumhouse will be sold for a price determined by how successful its movies are. Jason snagged a big partner, but now he has a couple years to grow the whole thing to really get what he wants.