Blumhouse's latest strategy to scare the hell out of you: video games

Over the last 15 years, Blumhouse has built a reputation for success by producing low-cost, original indie horror films. Now, the studio best known for such movies as the “Paranormal Activity” franchise and “M3gan” is looking to do the same in video games.

The Los Angeles-based film and TV production company recently announced its first slate of games, starting with an homage to ’90s teen horror films called “Fear the Spotlight,” a third-person, puzzle-solving adventure that’s expected to come out in the fall on desktop and consoles.

The studio saw an especially relevant opportunity — not only was the games industry growing, particularly among young people, but Blumhouse’s own fans frequently identified as gamers, Blumhouse President Abhijay Prakash said in an interview.

“I don’t think you can be in the entertainment space and not notice or be aware of gaming,” Prakash said. “The market is growing globally and diversifying its audience, it’s super relevant to the audience we’re already in touch with, and there was a business opportunity for us to do what we did in movies and apply it to games.”

Blumhouse is the latest studio entrant to the massive video game market. Megan Ellison’s indie firm, Annapurna, has a gaming division, as do brother David Ellison’s Skydance Media and J.J. Abrams’ Bad Robot. Warner Bros. Discovery’s gaming unit has long churned out big franchise titles, including last year’s Harry Potter-themed hit, “Hogwarts Legacy.”

“It’s not just potential revenue,” said Danny Bilson, director of USC Games, a joint program with the university’s engineering school. “It’s culture. It’s fishing where the fish are.”

Gaming is big business. More than 190 million Americans play video games at least once a week. U.S. consumer games spending last year totaled $57.2 billion, according to the Entertainment Software Assn., an industry trade group.

Globally, revenue last year from the games industry was estimated at $183.9 billion, a slight increase compared with 2022, according to a report updated in May by Amsterdam-based gaming research firm Newzoo.

Moreover, the amount of time people spend gaming — and importantly, how much money they spend — has remained resilient through recessions. (The industry, however, has recently experienced a pullback after a pandemic-fueled boom in hiring and production, resulting in thousands of layoffs.)

“Gaming continues to be a much more interactive and exciting way to enjoy entertainment,” said Josh Chapman, co-founder and managing partner at Konvoy Ventures, a Denver-based venture capital firm that focuses on gaming investments. “It’s no surprise that Hollywood studios are looking to games as additional revenue. … It’s a way to get their IP [intellectual property] in front of a new fan base.”

The pipeline also has run the opposite direction, sometimes to great success. Postapocalyptic video game franchise “The Last of Us” spawned the wildly popular HBO series of the same name, starring Pedro Pascal. Bethesda’s “Fallout” games became the basis of a show for Amazon’s Prime Video.

Blumhouse executives began thinking about expanding into games about three years ago. Chief Financial Officer Josh Small, who previously helped Annapurna get into gaming, was a key driver of those discussions, Prakash said.

The company hired veteran video game producer Zach Wood and former PlayStation executive Don Sechler to run the gaming division, which launched last year.

Games can be expensive to produce. But as with its low-budget horror films, Blumhouse is taking what executives describe as a “lean and mean” approach to the sector. The division is targeting indie-level budgets, mostly under $5 million per title.

Blumhouse Games, which has a handful of employees, serves as a publisher, partnering with indie developers to finance and make the games, then taking the final product to platforms like online gaming marketplace Steam, as well as Xbox, PlayStation and Switch, where consumers can pay per game.

So far, the games slate has hewed closely to the horror content of Blumhouse’s roots.

“Fear the Spotlight,” developed by L.A.-based Cozy Game Pals, centers on two teen girls who venture into an abandoned school to conduct a seance, an undertaking that inevitably goes wrong. “Crisol: Theater of Idols,” from Madrid-based developer Vermila Studios, combines religion with horror and requires the player to use their avatar’s own blood as ammunition. The slate will include a mix of desktop and console games, as well as mobile games.

Perhaps surprisingly, one thing the current slate doesn’t include is any game related to Blumhouse movies. That means players won’t find games that expand the universe of “The Purge” or allow them to dance with M3gan. The current separation between the games and Blumhouse studio stories was intentional, said Wood, who serves as president of Blumhouse Games.

“It’s a games-first approach,” he said. Though the team knew fans would expect to see games based on Blumhouse‘s films, they wanted to focus first on originals, “similar to how Jason [Blum] built the film business,” he said.

Wood added that Blumhouse Games doesn’t evaluate pitches from developers with an eye toward film or TV partnerships. Though the games subsidiary does talk with the studio side — and the door is open to future collaborations — the focus is on “building trust with fans” to expect creative, unique horror games, he said.

It’s a strategy similar to that of Bad Robot Games, which started as a small subsidiary and evolved into a larger game developer and publisher. Bad Robot Games now focuses on a mix of existing intellectual property and new stories, Chief Executive Anna Sweet said in a statement.

“Gameplay always comes first,” she said. “Once we find the fun, we then look at how we can build a world and story that complements it.”

Developing games based on existing movies is often a way for studios to expand a film’s popularity and increase longevity — and monetization — among fans. Netflix has expanded its mobile-only game offerings with new titles based on its hit reality shows, such as “Too Hot to Handle,” to reduce subscriber churn and increase the time viewers spend on its service. But betting on existing movies doesn’t always work.

Warner Bros. Discovery took a $200-million hit to its profit in the first fiscal quarter this year due to poor sales of its game “Suicide Squad: Kill the Justice League.” (Company Chief Executive David Zaslav called the release “disappointing” in a May call with financial analysts.)

Walt Disney Co., too, has had its ups and downs with games. After years of struggling as a game developer and publisher, the company adopted a licensing model in 2016 that allowed it to work with outside entities to make games based on Disney characters and stories.

In February, Disney leaned harder into that strategy by announcing a $1.5-billion deal with “Fortnite” developer Epic Games for a minority stake in the company and the creation of a “games and entertainment universe” involving Disney brands.

“The best media companies in Hollywood will figure out gaming as a tool,” said Konvoy’s Chapman. “If they launch into games, opening weekend remains important but less important. It’s more about, how do you monetize this over time?”

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