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How Paranormal Activity Started a New Category in Horror

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I recently resurrected an old presentation I gave at Twitch and shared a new version with students in Justin Winter‘s AI Producing class at LMU. This post is a recap!

15 years ago, Paranormal Activity was released, just in time for Halloween in 2009. It was a viral phenomenon and the highest grossing horror movie of the year. The momentum was so powerful that Paranormal 2 and 3 became the highest grossing horror films in 2010 and 2011. 

This was an industry-shifting movie for many reasons (the beginning of Blumhouse’s low-budget model and the marketing campaign1 among them), but I want to focus on one unexpected upshot you won’t see unless you dig into the data like I have: Paranormal Activity met very unique conditions in the market which caused a new genre to emerge. It’s a case study in how niche content can go mainstream…and how sometimes, it doesn’t. 

PA was originally made for just $15,000 as a “found footage” horror movie. The premise is that we’re viewing “real” home video footage of an event that has been edited together after the fact. This masterful style gives the film creative license to have all the warts and imperfections which come with something user-generated. The low budget made it outrageously profitable. PA appeared in film festivals in 2007. It was scooped up by Paramount for only $350,000, who invested another $200,000 and widely released it in 2009, earning $601M (a phenomenal 1000x ROI for Paramount). 

Highest Grossing Horror Films by Year: 2009-2011

That’s all great for the individual franchise. But it’s even better for the film community because it kickstarted a new genre. Right after after PA comes out (2007 in festivals, 2009 wide release), independent filmmakers and major studios began creating hundreds of new found-footage horror movies. Have a look at this data I pulled from IMDb, charting the number of found footage horror movies since the 70s: 

Number of Found Footage Horror Movies Released per Year

As you can see, >80% of all found footage horror was made after PA. Why? Because PA helped people clearly see the template for this content: do away with high-cost talent, lighting, music, production value – don’t even invest in visual effects and gore. It conveyed a formula for the genre which others copied. 

You’re probably already getting ahead of me though… why am I giving all this credit to Paranormal Activity? There’s one more bump on this graph. 

Indeed, 10 years prior, The Blair Witch Project debuted. But only a handful of found footage movies come out after this disruptive original indie. So Paranormal Activity inspired countless imitators and a whole new genre while Blair Witch does not. Why? 

Oddly, popularity has nothing to do with it. Nor do economics. It’s smart to expect those drivers: popularity drives the zeitgeist which drives filmmaker inspiration. And economics compel producers and studios to invest in new genres. But in reality, Blair Witch was more popular and economically successful than PA. Nominally, Blair Witch made $604M in the box office, which is a little more than PA. And if we adjust for inflation, Blair Witch made $1.3B by today’s standards. So it’s unlikely that economics or viewership made the difference. 

At two different times, very similar movies are released, both to very large audiences, both extremely profitable. But the second one has a knock-on effect of inspiring copies and the other does not. When I give this lecture IRL, we stop here and mine for different theories from the class (and I’d be curious to hear yours too!). There is no right answer. However, my hypothesis is that one macro theme captures many of the drivers: technology lowered the barrier of entry for this type of filmmaking. 

In the 10 years between 1999 and 2009 there were multiple technological developments in entertainment which make copy cats of PA far more viable. DV cameras spread with the Panasonic DVX100 and Canon XL2 introducing a “prosumer” category (and eventually DSLRs like the Canon 5D). Non-linear and prosumer editing software like Final Cut Pro gains rapid market share and becomes available to consumers at a lower price point (accelerated with piracy as distribution) plus iMovie is bundled with Macs in 1999. HD video becomes widely adopted which doubles the resolution of a home movie. Online distribution and promotion become possible through YouTube and crowdfunding platforms. I’d even argue that software and websites for staffing/coordination hit more of a stride around 2009 (craigslist, Celtx, MySpace). Even the more qualitative cultural changes (like normalization of UGC and shaky cameras) are dependent on these technologies’ proliferation. 

Imagine trying to make Blair Witch before all of this. Editing a movie required a special combination of Avid software and hardware rented from a post house on a per-hour basis (the creator of Blair Witch had access to these computers through his day job). The Blair Witch filmmakers found their cast through an ad in a physically printed magazine. Even in its simple, “home movie” form, Blair Witch was intimidating to replicate. 

Paranormal Activity’s impact isn’t just a story of creative inspiration; it’s an example of how technological accessibility plays a parallel role in trendsetting. In the years between The Blair Witch Project and Paranormal Activity, it took dozens of technologies across the filmmaking supply chain to unlock a new genre. As we consider AI’s potential in entertainment, I like to consider possibilities like this one. AI is poised to do for fringe content what DV cameras and non-linear editing did for found-footage. Yes we’ll lose some jobs but in those particular areas (VFX, stock footage), barriers to entry will come down and enable new talent. I predict we’ll see many more new genres proliferate, inspired by innovative boundary-pushers with the right timing. Just as we saw with found footage, by reducing production costs and creative limitations, AI will enable niche formats tailored to diverse audiences.

Thanks to Scott Brooks and Ryan Latchmansingh for reading drafts of this!

  1. The guerrilla marketing campaign for Paranormal Activity could be its own case study. In trailers and on social media, ads asked fans to “demand” online that the movie come to their local theater. Then, as the movie spread to more screens, the ads showed off the number of new screens and proclaimed “you demanded it!” Trailers even utilized night vision footage of folks’ shocked reactions in theaters. Most likely, distributors had to commit to rolling out the movie nationwide months in advance because of the complexity of P&A– so the social proof of “you demanded it” was as much a hoax as the footage in the movie.  ↩︎

5 Unexpected Things Every New Dad Needs – Expecting Father’s Baby Gift Ideas

If you (or someone you know) is expecting a newborn I can already predict that their baby registry is packed to the gills with ironic onsies found on Instagram and useless organic baby bath salts. What’s NOT on the registry are these five things. And these five things are the dad gifts that will actually be useful to your expecting father friend.

These items are weird. In fact, if you put them on your baby registry, your relatives will be perplexed. And yet I’ve found them absolutely indispensable after 6 weeks taking caring for a newborn baby. These 5 purchases were essential to my newly-“dadded” man-brain and they were absolutely overlooked by Blake Lively or whatever blogger’s top ten gifts for dad list, so that’s why I’m sharing them here.

1. 50X Blue Surgical Huck Towels

By far and away the most useful thing in our entire household for 6 weeks straight has been all 50 of these simple reusable surgical huck towels. What the hell are surgical huck towels? They’re basically just uber cheap towels the use in the ER. This may seem straightforward so stay with me for a few paragraphs…

The idea of using a towel completely changes when you have 50 of them. When you just depend on the dozen or so “burp towels” you might get in a few gift baskets, you’ll subliminally limit your usage to just the dozen. When you feel like you have infinite towels, you will finally. be. FREE.

And you are going to need infinite towels. Towels for messes. Towels to protect areas from messes. Towels to cover up areas already covered in messes.

Basically, every time you do something with a newborn, you should start first by laying down a towel to contain whatever hazmat they might inflict on your world. When you have 50 of them, you’ll keep them in every basket, cabinet and drawer within arms reach of baby activity. Use them like paper towels, only they’re washable, soft and reusable.

2. Mini “Button Lamp” LED Lights

You will be amazed as how critical light management is. Even the slimmest shaft of light from the crack of a doorway will startle awake the little one you just spent hours shushing to sleep. So, your job as a dad is to create very simple and non-disruptive lights for essential tasks that take place late at night.

Your old man used motion-activated night lights. The best new solution are these simple mountable LEDs with a basic switch. LEDs are so low-power that they don’t need a wall socket so you can affix them anywhere — both discreet and right where you need it.

These are surprisingly bright for a single-bulb running on a hearing aid battery. You’ll want to stick it in a hidden-away spot both for aesthetics and because it’ll help your light “bounce” more softly into the right position.

These are both your “oh shit” lights and your crucial partners during regular nighttime chores. Here are the essential places we plunked them:

  • In the master bathroom so you can sneak in to pee without lighting up the whole room
  • Right next to the crib for emergency spit-ups
  • Above either side of the bed so that we can feed her at night without waking her too much
  • Behind the changing table because sometimes you can’t quite see if things down there are clean
  • Above the kitchen sink because you’ll be washing bottles, pumps and pacifiers at all hours

3. Temporary blackout shades

For like $5 each, you can buy the most impervious blackout shades available and then just toss them when you’re done. These are temporary disposable ones that stick anywhere with paint-friendly masking-tape-like stick.

Like I mentioned above — you need to prevent even that slender strip of streetlight from peeking between your mini-blinds and the window sill… and on to your newborn’s face.

The master bedroom’s baja chic window treatment is not going to cut it for the next few weeks while baby co-sleeps. Dad’s going to have to buck up for this temporary fix in a few rooms. Just layer them over the terrible light leaks. It’s a little ghetto but you’ll only need it till she sleeps in a more permanent place.

4. Hatch devices — more importantly, their app

My wife and I got on the Hatch train much too late for their epic smart scale to come in handy… I remember thinking, who the hell would want to weigh their baby so frequently? Well, new parents quickly learn how crucial the newborn’s weight can be to their happiness and sound sleep.

You can do two things with a baby’s weight: 1) get a sense of generally how long they can go between feeds because a heavier baby sleeps longer (in other words: estimate how long you can sleep without interruption) and 2) find out how much they’ve actually eaten on a given breastfeeding session (by weighing them before and after).

Another key: The Hatch App

Even if you’re not using the Hatch tech (we also like their sleep light) everyone can benefit from using the Hatch app — and it’s free. You can track everything from diaper usage, weigh-ins at the doctor’s office, nap times and feeding durations. What gets measured gets managed! And you’ll like managing your baby’s stats for two main reasons:

  1. COMMUNICATION – You, your partner and (God willing) some other helper/relative will all be caring for this baby. It helps enormously with communication if all parties know when the most recent diaper change happened or how long the last nap was. For instance, late at night, if one partner skips a diaper change, when then next partner wakes, they can just see on the dashboard what happened rather than waking their snoozing friend.
  2. ANALYSIS – Maybe, just maybe… you can begin to read the tea leaves of the child’s schedule, detect patterns and better diagnose the troubles that ail them and cause all the fuss and crying. Good luck with this one but sometimes we’ve had epiphanies looking at the “Schedule” tab. If anything, it will help you estimate the number of diapers to order on Amazon.

5. IKEA smart lighting with Alexa

Okay, I’m back on the lighting thing! But this is less about maintaining the oh-so-important mood lighting in your home and more about being hands-free.

When you’re angrily hot-stepping across your home with a flailing baby in your arms, it’s a huge win if you can plop her on the changing table, grab a wipe in one hand, a diaper in the other and holler “Alexa, turn on the lamp!” If a stubborn child is growing drowsy in the perfect position in your arms, you can hands-free ask Alexa to turn on white noise to further lull her… or your favorite podcast to lull you!

I’ve found IKEA’s lights to be very buggy but cost-effective enough that you’ll convert nearly your whole home in a weekend. Once a new dad has an inexpensive Alexa device and a few bulbs installed in the nursery, the family is pretty much kitted-out with hands-free automation.

Still not inspired? – More Dad gift ideas

It should go without saying but please PASS on the ironic onesie or the plush corgi and if all else fails, buy your expecting dad one of these things:

So those are the top 5 gifts I give every dad now that I’ve had a newborn myself! People will buy a new father all the other crap he needs so I’ve skipped that important junk. These 5 things will come in true handy and are at my fingertips when a new colleague or friend has a little one coming.

Apple’s Rumored Hardware & Content Bundle – Maybe Content is Just for Retention?

I’ve been thinking a lot about the rumor of Apple’s hardware and content subscription bundle. The idea — whether it actually happens or not — is that they’d create a very expensive subscription of $80/month or so that bundles Apple Music, the new Apple original content, Apple Care, iCloud and a new iPhone every year. This is very much a rumor but very viable avenue posited here and by Matthew Ball at Redef.

This immediately reminds me that for years, Americans paid $100+ per month for another expensive hardware and content bundle: cable TV. I remember the salesman coming to my home and explaining to my parents what cable TV included. It was much more than TV, because before the internet, that box was your only gateway to many things. It was movies, music channels, educational programming for your kids, breaking news, live concerts and the hardware to make it all look beautiful on your only screen.

One way to frame Apple’s rumored hardware/content bundle is that they attract you with their device ecosystem (hardware) and then keep you hooked with their shows and music (content). The phone and its TV and cloud components are already a huge draw for audiences so their content can play the role of keeping users engaged there by making that ecosystem useful on a daily basis.

This got me thinking… maybe content isn’t really an effective audience awareness or acquisition tool AT ALL. Maybe, when all the cards fall, content is just the retention piece of a recurring payment business model and other elements of the bundle are what bring you in the door. This is somewhat reflected by the calculus Amazon did around their original video: it turned out that prestige TV shows like Mozart in the Jungle and Man in the High Castle weren’t such an efficient acquisition tool for Prime.

Amazon shows don't easily drive Prime memberships

Check out how this thinking might apply to other businesses. I’ll use this analogy: come for X (acquisition); stay for content (retention).

  • Apple hardware/content bundle – Come for the hardware ecosystem; stay for Oprah.
  • Amazon Prime – Come for free shipping; stay for Nicole Kidman.
  • HQ — Come for a cash prize; stay for the trivia.
  • Facebook — Come for your friends; stay for Facebook Watch.
  • And the corollary seems to also be true with failed SVODs and streaming services — there’s no acquisition component, just a bunch of originals and licensed content to retain the audience that never came.

There are probably a bunch of examples that prove this thesis wrong, chief of which are Netflix and HBO. (But you could argue that they OVER spend on content, trying to force content into becoming an acquisition tool.)

Even if it’s only a little true, it’s a helpful thought experiment: what if you had to launch a streaming service WITHOUT using content to acquire an audience? You’d have to offer real utility to your users — some other valuable product or service that would attract them to your subscription. Apple already has that part figured out: the phone, the ecosystem. And on the content side of your business, brands like Marvel, leagues like the NFL and celebrities like Oprah wouldn’t be as valuable because you already have a giant draw for new users. If your content is only playing the role of retention, it doesn’t need to hit an attention-grabbing must-see fever-pitch. It can be much less ambitious. You can spend way less than Netflix.

The Google/Facebook Digital Ad Duopoly by the Numbers – 2017 Advertising Revenue by Company

Digital ad revenue by company 2017People keep saying that Google and Facebook get 90% of digital ad spending… though still a concerning stat, this is somewhat of a distortion. The rumor started with Mary Meeker’s Internet Trends report and has been paraphrased and rounded up. The real stat is that the duopoly gets about 90% of digital spending growth. So, as advertisers and agencies spend more on digital ads, Google and Facebook are gobbling up most of the new money. That doesn’t really make them a monopoly… it just means they’re doing a great job at keeping other companies from growing in a white-hot space.

eMarketer released some reports giving us real insight into their dominance. Turns out, the duopoly has about 63.1% of the spending. Again, this should still be concerning to you if you work in advertising for anyone but Google and Facebook… but it paints a slightly more optimistic picture.

Check out their data below. Since I’m mostly concerned with market share, I’ve compiled that nicely here:

  • Google 42.17% (YouTube 4.67%)
  • Facebook 20.93% (Instagram 3.71%)
  • Microsoft 4.34% (Linkedin 0.98%)
  • Verizon 4.34%
  • Amazon 1.99%
  • Twitter 1.46%
  • Yelp 0.87%
  • Snap 0.77%
  • IAC 0.54%

Here are my observations:

  • Google has twice the market share of Facebook – When we say the word “duopoly” or call out 90% of growth and 60% of market share, we’re missing the fact that Google has more than twice the market share of Facebook. Put another way, Google has more market share than Facebook and all the other significant digital ad companies combined.
  • Instagram vs. YouTube – By the same token, Facebook has one asset that’s whooping Google: Instagram. Without much of a video product, Instagram is still only $800M behind YouTube in terms of net revenue and the eMarketer predictions have Instagram surpassing YouTube next year.
  • Photo finish for 3rd – I’m really interested in who has the best chance of eating away at the duopoly and it’s a photo-finish for third place with Microsoft and Verizon holding 4.34% of the market each. But they might not really be competitors because AOL/Verizon actually reps a lot of Microsoft’s inventory and why wouldn’t they partner to take down the Goliaths? It would be interesting if these two could start to chip away at either.
  • Snapchat is slightly better off than they look – I’m bullish on Snap because I like a good underdog. eMarketer points out that while they only have .08% of the overall digital ad market, they have more than 1% of mobile and a lot more teens than Facebook and Instagram.
  • And Amazon is lurking at 2% and they just started trying.
  • Apple isn’t on this chart.

My Favorite Slide Explaining Apple, Google and Amazon’s Domination of Entertainment Companies like Disney

Market Caps of Content Companies vs Distributors via BTIG

I LOVE LOVE LOVE this slide from Rich Greenfield at BTIG. His whole presentation is definitely worth the watch but this one graph truly says it all. (And I’m always trying to pull it up online to share in meetings… so I’m also posting it here to make that much easier.)

In the presentation, Rich first shows market caps of the companies below the line — all of our beloved entertainment creators. We see them in print and on every screen and think of them as massive, powerful companies. Then, he layers on the market caps of the “platforms” and distribution companies that sit between those companies and their audiences… and it’s easy to see how those content co’s are dwarfed.

Rich is looking at this through almost exclusively through a lens of financial analysis and market value… which might not tell the WHOLE story, but it paints a pretty dim picture for content creators and brand owners: Content is not king.

Some things worth noticing (many of these points are made by Rich):

  • None of the entertainment companies below the line — even the juggernaut, Disney — has a meaningful direct-to-consumer platform… they all depend on the companies above the line to reach their audiences
  • Apple could buy Disney in cash
  • Google or Apple could buy the entire entertainment industry in cash, except Disney
  • Every one of the distribution companies above the line have meaningful plans to make their own content that they own completely and perpetually (in other words, they could start to make their own content without depending on the content companies and their brands)
  • Netflix isn’t even on here but its market cap around $70B, making it bigger than everyone but Disney
  • Neither is Snap… it’s much smaller than Netflix at $20B (as of this writing), but it still stacks up above Viacom, Discovery and others
  • The digital-oriented distributors like Facebook, Apple, Google and Amazon have incredible volumes of data and knowledge describing their audiences, which is a huge advantage in content creation
  • While some of the content companies have partnered with and invested in the FANGS companies, they’ve missed their chance to buy one of them or build their own; Hulu is the only example and they half-heartedly participate in it
  • Nobody has been able to successfully create a large “direct to consumer” platform with content or brands alone… Netflix had to use DVD rentals, Amazon is using ecommerce, Spotify is using music and UI. In other words, we haven’t seen someone earn lots of subscriptions and ad revenue by only saying “we have ESPN.” It’s always content paired with some other strategy.

What Rich calls the “punchline” is this great thesis: content companies — especially Disney — have to make an acquisition in order to complete their business. What should they buy? Well, all of their options SUCK. Netflix is too expensive. Snap and Twitter don’t come with subscriptions. Pandora or Spotify aren’t video platforms.

That punchline explains many of the plays we see being made around the industry: Twitter continuing to pursue video in an attempt to demonstrate its value as a video platform. Time Warner selling itself to AT&T. Netflix spending billions on original content. NBC investing heavily in Snap. The list goes on…

The Most Important Thing About Creating Content Or: The Secret to Great Content Strategy

Have you ever watched a show and thought this show is perfect for me? Maybe a movie?

Screenshot of Matthew McConaughey in True Detective observing the opening crime sceneThe last time this happened to me was True Detective on HBO. It had a cast I love, a plot that intrigued me and cinematography I admired. That seems like a lot of expensive reasons to like a show: world class writing, acting and filmmaking!

People love all sorts of content. What do they all have in common? Some of my colleagues would say story, many would say character. But then how would you explain that some people hate a certain book… even though it’s a great story? How would you explain BuzzFeed or ESPN? How would you explain a stand-up comedian? Story and character don’t really explain those things… especially not why people love those things.

That’s because the most important part of creating content people will love is… understanding what people love. It’s the “understanding” part that’s important. It’s understanding them deeply — what they want and need. How they spend their spare time. Their fantasies and fears. In one word, it’s empathy.

Most people don’t think of it this way, but great content that you love is engineered to be that way. It’s not an accident that you like the shows you do. It’s usually not just some guy making something that he alone thinks is perfect for himself — at least not if it’s a show you love.

Great creators get inside your head, take out your thoughts and wants… then give it right back to you.

Kevin Spacey in House of Cards being turned down for Secretary of StateThe process of doing this kind of research and thinking is the essence of what some people call “content strategy.” Here’s a clear and perhaps simplified version I can think of and you may have heard of it before. It’s how House of Cards was allegedly developed. Have you seen that? If you have, you probably liked that it starred Kevin Spacey, thrilled you like a thriller and had a creepy tensions that’s probably hard to describe. Well, none of this was a mistake. Netflix found in its data that:

  • Netflix users like Kevin Spacey
  • Same with their computer-generated genre “political thrillers”
  • It also showed that films by David Fincher are popular — he produced House of Cards and his involvement leaves you with that hard-to-pin-down creepy feeling… you’ll sense this pacing and style in other movies like The Girl with the Dragon Tattoo or The Social Network
  • (Bonus: The DVDs of the original House of Cards mini-series were also popular among Netflix’s by-mail customers)

In fact, Netflix was so certain of their content strategy here that they didn’t ask the producers to do a pilot of it.

This actually makes a ton of sense! What does a pilot really do? It’s engineered to get into a different kind of head: a development executive’s head! A great pilot empathizes with a development exec by introducing the characters and showing them the direction of the show. It’s not really for the audience. You don’t have to sell a show to the viewer in the very first episode if you already know they love Kevin Spacey, David Fincher and political thrillers. You’re reading their mind already. The pilot doesn’t matter — it’s a homerun for that audience.

And a homerun for an audience entertains them. And the key to entertaining them is understanding what they want. And truly understanding someone — truly getting them — that’s empathy. I have a literally religious obsession with that word, empathy. And that’s why I think it’s the most important part of creating content.

Next time you create something, think less about what you like. Consider what people like you like. And you’ll know you’re creating something they’ll love.