Does Horror Pass the Four Tests of Profitability? I’ll Tell You
Breaking down four factors — revenue, profit, ROI and hit rate — the data reveals why the industry’s favorite ‘cheap win’ often doesn’t
I offer analysis for paid subscribers every other Thursday. I wrote about the overhyped valuations of A24 and Angel Studios; covered 7 sleeper hits of the Streaming Wars; and explored why animation continues to make bank and IP dominates the box office.
Hollywood has a profitability problem.
Oh, I don’t mean with the shift to streaming, though that is a real concern. No, I mean we can’t decide what “profitability” means.
No genre captures this confusion more than horror. It’s been heavily hyped in recent years, partially because when it hits, it hits big. Nabbing a 4,500 percent return on investment (as Terrifier 3 did) is majorly profitable, legit.
At the same time, as I’ve written before, horror isn’t as popular, nor as profitable, as big budget tentpole films. Very rarely do horror films “win” the year from a popularity standpoint, as in very few finish the year in the top 25 highest-grossing films in America.
What gives? How can a genre both be wildly profitable and not that profitable at the same time?
A few months back, Richard Rushfield wrote about the need to create a “new math” for evaluating feature films. I agree, and I focus on four tests of profitability:
Total revenue
Total profit
Return on investment
Hit rate (across a genre or other category of film)
I call these the “four factors” of film analysis, and I devised them in part to address this conundrum posed by horror films: a film (or genre) could succeed at any of the four factors above to be considered a “success.”
But success is subjective, depending on your stake in the game, since different folks in the feature film value chain care about different things. Theater owners, for example, don’t care about ROI; they need butts in seats (total revenue). The big studios care about ROI, but they care about total profit even more. Meanwhile, independent producers can thrive on return on investment, and everyone cares about the hit rate of various genres.
So let’s run that math for horror films. Bottom line: Horror excels by certain measures (hit rate and ROI) but has a much lower revenue ceiling than other genres. Plus, despite all the success in theaters, most horror films struggle on streaming.
In today’s newsletter, I’ll get into:
How redefining profitability (across four factors) changes which genres actually win in Hollywood
The ROI for horror vs. other genres
Why horror is having its most profitable and least profitable moment — depending on how you count
The math behind horror’s billion-dollar year
The two data points that explain why theaters need horror more than horror needs theaters
What streaming performance data reveals about horror’s biggest blind spot
Why horror’s R rating keeps it from hitting the top — and what PG-13 titles are proving instead
The surprising way horror outperforms “prestige” genres — and what that says about audience taste right now
How horror will fare in the top 25 movies of 2025
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