''Paranormal Activity'' -- How the low-budget horror film became a box office smash

It’s time for Katie Featherston to scream. No big deal — she got plenty of practice while making Paranormal Activity, in which she plays a woman tormented by a supernatural houseguest. So what’s another yelp on this October afternoon in a Manhattan photo studio? Lying in bed with her costar Micah Sloat, Featherston looks straight into the camera and lets out a perfect blood-curdler that rings throughout the entire loft space — and much of the building. Within seconds, the doors of the studio across the hall fling open. Out pop two people, their faces ashen with terror.

Fortunately, everybody can remain calm. Nobody’s being murdered or terrorized. In fact, life in the Paranormal Activity universe is pretty fantastic. In its first weekend of wide release, the itty-bitty horror flick — made for just $11,000 in writer-director Oren Peli’s house in San Diego — slayed Saw VI for the top spot, boosting its total haul to $62 million. The killer weekend furthered comparisons to that other groundbreaking, low-budget scary movie, The Blair Witch Project, and cemented Paranormal‘s status as a box office phenomenon. ”It’s pretty exciting,” says Peli, who celebrated the triumph with ”a plain cheeseburger and a Jack and Coke” on the set of his next film, Area 51, in Utah. ”I would have been happy with just a strong performance, regardless of where Saw ended up. I still would have been stoked!” At the photo shoot, Featherston, 27, was just processing all the news. ”On Saturday, my mom was like, ‘Katie, you’re number one!”’ she says. ”And I was like, ‘No, not yet, just one step at a time.’ Then Sunday, Oren e-mailed the newest numbers and…,” she trails off. ”I gotta tell you, everything that has been happening? I could not be more excited and thankful, but it doesn’t feel real.” That’s understandable. A year ago, nobody was sure Paranormal Activity would make it into theaters at all. ”There were a lot of ups and downs,” says Sloat, 28. ”The movie got lost for a long time.”

The journey began in 2006, when the Israeli-born Peli, then a videogame programmer, started hearing strange noises in his San Diego home. ”I’m not saying there was a ghost, but I couldn’t logically explain what was going on,” he says. ”The technogeek side of me said, Well, what if I set up video cameras and made [scary] stuff happen? That could make an interesting movie.” He sketched a plot: A young couple film themselves sleeping at night to figure out what’s causing freaky disturbances. The woman is deeply shaken and worried about ticking off some evil entity. The man is a bit macho, daring the thing to come out and fight.

Peli ponied up $11,000 of his own money to get Paranormal off the ground, then held an open casting call in Los Angeles, where he found Featherston and Sloat, unknowns with minimal experience. ”I went in, sat down, and Oren said, ‘Why do you think your house is haunted?”’ says Featherston. ”There was no ‘Hey, how are you? Can I have your head shot?’ So I just started talking. I went with it. And that’s kind of how the whole process was.”

Production on the first cut of the R-rated film spanned seven days, in October 2006, at Peli’s home. There was no script. The director simply told his actors (who had never met before the audition) where he wanted a scene to go and they’d improvise. Nor was there a crew. Peli wanted to create a home-video-style thriller, so he had his leading man pull double duty as camera operator. ”It was a very tight schedule,” says Sloat, who, like Featherston, used his real name in the movie. ”We were shooting until three or four in the morning every single night. We’d wake up early to catch the dawn, shoot, take a nap, and then shoot again all day.” All the while, Peli told no one what he was up to. He figured someday a distributor might want to pretend the footage was real, áa Blair Witch. ”I didn’t want to limit any options or say anything that would come back to haunt me,” says Peli. ”No pun intended.”

Early on, few distributors were interested at all — even after the film played to breathless praise at L.A.’s Screamfest in late ’07, and again in early ’08 at Slamdance. After the second festival, DreamWorks (then part of Paramount) made an offer, but the studio only wanted to buy the movie to remake it as a star vehicle. The director wasn’t pleased. Eventually, Jason Blum (a former Miramax exec who’d come on board as a producer) persuaded Peli to accept DreamWorks’ offer of $350,000. Blum felt sure they could talk the studio into releasing the movie rather than remaking it: ”I told Oren, ‘If we can get decision makers to see this movie with an audience, we’re going to get distribution.”’

And that’s just what happened. DreamWorks co-chair Stacey Snider fell for the movie at a test screening (”It was hellacious and fun and exciting — people were screaming!”), then lent a copy of it to Steven Spielberg. But not even the director of Jaws could stomach watching Paranormal alone at night. ”It just killed my marrow — it was too real to watch in the dark,” Spielberg recalls. ”The next morning, in broad daylight, I watched the whole picture and it still scared me beyond measure. That’s when I called Stacey and said, ‘We shouldn’t remake this. We should release this.”’ His only caveat? He didn’t think the ending delivered a big enough payoff. So, armed with an additional $4,000 from Paramount, Peli shot a finale Spielberg had suggested. As for Spielberg, he continued to rave about the movie. ”I was a broken record,” he laughs. ”I sent more e-mails and made more phone calls, trying to get everybody to agree with Stacey and me that it should be released.”

Unfortunately, Spielberg couldn’t do much campaigning once his company split with Paramount in September 2008. The terms of the divorce dictated that Paranormal remain with Paramount. Suddenly, Peli’s movie seemed doomed. It hung in limbo until president of production Adam Goodman (who had worked with Spielberg and Snider at DreamWorks) convinced his colleagues at Paramount that they had a potential hit. ”The challenge then became: How do we celebrate our cool, $11,000 home-video shoot when we’re competing with a lot of slick horror movies?” says co-president of marketing Megan Colligan. Everyone agreed that opening Paranormal wide would be suicidal, so they kicked off a limited release with midnight screenings in 13 college towns. They also agreed that Facebook and Twitter could be huge assets, since the online horror community had kept Paranormal buzz alive ever since Screamfest. Soon, senior VP of interactive marketing Amy Powell suggested they use Demand it!, an online tool enabling moviegoers to request that the film play in their area. ”I could feel it in my blood — we had to market this movie online,” says Powell. ”I really felt this film had to have this grassroots, do-it-yourself support to push it from the bottom up.”

As Paranormal expands into even more theaters, it seems likely to hit at least $100 million. All of Hollywood is watching. ”What they did was very clever,” says a rival marketing exec. ”I keep hearing it’s the scariest movie ever. When something generates that kind of word of mouth, you can be creative. And they were. They turned it into a movement.”

Not surprisingly, Paramount is considering a Paranormal sequel. Peli and Blum could be involved in some form, but the director’s main focus now is Area 51. (Secretive as ever, he won’t divulge details on the project, but it’s said to be about alien conspiracy theories. Paramount has not bid on the movie, so Peli still needs a distributor.) Because sometimes there is justice in the universe, Peli will have a share of Paranormal‘s profits. The director is also looking out for the stars, who were originally paid $500 each. ”I don’t have to have a job other than acting. So I bought a handbag, my guilty pleasure,” Featherston beams, pointing to the gray Coach purse at her side. Now the actors just have to keep their careers in motion, something most of their Blair Witch counterparts failed to do, despite being in a movie that made $141 million. Says Featherston, ”I have to get out there and audition and use this opportunity to the best of my advantage. I’ve been at this a long time and I’m not gonna stop now.”

Though neither she nor Sloat has lined up another job, they’ve both signed with agents. And they seem almost embarrassed by the VIP treatment the industry is starting to give them. ”The quality of meetings we’re able to get right now is much higher. So are the scripts,” says Featherston, her big blue eyes widening in amazement. Nodding, Sloat adds: ”Just going in the room with casting directors is a lot different. It’s like, ‘Okay, I’ve seen your work, I know what you can do. Let’s just see you in this role.”’ The actor has at least one idea for spending his newfound capital. ”I would love to have a massive party and meet all the sweaty, geeky, awesome fans who posted on the Internet and believed in the film,” he says. ”I just want to thank them.” Careful, Micah. Remember what happened the last time you invited somebody in.

How to make a movie for $11,000
Director Oren Peli reveals where every penny went

Camera (Sony FX1): $3,000
Red Bull: $100
Miscellaneous camera equipment (tapes, lights, lens, batteries, microphone): $1,000
Editing PC (Dell) and editing software (Sony Vegas): $4,000
Catering (groceries and Pizza Hut): $500
Casting costs, accommodations, trips to L.A.: $1,000
Wood for making a cross: $20
Baby powder: $3
Materials and printing costs for Ouija board: $35
Actors (Micah, Katie, and others): $1,500
Cop costume rental (for deleted scene): $400

TOTAL: $11,558

Paranormal Activity
  • Movie
  • 86 minutes