Why NBCUniversal Shelled Out $400 Million for an ‘Exorcist’ Trilogy | Analysis

The power of Christ was not all that compelling last weekend when Universal and Blumhouse’s “The Exorcist: Believer” debuted atop the box office with $26.4 million in domestic revenue against a budget of $30 million.

But NBCUniversal has a lot more on the line with the David Gordon Green-directed film: In July of 2021, it shelled out $400 million for the rights to “Exorcist” IP. With poor reviews and a C from CinemaScore, Universal may need a miracle to avoid devilish red ink.

What did that $400 million buy? In a word, everything.  Studio insiders told TheWrap that the price tag —which TheWrap believes is the most ever paid for a horror franchise — included production budgets for three feature-length movies, producer fees, talent buyouts, rights backends and the ability to use the IP company-wide. Universal can leverage the granddaddy of all religious horror franchises for theme parks, Halloween Horror Nights experiences (this year’s even has an “Exorcist”-themed maze) and whatever value the new films bring to Peacock.

Price tag notwithstanding, the deal might have made more sense in the summer of 2021 when it aligned with what a streaming-obsessed Wall Street wanted from the entertainment industry. But a change in priorities, emphasizing profits over content volume and subscription numbers, made the existence of a new “Exorcist” trilogy on Peacock less inherently sensational. The deal makes less sense in 2023.

A show of force in the streaming war

The “Exorcist”/Universal deal occurred four months after Netflix dropped $450 million on the rights, production costs and related expenses for Rian Johnson and Daniel Craig’s first two “Knives Out” sequels. “That was the era of overspending,” said David Herrin, founder of the entertainment tracking and research film The Quorum. “It was the arms race of content.”

NBCUniversal winning the auction for the “Exorcist” IP showed that legacy studios could write checks on par with streaming platforms. “Stock prices are based on future growth,” Entertainment Strategy Guy (an industry analyst in the realm of streaming ratings who chooses to remain anonymous) told TheWrap. “So an expenditure like this was a signal to Wall Street that NBCUniversal was taking streaming seriously and that Peacock might eventually challenge Netflix.”

In this environment, NBCUniversal’s $400 million bet on a theatrical “Exorcist” trilogy, which was also meant to boost Peacock isn’t so different than the Walt Disney Company sending three big-budget Pixar films — “Soul” in 2020, “Luca” in 2021 and “Turning Red” in 2022 — straight to Disney+. In those cases, the studios spent large amounts of money or removed massive revenue streams to create the appearance of strength for their respective streaming platforms.

Wall Street changed its mind

However, in early 2022, the investor class shifted its thinking 180 degrees. Spending billions of dollars on streaming shows and movies no longer qualified as a testament to a company’s commitment to the new normal. Direct-to-streaming originals are now in decline, with even Netflix pledging to cut costs and rein in the quantity and expense of their films and shows.

Also, as previously discussed in TheWrap, there has been little correlation between subscription bumps and A-level movies. Nor is there much of a connection between high viewership for a specific piece of content and the stock price. Disney is going all-in with theatrical windows for their live-action and animated fare. Warner Bros. Discovery, whose previous regime sent all of its 2021 theatricals concurrently to HBO Max, has no interest in sending its theatricals straight to Max or producing higher-budget streaming movies.

The notion of “The Exorcist: Believer” underperforming at the box office but still providing excessive value by pulling strong Peacock viewership is, in effect, a 2021 idea.

“Exorcist” is not “Halloween”

Herrin said Universal’s “Exorcist” deal was likely also buoyed by horror-film timing. It occurred on the heels of the first well-reviewed and well-received “Halloween” legacy sequel. “It was impossible to know that the next two ‘Halloween’ sequels, ‘Halloween Kills’ and ‘Halloween Ends,’ would not connect in the same way with moviegoers,” he said. “This was also after ‘Halloween’ and ‘It’ opened like gangbusters.”

But Bruce Nash, founder and publisher of box-office data site The Numbers, contended that horror reboots “are a 30/70 proposition.” Occasionally, one takes off. “For every success like ‘Halloween’ or the new ‘Scream’ sequels you have misses like ‘Doctor Sleep’ and the early-2020 reboot of ‘The Grudge,’” he said.

Nash noted “Doctor Sleep” was itself a polished and comparatively prestige legacy sequel to “The Shining,” a horror movie about as iconic as “The Exorcist.” Yet even with good reviews, “Doctor Sleep” flopped in late 2019.

Boxoffice Pro senior analyst Shawn Robbins said that “Exorcist: Believer” performed in line with realistic forecasts and that expectations were inflated in light of recent horror successes. “It’s a legacy franchise sold as a sequel to a brand that’s had one iconic film in 50 years and several moderate performers over two decades ago,” Robbins said. “It doesn’t mean the film’s opening is a disaster.”

An acceptable risk

Even if Blumhouse’s “Exorcist” trilogy goes to hell, Universal can afford it. With sky-high returns from “The Super Mario Bros. Movie” ($1.4 billion at the worldwide box office) and “Oppenheimer” ($950 million), each of which cost around $100 million, Universal can roll the dice.

According to Jason Blum’s own statements in Fortune magazine, he really wanted to make an “Exorcist” movie. Considering how much fortune and glory Blumhouse has brought to Universal, that’s a pretty good reason to go for it. Amid a constant push-pull between studios prioritizing IP and share prices over filmmaker vision and artistic relationships, Universal seemed determined to win the auction no matter the price and let the CEO of Blumhouse Productions make his “Exorcist” films — just to keep him in-house.

“The last thing Universal would want is for Jason Blum to go work at Netflix had they won the ‘Exorcist’ bidding rights,” Nash noted. “When you have someone that important, such an investment is reasonable in the big picture. And, heck, you might get a hit.”

Profitable on paper?

One high-level distribution insider told TheWrap that it was “too early to make a judgment as to whether it was an overspend or a good deal just based on the box office of one film.” However, with poor reviews and mediocre buzz, this isn’t a case like “Batman Begins” or, more recently, “Teenage Mutant Ninja Turtles: Mutant Mayhem,” where audiences left the theater excitedly pondering what might come next.

“The real problem they have is lack of demand for more,” a seasoned producer stated. “They need to figure out how to excite fans again.”And that “is easier said than done, the producer said, in a world filled with 50 years’ worth of exorcism and religious-themed horror movies.

“You can write a check for $400 million and then your market cap increases by $500 million,” Nash said. “It can potentially pay for itself on paper, even if the films themselves may not become profitable.”

For NBCUniversal, the goal at the time was the appearance of strength and confidence in their own streaming platforms. If shelling out $400 million made the company’s stock go up (or not drop that far), it might have [theoretically] been worth it regardless of the final outcome. That didn’t quite happen, partially due to the great reversal of February 2022, but it made some sense in July 2021.

“The per-unit economics has always been bigger than streaming economics,” Entertainment Strategy Guy explained. “However, in the ‘streaming is the future’ bubble economy, projections for streaming revenue were much higher.”

Whether an example of putting the cart before the horse or a skewed example of streaming-era economics, Universal made a big bet at a time when it was more important to show that an old-school studio could compete with streamers than whether, on a case-by-case basis, they should.

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