By Brent Lang
LOS ANGELES (TheWrap.com) - In a summer of superheroes, cartooned critters and bloated budgets, New Line Cinemas beat the odds by betting on a pair of low-cost films that defied expectations to become two of the most profitable hits of the year.
Going into blockbuster season, "The Conjuring" and "We're the Millers" were barely a blip on the radar. The talk was squarely centered on "Iron Man 3″ and "Man of Steel," with very little buzz left over for a gross-out comedy about an unlikely tribe of drug mules and a horror film without any A-list stars.
Yet with as a roller coaster summer at the movies reaches draws to an end, "The Conjuring" has made back its $20 million budget more than tenfold, scaring up $243 million globally.
Likewise, "We're the Millers," filmed for an economical $34 million, has topped the domestic grosses of the much more expensive "Hangover Pat III," racking up $112.8 million in North America and an additional $39.5 million in foreign territories.
"It all came together," Toby Emmerich, president and COO of New Line Cinema, told TheWrap. "The movies tested well, they had good dates and they were effective examples of counter-programing. I'd say the movies exceeded our expectations, but going into the summer, the expectations for both movies were very high."
Plus, the low-cost of the films allowed New Line and its parent company Warner Bros. to finance the productions without bringing in outside partners. Other major films must divvy profits between an array of production companies and film financiers, but these spoils belong entirely to the studio.
"This goes back to what New Line's roots were, smartly positioned films that have the lowest of low budgets," Jeff Bock, an analyst with Exhibitor Relations, said. "To have two films match their budgets at the box office within the first week of their release is phenomenal. It can't work for everybody, but when you have a big studio like Warner Bros. behind you and a smart marketing campaign, it's a great strategy."
New Line is already putting the finishing touches on a first draft of a sequel to "The Conjuring" and has begun discussing the viability of a follow-up to "We're the Millers."
It's an explosive turnaround for a studio that started out 2013 with a whimper. "Jack and the Giant Slayer" eked out $197.9 million worldwide, barely as much as the $195 million it cost to produce. Steve Carell and Jim Carrey couldn't save the laugh-challenged "The Incredible Burt Wonderstone," which grossed an anemic $22 million.
In the wake of its twin flops, New Line was pilloried in some Hollywood circles. Emmerich admitted that the criticism could be bruising, but said that the studio's confidence in its summer slate helped cushion the blow.
"The movie business is cyclical, you have hits and misses," Emmerich said. "The good thing was during that first quarter, we'd already seen how our summer films were playing in front of test audiences, so we knew we were challenged, but we also knew that we had good stuff coming."
After a summer riddled with pricey flops, New Line's more fiscally conservative approach could begin to find favor in an industry. Emmerich doesn't think that that Hollywood will turn its back on tentpole films. But he acknowledged that this summer's flops may prompt some to take a hard look at their business models.
He said too many films carry costs that require that they open to $50 million or more if they have any hope of recouping their investment.
"Studios are going to be more cautious and more selective in their decisions to make movies that must open in that range in North America in order to be successful," Emmerich said. "This summer showed that it can look like you have good on paper, you can open in a prime time and you can still miss the mark. I can't imagine that trend is not resonating in with senior executives in studio board rooms."
The smaller costs of "The Conjuring" and "We're the Millers" reduced New Line's risk, enabling it to slowly build up word-of-mouth rather than swing for the fences. Emmerich said that strong test audience response gave the studio confidence that both movies appealed to enough of a niche to attract a crowd in a competitive marketplace.
Yet, there were still risks.
Though a few horror films like "The Blair Witch Project" have found a receptive audience, summer is not traditionally a strong season for the genre. Sliding "The Conjuring" in at October and tying it to Halloween, for example, would have been a natural decision, but New Line felt that the movie was strong enough to succeed at any time of the year and might provide a reprieve from the glut of costumed heroes.
One thing working in the film's favor was that it was embraced by critics. Director James Wan's decision to forgo gore in favor of Hitchcockian suspense picked up a bevy of good notices, earning an 86 percent "fresh" rating on Rotten Tomatoes.
"We're the Millers" scenes of Jennifer Aniston stripping or a teenager suffering a spider bite on his nether regions struck a chord with moviegoers in the mood for raunchy comedies. R-rated comedies like "Identity Thief," "Ted" and "Horrible Bosses" have worked by offering an envelope-pushing humor that can only be found at the movies.
"There's so much content available with the internet and viral videos that people are looking for something that's more hard-edged when they buy a ticket," Bruce Nash, founder of the box office website The Numbers, said. "Softer films like ‘The Internship' that don't appeal to an adult audiences are the ones that are under-performing."
New Line is hoping to close out its year on a high-note by embracing the blockbuster strategy that it ignored for the past four months. December brings "The Hobbit: The Desolation of Smaug," the second part in Peter Jackson's adaptation of J.R.R. Tolkien's novel.
Some critics griped that the decision to expand that relatively slender book into three parts was motivated by commercial, not narrative considerations. Emmerich counters that he's just seen a rough-cut of the movie and promises that the decision to draw out the story of a band of treasure-seekers will become clearer in part two.
"In the second film you see why Peter made the decision to make this three movie," Emmerich said. "It expands the world and it draws on other plot lines and characters that were not in ‘The Hobbit' novel."
If "Lord of the Rings" fans agree, New Line could end 2013 with a $1 billion-plus Christmas present.