Blumhouse Is a Movie Production Studio in Los Angles
BlumhouseBlumhouse is a movie production studio in Los Angles and the company is famous for its cost leadership strategy. When comparing Blumhous’s budget to box office gross ratio to the industry, one can tell that Blumhouse continuously produces more profitable films than its peers. While Blumhouse’s average movie production budget is $5 million, an average film in Hollywood cost $60 to $70 million to produce. Blumhouse’s ability to produce films at significantly lower cost is a huge competitive advantage because the company can avoid taking a huge hit if a movie fails. The primary objective of Blumhouse’s cost leadership strategy is to archive competitive advantage by keeping the cost of operation significantly lower than competing studios. One way Blumhouse control the production costs is not giving directors extra fund while filming is underway. Blumhouse’s directors are required to plan ahead and manage the budget seriously because there is no exceptions to this rule. On the other hand, Blumhouse seek previously failed directors with solid skills and likes to hire undervalued talents. Those undervalued directors often willing to take lower pay because they crave for a chance to prove themselves. To enhance creativities and compensate for the strict budgeting, Blumhouse Directors have full control over the final cuts.To further implement its cost saving strategies, Blumhouse pays casts and crew members on the Hollywood “scale”, and they will get a bonus only if the box office reached expediential goals. Blumhouse is able to archive this because actors are clustered in Los Angles and there are many undervalued talents who are willing to work for little monetary compensation in exchange for exposure to the general audience. Blumhouse’s other saving measures include: no special effects in all movies, directors have to choose cheap locations and set designs, all shoots are to be kept as short as possible. Even speaking roles are limited because they cost more. Blumhouse’s low budget films also tend to the horror genre. Because a horror movie can often be filmed in with smaller budget as it doesn’t demand so much location changes, sometimes one single house could suffice. Another way Blumhouse cut cost is to focus on product extensions (sequels) because they cost less, and sequels of hit movies are more likely to succeed because they already have a customer base. Besides cost saving, Blumhouse’s second strategy is to differentiate itself from other studios is through its unique sales and marketing partnership with Universal. Blumhouse has a 10 year contract with Universal, the latter provides the entire production budget, marketing and delivery costs. This allow Blumhouse to not put in any capital in their film from cradle to grave. In addition to providing monetary supports like the production budget, Universal is also responsible for the promotion and distribution for the films strategically. After Blumhouse show a movie to Universal, Universal has the right to make a decision on the release strategy. Universal can take a film “wide” when they believe the film will be a hit, meaning to release the film in large number of theaters and support it with a big promotional budget.
Blumhouse is a distinctive entity in the Hollywood landscape, characterized by its unique cost leadership strategy. This strategy is not just about minimizing costs, but about optimizing resources and maximizing returns. The company’s approach to film production is a testament to the power of strategic planning, calculated risk-taking, and innovative thinking. The average budget of a Blumhouse movie is significantly lower than the industry standard. This is not a result of mere frugality, but a conscious decision to control production costs and mitigate financial risks. This approach gives Blumhouse a competitive edge, as it can avoid the potential financial fallout of a film’s failure. Blumhouse’s method for controlling production costs is multifaceted. A key aspect of this strategy is to not allocate additional funds to directors during filming. This policy encourages directors to plan meticulously and manage their budgets diligently. Moreover, it fosters a culture of accountability and resourcefulness within the company. Blumhouse also seeks out directors who may have faced setbacks in their careers but possess solid skills. These directors, eager to prove their abilities, are often willing to work for lower pay. This strategy not only reduces costs but also provides these directors with a platform to showcase their talents. In addition, Blumhouse compensates for its stringent budgeting by giving directors full control over the final cuts. This not only enhances creativity but also fosters a sense of ownership and commitment among the directors. Blumhouse’s cost-saving measures extend to its cast and crew as well. The company pays them according to the Hollywood ‘scale’, with bonuses given only if the box office hits certain targets. This performance-based compensation system motivates the cast and crew to strive for success. Blumhouse’s preference for the horror genre also contributes to its cost-saving strategy. Horror films typically require fewer location changes, which can significantly reduce production costs. Moreover, the company focuses on sequels, which are less risky and more cost-effective as they already have an established customer base. Blumhouse’s partnership with Universal is another key aspect of its business strategy. Universal covers the entire production budget, marketing, and delivery costs, allowing Blumhouse to fully focus on the creative aspect of film production. This partnership not only reduces financial risks but also gives Blumhouse access to Universal’s extensive distribution network and marketing expertise. Overall, Blumhouse’s success lies in its ability to balance cost efficiency with creative freedom. Its innovative strategies challenge conventional Hollywood practices and demonstrate the potential for alternative models in film production.