Into The Cineverse With ‘Terrifier 3’s Distributor: How A Six-Figure Investment Turned Into Tens Of Millions In Box Office

As Smile 2 takes over the top spot at the box office this weekend, it is starting to sink in across the industry that defending champ Terrifier 3 has already racked up almost $30 million since its October 11 debut.

After dealing an embarrassing blow to exponentially pricier rival Joker: Folie à Deux, the threequel’s economic model has put it on course to deliver a level of profit that is, well, terrifying. Cineverse, the film’s distributor, says it put just $500,000 into marketing and promotion for the release. Additional costs to acquire rights were covered by a loan of up to $3.666 million, which was collateralized by the breakout success of Terrifier 2 and the outlook for the latest installment. The lender will receive 15% of royalties once they come in across the full waterfall, up to a cap of about $6.4 million.

As to the final production budget, writer-director Damien Leone and producer Phil Falcone have said it ended up in the low-single-digit millions.

The hitherto low-profile Cineverse (formerly Cinedigm) used to be known for selling cinema equipment, a business it has abandoned in recent years. It has just 179 employees, a market value of $35 million and no corporate offices (employees work virtually – so no high-fives at the studio commissary for this opening-weekend darling). The company has pivoted to a streaming-centric operation, spanning free and subscription platforms as well as streaming tech services and a top-tier collection of podcasts. While the company also has its own slate of films and series, it has mainly focused on building out a niche media ecosystem precision-tooled for targeted events like Terrifier 3, though never before at this scale.

Erick Opeka, President and Chief Strategy Officer, has heard the siren song but does not intend to succumb to it. Still, industry minds want to know: Will the company, like so many before it, suddenly get seduced into making bigger bets on the way to self-destruction?

“The road to hell,” Opeka told Deadline in an interview, “is paved with indies whose hubris after one successful movie let them think that they were invincible and could pick any kind of winner, that anything they touch was going to turn to gold. … If you do not have a rich parent or the financial underpinnings, as most indies don’t, then these adventures can be quite risky.”

Chris McGurk, CEO of Cineverse, is well-acquainted with that roll-the-dice impulse, having at one point in his career been the overseer of Miramax as a Disney exec after the media giant acquired the upstart. McGurk also held top exec posts at Universal, MGM and Overture Films before coming to Cindedigm in 2011. He has talked often about an early Cinedigm misfire, the acquisition of breakout-actor-filled festival darling Short Term 12, persuading him to keep theaters at arm’s length and lean into streaming, which was reshaping the business in the 2010s.

“How we’ve kind of de-risked this is, I look at the investments we’re making in this are way below the kinds of risks that are kind of existential to a company,” Opeka said, “and I think after the last movie, we didn’t. Terrifier 2 was a surprise hit, we did 8 figures of box office and we didn’t know what we had.”

Cineverse’s holdings run the gamut, from faith-and-family Dove Channel to superhero-focused CONtv to arthouse outlet Fandor. Two of its assets have made it a major player in horror: subscription streaming outlet Screambox and digital media outlet Bloody Disgusting, were particularly valuable in surfacing Terrifier and enhancing the value of its sequels. The original installment in the ultra-gory saga of Art the Clown came and went in 2016. Once Cineverse was tapping more deeply into the horror community, it picked up signals that Art still had legs, and the company boarded the sequel.

Theatrically, T2 generated $11 million in domestic box office, $15.7 million globally. When it hit Screambox, it drove a nearly threefold increase in sign-ups over its first two weeks on the platform.

Unlike the conventional model, in which a successful negative pickup induces the distributor to want to take the franchise in-house, Cineverse is content to keep its expense profile on Terrifier extremely low.

With the third go-round, Opeka said, “We’re spending more, but it’s a very, very cautious, Moneyball approach. Given the access to more than 2,000 screens, smart choice of IP and extreme cost controls and leveraging the great base of assets we have, there’s a way to do this smartly.

“Are you going to see us taking big swings on trying to launch original IP? Probably not. Will we find other franchises that we could maybe reboot or partner with, that we can bring into the tent of this model? Absolutely. Can we find diamonds in the rough or cost-effective gems to release? This is the story of indies time immemorial. It’s dancing at the feet of elephants.” Gem-hunting, he adds, is a long way from “launching lots of franchises and investing millions of dollars in developing them.”

On the contrary, Opeka said, “Our idea is to partner with great producers who have great ideas on great properties and then use this engine we have to de-risk probably the most significant downside for those producers, which is the P&A and marketing spend, and do it in a very judicious and cost-effective way.”

The approach, he said, stands to make Cineverse an appealing options for filmmakers, given the challenges in the indie sector. “In this environment we’re in, where producers are struggling with the cost-plus model and the lack of active buyers in the market,” Cineverse is aiming to “go back to the roots of high-quality indie releases.”

A hit like T3 could do a lot for a company Cineverse’s size. Its long-beleaguered stock jumped nearly 20% on the Nasdaq on Friday to close at $2.28 as investors seemed to finally grasp the impact of the horror phenomenon. The company had received a de-listing notice after it fell below $1 for an extended period, but a series of moves including a reverse split held that adverse event at bay. With a library of more than 33,000 film & TV titles, the company has reach to more than 82 million streaming viewers, 1.4 million-plus SVOD subscribers, and 25 million social media followers. Along with a growing roster of podcasts, the company has invested in proprietary discovery tools to help reduce friction in streaming, and is a big believer in the potential of AI, making some targeted investments in the space.

As a number of media moguls have learned in recent years, however, streaming can be a grueling business. Cineverse had a net loss of $21.8 million for the fiscal year ended last March, and total revenue declined to $49.1 million from $68 million the previous year (in part due to the pop in fiscal 2023 from Terrifier 2).

After years of effort, though, the former cinema equipment specialist has finally arrived at a framework with demonstrable synergy. The T3 breakthrough demonstrates it is able to provide marketing and distribution services to third parties, leveraging Screambox and Bloody Disgusting as it did for Terrifier 3, but for a fee.

SVP of Marketing Lauren McCarthy was asked in an interview with Deadline how a series of stunts – one in which Art Venmo’s a penny to those calling a hotline, or one in Times Square where he shook his head dismissively at a giant Warner Bros. billboard for Joker 2 – extends beyond the theatrical opening.

“It’s all about community,” she replied. “When someone enters the world, they are sucked into the world,” spanning all of the various places where Art lives within Cineverse. A text message list used to drive ticket sales in the early theatrical run may at some point turn into a Screambox text message list, she said.

“Our mousetraps work both ways.”

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