Could ‘Lights Out’ jolt Hollywood’s YouTube strategy?

What if Hollywood’s most profitable summer movie came not from a comic book, a bestselling novel or a video game, but from a viral video on YouTube?

After the success of the tiny-budget horror film “Lights Out,” about a threatening creature that only appears in the dark, that scenario doesn’t seem so far-fetched.

The PG-13 movie was based on a three-minute film from Sweden and made by a director no one had ever heard of. Yet the well-reviewed film grossed about $40 million in ticket sales in its first week of release, roughly eight times what it cost to produce — an extraordinary return on investment. Naturally, a sequel is already in development.

Low-budget horror has long been a reliable profit center for the film industry, with recent examples including “The Purge: Election Year” and “The Conjuring 2.” But the eye-popping success of “Lights Out” represents a potential watershed moment for studios looking to YouTube as a source of inexpensive, untapped talent and ideas.

“I don’t know of any precedent that’s better than this,” said “Crash” producer and UCLA film professor Tom Nunan of the movie’s viral origins. “ ‘Lights Out’ is very fresh and very original, but it’s still in a genre that people love.”

And that may be just what the movie business needs as it grapples with a summer box-office season that has produced a number of high-priced flops and disappointing sequels.

As Hollywood hungers for fresh ideas and talent, YouTube has emerged as a key hunting ground for next-generation filmmakers.

“If you can get enough hits organically through YouTube, guess what, Hollywood will come calling,” said Jeff Bock, box-office analyst at Exhibitor Relations. “These online channels are the way that people are going to be discovered in the future.”

So far, video stars with massive followings have tried — with limited success — to transition to more traditional modes of filmmaking. YouTube itself has evolved from an outlet for home-made videos to a much bigger player in the entertainment world. The San Bruno, Calif.-based, Google-owned video platform opened a 41,000-square-foot production facility in Playa Vista in 2012, and in October launched the new subscription service YouTube Red.

For their part, major studios have been under pressure to reach younger audiences who aren’t flocking to movie theaters like their parents did. They’ve attempted to leverage the popularity of YouTube’s “creator” community, to reach a fervent, digitally-savvy audience. DreamWorks Animation, Lionsgate and Paramount Pictures have all invested in the growing space.

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To be sure, studios have struggled to come up with the right formula for turning YouTube viral content into big-screen success. Projects like “Snervous,” the 2015 documentary about YouTube star Tyler Oakley, are mostly distributed online and rarely make it into theaters.

Ironically, “Lights Out” didn’t come from YouTube’s deep roster of social-media gurus but from an unknown Swedish director working in his apartment with no budget. The story of David Sandberg’s discovery has parallels in the music industry, in which Justin Bieber was discovered via demos uploaded to YouTube. In another example, director Fede Alvarez was discovered in 2009 after he posted a short film on YouTube and ended up making the 2013 “Evil Dead” remake.

The unexpected journey for “Lights Out” is a modern, digital twist on a well-established Hollywood practice. Popular films such as “Mama,” “Saw” and even the Oscar-nominated “Whiplash” got their starts as film shorts. Now, YouTube has become a go-to place for budding filmmakers to share short movies that previously wouldn’t have had the opportunity to reach a wide audience.

“The Internet has changed the game forever and there is longstanding precedent for finding new ideas this way even before this latest wave of disruption,” said Darin Friedman, partner at the Beverly Hills entertainment firm Management 360.

Producer Lawrence Grey first saw the beginnings of “Lights Out” the day he moved into his Mid-City office in 2014. He was looking for material and making phone calls, when a friend pointed him toward a short film going viral on the social-media site Reddit.

The original short had no budget or dialog – just a woman (played by Sandberg’s wife, Lotta Losten) terrorized by a shadowy apparition. Grey watched it on his work computer with the sun coming through his office windows, not the ideal setting to watch a scary movie. Nonetheless, he said, it freaked him out.

“I went to bed that night haunted by images of that short,” Grey said.

After that, he contacted the director and they started coming up with ideas for how to expand the story.

Grey paid $10,000 for the rights to make the feature, with the condition that Sandberg would direct the full-length version. He also got James Wan (creator of the “Saw” and “Conjuring” franchises) to sign on as a producer, giving the film name recognition and helping with casting and crew decisions.

With Wan’s endorsement, Warner Bros. and its New Line Cinema unit agreed to fund the project, covering the $5-million in production costs, plus marketing and distribution expenses. One of the selling points had been the video’s huge popularity on YouTube, where it eventually attracted 200 million views, indicating a strong built-in audience for a potential movie.

“I think there’s a great moment now where the audience is telling Hollywood, ‘Make this!’ ” Grey said.

New Line decided to release it in the middle of summer as a classic counterprogramming choice against “Star Trek Beyond” and the kids movie “Ice Age: Collision Course.” The film opened to $22 million, edging out “Ice Age,” which cost $105 million to make.

“Whenever you gross more than four times the budget on opening weekend, that’s a win,” Jeff Goldstein, head of distribution for Warner Bros., told The Times last Sunday.

New Line’s promotional campaign for “Lights Out” capitalized on the short’s viral popularity by chasing not just die-hard horror fans, but social-media-addicted audiences. The filmmakers and the studio spoke directly to the YouTube crowd, hosting a screening with the filmmakers at this year’s VidCon gathering of video creators in June.

Although it wasn’t directly involved in the film, YouTube took advantage of the buzz surrounding the project to promote its own efforts to support budding filmmakers. Sandberg and Losten held a career workshop for new directors at YouTube’s facilities in New York.

“It’s inspiring to see storytellers like David do great things on and off YouTube, and to see how engaged he was in helping mentor talented creators,” said Adam Relis, head of YouTube Space NY.

There’s little doubt the online popularity of the Sandberg short boosted the film’s prospects, said UCLA’s Nunan. Still, he cautioned that it takes more than a YouTube sensation to make a profitable franchise.

“It certainly helped, but it wasn’t the complete secret sauce,” Nunan said. “There were a lot of things working in its favor.”

And it remains to be seen whether studios can repeat the success of “Lights Out,” or if it was a one-off success.

Grey, though, has no doubts that studios and production companies will increasingly turn to YouTube for source material.

“Where would I have had access to David but through YouTube?” he said. “I bet there will be a whole bunch of short films that get bought and adapted in the hopes of finding the next David Sandberg. … My hope is it’s a model in that the institutional players see it and say, ‘You never really know where the next big thing is going to come from.’ ”

Times staff writer Tre’vell Anderson contributed to this report.

ryan.faughdner@latimes.com

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