Goodman also admitted that DreamWorks, formerly a leg of Paramount co-headed by Steven Spielberg, had swooped in and pocketed 'Paranormal Activity' with every intention of leaving it on the shelf and remaking it with a big budget and marquee stars. Then they wised up.

Just look at what Robert Rodriguez managed when he had to pay for everything himself, or had a shoestring budget (El Mariachi $10,000 and Desperado $10m(?)), compared to some of the later tat he produced...

More isn't always more...

Don't forget Mega Shark Versus Giant Octopus. I'd like to know what the budget was on that film...

...and how much money it made!

They're in for the long haul, cult classic status.

This is a good point - the economics of the movie industry aren't entirely like that of many others.
With manufacturing, you work out your material, research, shipping and manufacture costs, stick on a percentage and that's (usually) your RRP.
And that's more or less the end of it, until you come up v2.0 of it.

Films can take decades to reach the break even point. I'm struggling to remember the exact date, but I'm fairly certain Blade Runner didn't break even until the late 90's early 00's. Most 'conventional' films seem to take 5 years before the production company is in profit again with it.

Buchwald v. Paramount (1990) was a breach of contract lawsuit filed and decided in California in which humorist and writer Art Buchwald alleged that Paramount Pictures stole his script idea and turned it into the 1988 movie Coming to America. Buchwald won the lawsuit and was awarded damages, and then accepted a settlement from Paramount before any appeal took place.
The decision was important mainly for the court's determination in the damages phase of the trial that Paramount used "unconscionable" means of determining how much to pay authors. Paramount claimed, and provided accounting evidence to support the claim, that despite the movie's $288 million in revenues, it had earned no net profit, according to the definition of "net profit" in Buchwald's contract, and hence Buchwald was owed nothing: a classic example of Hollywood accounting. The court agreed with Buchwald's argument that this was "unconscionable", and therefore invalid. Fearing a loss if it appealed, and the subsequent implications of the unconscionability decision across all its other contracts, Paramount settled for undisclosed terms.

Hollywood accounting can take several forms. In one form, a subsidiary is formed to perform a given activity and the parent entity will extract money out of the subsidiary not in terms of profits but in the form of charges for certain "services". The specific schemes can range from the simple and obvious to the extremely complex.
Three main factors in Hollywood accounting reduce the reported profit of a movie, and all have to do with the calculation of overhead:
Production overhead – Studios, on average, calculate production overhead by using a figure around 15% of total production costs.[citation needed]
Distribution overhead – Film distributors typically keep 30% of what they receive from movie theaters ("gross rentals").[citation needed]
Marketing overhead – To determine this number, studios usually determine about 10% of all advertising costs.[citation needed]
All of the above means of calculating overhead are highly controversial, even within the accounting industry. Namely, these percentages are assigned without much regard to how, in reality, these estimates relate to actual overhead costs. In short, this method does not, by any rational standard, attempt to adequately trace overhead costs.[citation needed]
Due to Hollywood accounting, it has been estimated that only about 5% of movies officially show a net profit,[citation needed] and the "losers" include such blockbuster films as Rain Man, Forrest Gump, Who Framed Roger Rabbit, and Batman, which all took in huge amounts in box office and video sales.[citation needed]
Because of this, net points are sometimes referred to as "monkey points," a term attributed to Eddie Murphy, who is said to have also stated that only a fool would accept net points in his or her contract.[citation needed]
All of this shows why so many big-name actors insist on "gross points" (a percentage of some definition of gross revenue) rather than net profit participation.[citation needed] The saying in Hollywood is "a percentage of the net is a percentage of nothing."[citation needed] This practice reduces the likelihood of a project showing a profit, as a production company will claim a portion of the reported box-office revenue was diverted directly to gross point participants.