"I fundamentally believe that the higher the budget of a movie means the less risks you can take."

"Insidious" has a third film in the works. "The Purge" has a forthcoming sequel. Do you just greenlight sequels for monetary reasons?

Well, for me there are a lot of parallels between doing a sequel and doing low budget movies, which is they give creative parameters. As a creative person myself, I work better with parameters as opposed to anything goes. Sequels force you to work creatively so that you don't make a movie that people go into and say "That was so original, why was that a sequel? That should have just been it's own movie. It had nothing to do with the first movie."

You don't want them to come out saying, "Well that movie felt exactly like the first movie. Why did I waste $14.50 on that." I think that's fun. I really like the challenge of that. It's like a puzzle or game. In terms of whether we will do a sequel or not, that's largely driven by the performance of the movie. I'm not going to pretend that it isn't. If the movie is really successful obviously a sequel is more feasible than if one isn't.

In order to open up the doors for a sequel, most horrors nowadays tend to end with an open ending.

That I really discourage our filmmakers to do. It's really hard to make an original movie of any kind that succeeds in the theatrical market place, in the wide release market place. To say you need to end the movie open ended so a sequel is possible, that's nuts, [but] it's completely responsible on a movie that's a $100 million or more. To do a movie at that budget level and not be thinking about the franchise is crazy. But on a micro-budget movie, I always tell the filmmakers make a great movie. If you make a great movie that succeeds, we'll figure out a sequel. It's like counting the box office before the movie opens.

The best example of that is "Paranormal Activity." Certainly, before we made the second movie, all anyone could say, "Oh boy, it's 'Blair Witch 2' all over again. How on earth can you make a sequel to 'Paranormal Activity'? It doesn't make sense. There's no storytelling. The movie is not set up for a sequel. " All that is true, but we figured it out, and I think if you create a movie that touches a nerve, sequels can be figured out.

Ethan Hawke in 'The Purge'
Ethan Hawke in 'The Purge'

The success of "Sinister" and "The Purge" caught many by surprise, but following the huge surprise success of "Paranormal Activity," do your successes still surprise you? You've had such a remarkable run.

Success is always a surprise. Maybe I lose a little less sleep, but I still lose sleep. There are so many factors that go into having a successful movie. There's the movie itself obviously, there's marketing, there's the weather, current events. Everything can be right and then you have bad weather and your suddenly in trouble. There are too many factors that you can't control. I'm always thrilled and always surprised.