What made these films of that period so disturbing was that this was a time of a LOT of crime, inflation, post-Watergate depression and so on, and the media had just started to put a lot of focus on serial killers and how crime was everywhere and so on. There had been a number of assassinations of high profile figures, there had been heavily covered stories of sick killers (Manson, Ted Bundy, John Wayne Gacy,etc.), and there was a lot of focus in society on the "lone nut"/"loner psycho" types. Also, a hot idea among psycho-therapists in the 70s was that violence had a sexual connotation, with apparently studies that showed that men who committed acts of violence were aroused by it and so on. These kinds of subjects left people paranoid and sleepless. Urban dwellers thought the world was going to absolute hell. Indeed, if you were in NYC in the late 70s-early 80s, there was crime, drugs, filth, trash, sex shops,porn theaters, hookers, etc. all over Broadway and 42nd. Street.
Then, here comes these types of films, that were really very violent (not always but sometimes very gory), and featured women being tortured, raped, mutilated, terrified, and murdered.
It's not that a film like "Don't Go in the House", "Nightmare", or "Maniac" is scary like a traditional horror film, but that they are disturbing and unsettling because they are told from the KILLER'S point of view. Rather than a scary monster man like Freddy or Jason or even Michael Myers, or a zombie or monster of some sort, these guys seem like REAL people. There are humanized, and we spend more time with them than we do with the victims. We are taken inside of their twisted, private world. They seem like normal guys in public, then seem like monsters when they're home at night. The fact that we actually sympathize/identify with them as people at all makes it even MORE disturbing, and moreso because the films are asking us to do that.
In this film, just as you get to know and feel bad for Donny, then he does something horrible. And that scene in the steel room that everyone talks about was, indeed, VERY disturbing for its time. The savagery with which he flings open the door and then slams it alone is quite upsetting.
I saw this film, "Nightmare", and several other of those types of films in the theater in 1980, and I saw "Maniac" in a theater in 1981. Other films like that include the ultra controversial "Silent Night, Deadly Night" from 1984, and "The Driller Killer" from 1979.
Today's "Hostel" type movies may be a lot more gory and, frankly, quite silly, but they lack the edge these films had. These don't seem so rough to younger people now because, as someone else said, they seem dated and of their time now, and so the kids have a generation of seperation so that they don't identify with this material as strongly (they're laughing at the disco clothes and such). But, trust me, in 1979 or 1980 or 1981, if you went to the theater and saw these films, you'd feel nervous when you went home...
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