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The first movie is a metaphor for alcoholism (among other forms of addiction)
First off, Micah doesn't acknowledge the severity of the problem and treats it like a game. The fact that it doesn't immediately destroy his relationship with Katie further enables his carelessness, effectively making the demon more active. Micah's will to play with the demon (demonstrated by his renting of a Ouija board after it was made clear earlier in the movie that this would provoke the demon) strongly resembles the beginnings of drunkenness. That is, extreme sense of cockiness enabled by both the substance at work and the belief that "this stuff isn't even phasing me!" Eventually he can't seem to be able to get his way out of this situation he got himself into. It costs him the trust and respect of his girlfriend and ultimately his life.

Katie and Kristi have false memories of their childhood
Because of the events at the end of the third movie, it looks like Katie and Kristi will have been living with their grandma for at least another 10 years or so. However they never mention spending years with their grandmother, only that their house burned down in their childhood. It is possible that they have had their memories... altered either by possession by the demon or as a result of the cult's ritual. Then when they were old enough to have children, the grandmother let them go out into the world with false memories of a house fire and repressed knowledge of the demon.

The Slender Man is the Demon.
The ancestor of Katie and Kristi wanted to get rich so she made a deal with The Slender Man. Since she didn't pay her part of the deal in the form of 20 dollars, he decided to go after the first born son... Besides, when Slendy is in town, kids usually go bye-bye
  • Plus, the demon is never seen on camera, and we all know the effect Slendy's mere presence has on those. And how he just enjoys fucking with people.
    • The Demon could very well be Slender Man. The strongest argument for this is the fact people end up filming themselves continuously. Yes, it is said so that they can catch activity on tape, but the lengths to which the protagonists go becomes a little obsessive. Putting a camera in nearly every corner of nearly every room in your house because of one break-in? Not obssessive at all. Also, in the third film, Kristi mentions to her mother that 'Toby', the Demon/Imgaginary friend is tall.
      • The only flaw in this theory is that the first film was made TWO YEARS before Slendy appeared on Something Awful. That said, it wouldn't be impossible to retcon it into being Slendy.

Dr. Johan is the most badass demonologist on the face of the planet.
A demonologist who can't be bothered to fight a demon that's the worst his psychic medium pal has ever seen? What's he so busy with that he can't show up to help out?

He's in Prague.

Beating the shit out of Cthulhu.

With his BARE HANDS.

  • So he's Marconi from John Dies at the End.
  • Who the hell is Dr. Johan?
    • He's a demonologist that the psychic repeatedly recommends but never actually makes an appearance in the movie.

This movie takes place in the past of the Warhammer 40,000 universe.
The demon comes from the Warp, (explaining it's alien footprints and dickish behavior,) and Dr. Johan is the Emperor (also Batman).
  • The cultists in the third film worship Khorne. The Demon is a Daemon of Khorne; it is decidedly violent, but as of yet, nowhere near as strong as it will be in the 41st millenium. It can't attack people constantly, but as nerves get stressed and tensions run high, the negativity and rage feed it, allowing it to act out.
  • The Demons from the Marked Ones are Daemons of Tzeentch, as the Possession gives the host psychic powers and changed their forms horrifically. And further supporting this implication is the "Ways" where people can apparently Time Travel to unhallowed locations, such as the House from the first film - in other words, Warp Travel.
  • And the Daemon answering to Toby in the latest movie is in fact a very specific Daemon - M'kar the Thriceborn; he goes through three forms, uses a cult to construct his form, needs blood sacrifice to manifest, and even still has tricks up his sleeve involving possession. His end game, fittingly, is to let himself be manifested in the Materium.

It wasn't a demon at all
It was old man jenkins in a rubber mask trying to scare off those kids so he could get the Spanish doubloons underneath the house!
  • And he would've gotten away with it too, if it weren't for those meddling kids and their dog...

Katie wasn't possessed when she stabbed Micah.
In the alternate ending, Katie was just scared out of her mind. She grabbed a knife and stabbed what she thought, in the dark and in her panicked state, was the demon.
  • Which explains why in the two alternate endings, she either goes catatonic or slits her own throat.

Katie isn't the only one being mildly possessed.
Why is Micah such an unhelpful jerkass during the film, I wonder?

Katie was born to be a witch. The demon just wanted to be her familiar.
And her bodyguard. It knew Micah was bad for her and was jealous of his relationship with her. Anyone who ever dated a woman who has a pomeranian knows exactly what I am talking about. Katie likes being possessed once she gets used to it — it's why she smiles so much. She and the demon go off to live happily ever after, fighting crime. Without Micah to hold them back.
  • Well, the demon did slash out Micah's face in the photograph...the idea that it doesn't like Micah specifically doesn't seem too far off.
    • So the demon is essentially a non-romantic version of a Yandere?
      • After the events of Paranormal Activity 3, that is pretty likely.
      • Then why was it Kristi's "imaginary friend" and not Katie's?
      • Maybe the demon got more interested in Katie as time went on?
To be fair though, The demon never really wanted Katie in the first place. He wanted Kristi and her baby, but was put off track due to the maid in 2. The Demon got stuck with her, and maybe he is making the best of it. Then again...maybe he expected all this to happen?

The Demon is Katie
Connected to the WMG above. Suppose Katie really is a witch, but she doesn't know it. Her repressed witch side manifests as psychic phenomena, that strikes out at people she knows and acts out her unconscious wishes. The phenomenon carries to every member of her bloodline. In the first movie, Katie's repressed anger at her Jerkass boyfriend Micah manifests as a 'demon' that torments him. In the second movie, the mother's demonic aspect attempts to 'protect' the baby at all costs from outside threats (read: everything, including the unaware human aspect of the mother). In both cases, both personalities merge, however, in Kristi's case, her human side wins out, due to her overriding urge to protect Hunter. However, Katie's repressed anger bites her in the ass, and her Ax-Crazy demon persona takes over. Hunter is going to be some kind of mage messiah, and now that Demon!Katie has him, she is free to corrupt him in any way she pleases.

In PA 2, the demon specifically staged 'break in...'
...so that Dan and Kristi would get the cameras installed and record everything. Just to keep fucking with them more.
  • It seemed implied to be just that the demon was responsible for the 'break in,' given that nothing was taken except a rosary necklace.
    • And, as revealed in the third film, the tapes that documented their experiences as children. The demon couldn't have them seeing that...

The Demon is actually a Vampire from the Old World of Darkness
Ok, this one is tough to rationalize, but it works for both movies. The Demon is a Lasombra, which is why it never appears on the video cameras. It has high levels of Dominate (allowing it to possess and control Katie and the Mother), and Thaumaturgy, allowing it to perform acts of telekinesis. The shadow control comes part and parcel with being a Lasombra. Throughout the movie, it's slowly ghouling Katie and the Mother, until it can Dominate them remotely (ie. the end of the film). This is also why it seems most active at night. It also explains the bite marks.

The Demon has some connection to the number 3
All its attacks tend to come near the vicinity of 3 am.

Someone cursed the family in Paranormal Activity 2
The demon only seemed to get strong enough to mess with a large amount of stuff after an extended period of haunting in both movies. However, we see someone/something had completely trashed their house in the beginning of Paranormal Activity 2, way beyond what the demon should have been capable of that early on. Not only that, a necklace that Katie had given Kristi in their youth had been stolen yet nothing else had.

The necklace had some kind of demon-repelling qualities to it and after being stolen, it freed the demon that had tormented them as children back into their lives, very likely intentionally.

It was all a Xanatos Gambit by the demon
Aside from the obvious "he's fucking with us" scenario, Katie's picture gives the impression that the whole thing was planned.

So we have their house burned down while they were kids (hinted to be the demon), and this picture that apparently burned with the house. So why Katie? And why leave it with Kristi? Simple. The demon wanted to eliminate the last traces of their blood-line. We can assume there are no other blood relatives to the sisters because the demon only goes for Katie when exorcised. The demon implanted the idea in Dan to send it through Katie. Think about it, Kristi-possessed could have made off with hunter and killed Ali at any point it wanted to, but it didn't. Now here's where the wild guessing comes in. The demon made itself known to the sisters, as if knowing one of them would have a son. Once Kristi has Hunter, the Demon is trapped into haunting one sister as part of its bargain to take the first-born son, but it 'knew' them as kids, so it probably wanted them both. It made Dan play into a loophole so it could finish off the blood-line for not repaying its debt.

There will be a , focused on Ali.
Because this is a potential Cash-Cow Franchise, some THING will come after her in time for Halloween 2011, in order to keep the connection to the previous two. And it will happen in a college dorm in order to give the most potential succeedingmovies.
  • That sounds like it would kick ass, and I know college students everywhere wouldn't sleep for weeks, but the PA 3 teaser indicates it will be yet another prequel depicting Katie and Kristi's childhood, AKA the initial haunting.
    • According to Dread Central, Oren Peli has said that it will also partly be a sequel with its focus on Possessed!Katie.
    • This is entirely a prequel. Oren Peli might use that idea for the fourth one, but is not present in the third.
    • The fourth film has a Time Skip to Possessed!Katie raising 6 year old Hunter and haunting people next door.
    • The fifth film has a scene where an older Ali speaks to the protagonists about what she went through.

The Demon is actually a witch: The Golden Witch Beatrice
It's been implied that The Demon made a pact with their ancestors who wanted to get rich. Beatrice made a pact with Kinzo so he could get rich. It's been implied that The Demon did it For the Evulz. Beatrice also did it For the Evulz (most of the time, anyway), making the both of them troll. And of course, you couldn't forget that both series are based around killing! You can't deny this: The Demon of the Paranormal Activity and The Golden Witch Beatrice from Umineko: When They Cry are the murderer are one and the same!!
  • Beatrice is a major Troll, so that would explain the demon's major sadistic tendencies, but then where are her minions? The Stake Sisters? Ronove? And shouldn't Battler come leaping in, pointing his finger at the footage and explaining how it is all fake?

The reason the demon goes after Katie is because her family possesses a Denarian coin.
Well, we already have seen a Fallen that manifests as a living shadow.....maybe Nicodemus is younger than we think...

The demon really was feeding off the fear.
In both movies. When was the biggest demonic event? After someone was freaking out. And it used its new found energy to stir up more fear and panic to become even stronger. He wasn't doing it For the Evulz, but to get stronger. And after being exorcised he didn't have enough strength to repossess Katie.
  • Near the end of the third movie, when Katie starts to scream and freak out about Toby messing with their bedroom, Kristi tells her to stop screaming and "Just ignore it!", so it could be. Things only get worse the more the main characters freak out about Toby.

The Demon was fighting Kristi's maternal instincts
It would explain why He/She/It didn't snatch Hunter when possessing her.

Kristi and Katie made the deal with the demon as children, causing the curse that spans first two movies.
The PA 3 seems to be about their childhood, and this theory certainly makes sense with the storyline so far.
  • Then why are they so baffled as to why the demon is after them? Also, PA 2 seems to imply that it's their grandmother who made the deal.
    • Confirmed. It is learned the coven initiates women through some sort of brain-washing and they have no recollection of it happening.

will still revolve around Ali.
Part of the viral campaign for the movie is a flyer advertising "Darren's Timeless Memories", a company that transfers VHS to DVD. Ali will discover the tapes of Katie and Kriti's childhood and use this company to watch the movies in an attempt to discover what exactly is happening. The movie will cut between the tapes of Kristi and Katie as children and Ali in the present day.
  • Oren Peli has said that part of the movie will focus on Possessed!Katie, so it could very well also end up showing Ali. Perhaps Katie will show up while she's watching the tapes, and the security cameras will record it?

The next PA film will revolve around Ali
It'll be a few years in the future and have her desperately searching for her little brother Hunter, and looking for incidents similar to what happened to Katie and Kristi.

After:Dennis and Julie were killed, Lois and the rest of the cult took their bodies back to their home and set it on fire.
This troper had been waiting for the house to catch on fire, except it never happened. However, how could they have covered up the deaths of Julie and Dennis? Unless their bodies were put in their house and set on fire...any injuries they have would be unnoticeable, thanks to the fire.
  • It is possible Julie is alive. I looked carefully at her body and could only see her arm is broken. PA 2 Katie states their mother was freaking out all the time, so it is possible she is crippled after this event. People have survived crazy stuff before, it isn't implausible the same could be here.
  • If I recall correctly, wasn't it implied in PA 2 that Julie had killed herself? It would make sense that the cult somehow erased the girl's memories and introduced the fire to cover everything up.

The Demon has Yellow Eyes...
Katie and Kristi were two of it's special children. It even culminates the third movie by killing their mother...
  • And even burns their house down. Might be on to something here...

Katie and Kristi's Grandmother is Flemeth from Dragon Age
She's survived into the modern era, and the whole demon thing is just her using her magical powers, or perhaps her abomination side to spy on and mess with the family. Her entire aim is to possess Katie or Kristi, because that's kind of her M.O. The Grandmother even looks like Flemeth, is a creepy old lady who acts nice at first, and is possessed by a demon. Fits surprisingly well.

The Demon is Nyarlathotep.
  • The cultists from the third movie offered the first born son to Nyarlathotep in exchange for wealth and prosperity. Nyarlathotep is a sinister and highly intelligent entity. He's just screwing around because that's what he does. He's just hanging around the family waiting for someone to have a son, And seeing as all horrors in the world stem from the Mythos, it's entirely possible 'Toby' is just another one of Nyarlathotep's avatars.

The demon started focusing on Katie and Kristi as soon as Julie decided that she wasn't going to have more children.
We never know when Julie decided for herself that she didn't actually want more kids, we just know when she told her mother about it. Prior to that decision, the demon had been focusing on Julie to the extent that Julie was willfully ignoring it to preserve her sanity (which is why she's so adamant that it doesn't exist and refuses to watch Dennis' tapes until it drops a kitchen on her). Because why would the demon focus on the girls - who are too young to have kids of their own - when it still might get that coveted firstborn son out of Julie? Either Julie was fudging some details to her mother and actually couldn't have more kids, or it just never occurred to the demon that it could sabotage her birth control somehow and it immediately jumped ship.

The demon just wants a wife and son.
That's why it possessed Katie and took Hunter. It just wanted to settle down and have a family, it just has a different way of doing that than most people think cause amongst demons, terrorizing people is considered a sign of affection.

The Demon originated in Halloween Town

Alex is not dead.
She was hospitalized after the attack, or she escaped Katie and the hoard of blank-faced women.. Ali will reappear and team up with her to find out what the hell happened to their families. Also...
  • Alternatively, The Marked Ones shows that the Coven keeps a young blonde prisoner in the stables of Lois’s house. This could be Alex.

The final film (assuming it goes past a 5th) will bring Lois back.
She and the coven of women will face off the protagonist(s).

The 5th film will reveal a weakness in the demon.
But, naturally, the protagonist(s) will die before they can use it.
  • Partially Confirmed, but it happens in the 6th movie The Ghost Dimension. It is shown that there is an Extermination Ritual that can destroy a demon. The protagonists try it but fail.

There will be another prequel focusing on the moment in which the demon first appears.
Or perhaps the Latino spin-off will reveal this?

The Latino spin-off will feature Ben's family.
He mentions having an uncle (or grandpa, I forgot) living in Mexico.

Alex's mother from the 4th movie is a member of the coven.
1. She knowingly raised Hunter for the rest of the Coven.2. Drugging her own daughter with sleeping pills is just a little too negligent.3. Watch the movie again assuming this, it fits.

Ben's uncle in Mexico is Randy from the third movie.
It would link the movies together even more. Maybe Randy would team up with Ali from 2 to investigate the coven.

Robbie was also a demon.
While maybe not the same demon, Robbie was a familiar of Toby's who was able to take a physical form and mark Hunter. Once he was done with his work, he was kicked out.

The demon's original target to produce a son was Katie, but she had an undiagnosed condition that made her infertile.
In number 3, Toby crawls under Katie's covers, stands over her, lifting the sheets, and then sinks down. Where on her? Slightly below her stomach. Maybe doing so allowed him to see/feel/sense something wrong down there, like some form of damage or disease that would make her unable to produce any children at all, thus causing him to follow Kristi around until Hunter was born. However, tying in with another WMG, her maternal instincts beat out the possessed urge to take him away, and the exorcism forced him to use Katie as his pawn.

When Doctor Johan appears, it will turn out he's a Fake Ultimate Hero.
Given the series, I wouldn't be surprised.

Katie is telekinetic.
The demon is her subconsciousness, warped by her delusional grandmother's ritualistic abuse.

Documentation is important to summoning the demon.
Each time he is filmed, the proof of him helps to fortify his existence and makes him more capable of affecting the world. Eventually he will be able to take a visible, solid form that can interact infinitely with the material plane.

The demon is a spiritual embodiment of greed, particularly fond of materialism.
The witches made their pact with the demon for wealth and power, so it makes sense that it would be a manifestation of greed itself. Greed gives the demon more power, and in modern times, it finds itself particularly empowered by and drawn to the showy luxuries of its targets, such as their hoards of expensive cameras.

Doctor Johann was Father Todd's "source outside the Church"
Father Todd mentions that he got the information about the Extermination Ritual from a source outside the Church that he wasn't entirely sure he trusted. That source was the elusive demonologist Doctor Johann.

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