With Wes Craven attempting to develop another horror franchise based around "Shocker's" Horace Pinker, there was little point in New Line approaching him about a new Nightmare movie. Craven's concepts for Dream Warriors had sustained the series through two installments and looked likely to provide the basis for the fifth. New Line commissioned two sets of writers to work on a script. John Skipp and Craig Spector were set to work, finishing two drafts of the screenplay. Leslie Bohem finished a third & fourth draft before leaving the production team in March 1989 and Bill Wisher was brought in to revise the existing screenplay. Finally, horror novelist David J. Schow took a crack at combining key elements from all the previous drafts to produce a working script. Under the directing helm of director Stephan Hopkins, Nightmare 5 grossed more than $22 million at the American box office.
For New Line executive Michael DeLuca, Freddy Krueger was coming to the end of his useful life. "We became realistic about the limitations of the genre", he told Cinefantastique. "I always thought sequels were cheesy to begin with. You have an original idea that works, then you spend the next ten years ripping it off. What I've always liked about the Elm Street movies is that, even when they're incoherent, they're ambitious." Two years after the fifth movie, New Line decided that Freddy's Dead would be Freddy's swan song. The production was handled by Elm Street veterans, with executive DeLuca working on the script and Rachael Talalay filling the director's role. A twist ending in which the Dream Demons who had tormented Freddy Krueger settled on a new child was dropped at the last minute in an effort to convince critics and audiences alike that this was really the end. The film worked and audiences flocked to see Freddy do his stuff one last time. Costing $5 million to make, Freddy's Dead grossed almost $35 million in America alone in 1991.
Wes Craven's New Nightmare had been no ordinary project and it started in a most extraordinary and unexpected way. "It began with Bob Shaye asking me to come into New Line because he had heard that I had some problems with the way the business side of A Nightmare on Elm Street had gone over the last ten years and that had been instrumental in me not wanting to participate, not just creatively but business-wise, with New Line," says Craven of the meeting late in 1992 that sparked off the New Nightmare. "There followed a good hour's very frank discussion between him and me and I'll just leave it at that."
These detailed discussions resulted in the business side of the Freddy Krueger empire being resolved once and for all, to Craven's evident satisfaction: "Shaye listened carefully and in the subsequent month made good on all the things I felt had been left unattended, so that was the first half of why I came back to work for New Line. There were significant payments and the beginning of a very uniform and predictable accounting of profits and so forth. Then he asked me if I'd be interested in bringing Freddy back again, one more time. I always felt that under wonderful circumstances I'd love to get my hands on the franchise one more time. When I realized it would be the tenth anniversary and the seventh film, it was attractive to come back from a position of strength and do it. So, we agreed, that's Bob Shaye, Sara Risher, Mike DeLuca, the creative heads at New Line and myself and my producer Marianne Maddalena, that unless we could bring Freddy back in a way that wasn't farcical, like saying it was all a dream and Freddy isn't really dead, we wouldn't do it. If we couldn't do it in some way that was justified, then we wouldn't do it at all."
Central to his concept was securing Heather Langenkamp to the Elm Street fold for the third time: "I decided if I were to do it, I would want Heather to star in it. I felt that she epitomised the spirit of A Nightmare on Elm Street. I called her and we hadn't seen each other for some years, so we had lunch and discussed how our lives had gone, we talked about New Line Cinema and everything else. There were a few incidents, especially one that had come out of Heather having made the first film and having gone on and done a television series", says Craven of his star's real life fears. "The attendant of fame had caused her some real difficulties and frightening moments. So, I left that meeting thinking I would love to with Heather again. I realized that things that happened in real life are just as dramatic as things that happened in fiction."
As before, the final ingredient that allowed Craven's ideas to fall into place came from a dream, a trusted source of creative inspiration: "I had a dream, as happens quite often in my work. The dream was that Freddy and a whole bunch of us from New Line were at a cocktail party. Robert Englund was there in costume, acting like the burlesque Freddy that I felt he had become, and I felt in the dream that in the background was a shadowy figure that was moving parallel to Robert - his own darker shadow, completely apart from that party and it felt very frightening. I awoke with that and was trying to puzzle out what this dream might mean, when it occurred to me that when I wrote A Nightmare on Elm Street I was trying to account for something in human nature, in the human race, that had been here since day one and went all the way back to Cain and Abel, one half of humanity rising up to club the other, running right up to events in the world today."