It was supposed to be a documentary about the dead zones in the Chesapeake Bay.

But the material he was reading about the pollution of the bay was too scary. So director Barry Levinson made a horror movie instead: “The Bay,” a low-budget film in the found-footage category opening in limited release Friday (11/2/12).

“The facts were frightening – and making a documentary didn’t interest me enough,” Levinson, 70, says, sitting in a suite of the Waldorf Towers in Manhattan. “But the facts stayed with me. So we made a sci-fi movie like in the 1950s, which used science fiction to deal with the real fears we had.”

But use the term “found footage” – a technique that blew up with “The Blair Witch Project” and again with the “Paranormal Activity” films – and Levinson says, no, he hadn’t really thought of it.

“The idea was – what if some catastrophic thing happened? What if no media was allowed in? How would we know?” he says. “I mean, think about Pompeii. We know that all these people were caught in this volcano. We think we know something about them because of archaeologists and anthropologists. But we don’t know what really happened to those people.

“But today, if you collected all the cell phones, all the digital media, the Skypes, the emails and texts, you’d be able to see behavior on a small, intimate scale, but on a large scale. There’s an intimacy in that you get caught up in.”

“The Bay,” which played both the Toronto and New York film festivals, deals with a small town on the Chesapeake Bay which, in the course of one day, suffers a full-scale onslaught by a water-borne parasite – a mutation caused by the infection of small creatures by chemical run-off and proximity to a nuclear power plant. The parasites grow within their human hosts to outlandish size, before bursting loose to attack other humans.

Levinson worked on a miniscule budget with a cast of unknowns, shooting the film independently outside the studio system.

“The biggest problem with the studios is that they kept asking, ‘Is it a horror movie?’” he says. “I don’t know how to define it. It’s unnerving and unsettling; it’s got shocks. It has some good jumps, but I wasn’t trying to see how many I could get in. Apparently you need seven or eight jumps to qualify as a horror film.

“Not being able to define it doesn’t matter to me. I’m just trying to make this movie. But those are the times we live in.”

None of the major studios was interested in distributing the film (which was picked up by Lionsgate). As Levinson points out, “No studio person has seen it with an audience. Hey, it only cost $2 million, so it will make money, no matter what.”

But Levinson, who began his career as part of a comedy team with actor Craig T. Nelson (and then as part of an Oscar-nominated screenwriting team with ex-wife Valerie Curtin), has no illusions about the film industry. It’s never been particularly friendly to his well-crafted, character-driven stories. That’s been true since his very first film as a writer-director, 1982’s “Diner,” which was almost shelved before it was released, until critics (led by the late Pauline Kael) rallied behind it.

Though he has subsequently received Oscar nominations (for “Diner,” “Avalon” and “Bugsy”) and even the Oscar itself (for best director and picture for “Rain Man” in 1988), Levinson’s independent streak has meant that, while he continues to work, he still has to battle to get his movies made.

“I can’t lament it – that’s the reality,” he says. “The studios don’t have a love of production because corporate America has a very different sensibility than the old studios. There was a time when the studios had a real affection for film; now it’s only about what a film can make. Everyone understands that it’s a business.”

But the current state of film – with shifting modes of distribution that have refocused on home video and the Internet – doesn’t discourage Levinson.

“For me as a story-teller, I’m finding different ways to do things,” he says. “I’ve always liked pieces that dealt with behavior and those are harder to make. The studios have no interest in human behavior. It was hard with ‘Diner’ and it’s been hard since. They’re only interested in the adrenaline rush of making $200 million – even if the movie itself cost $200 million.”

People who bemoan the way smaller films have been forced to move to on-demand video or even Internet viewing miss the point, Levinson says. The ideal – of seeing great films on big screens – is rapidly becoming a relic.

“How much does the younger generation care about that?” he muses. “With my kids, three-quarters of the great films they’ve seen, they’ve never seen in a theater. Hey, some of my favorite movies I never saw in a theater. I saw ‘Citizen Kane’ for the first time on the late movie on TV.

“Young audiences no longer distinguish between theatrical release and the Internet. There’s always going to be entertainment. Does watching it on TV – or an iPhone – mean it’s been devalued? Probably so. But that’s the reality.

“And really, certain things work better on TV. You’re seeing an explosion of creativity on cable now. A lot of writers and actors are doing more TV because feature films have turned their back on everybody over 30. Theatrical has abdicated and gave up on that audience, so cable took it. I think it’s an exciting time. I don’t think anyone can predict how it will play out. But this is the beginning of something new.”