I think the reason younger generations do not find the movie as frightening is complicated. If I were to whittle it down I would say it has to do with familiarity and time.
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Movies that succeeded The Exorcist and copied it diluted the horror of the original to some extent. A lot of time has passed since it release and I certainly think many kids have heard about it in some fashion.
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I do agree with those who point out that this is a slow to build movie (which I love and contributes to the suspense) but which in turn can turn off a younger crowd. Personally, I find this a sad commentary on our up and coming adults.
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I also think there is something to be said for the general decline of belief in the supernatural or at least the kind seen in the film. If you actually believe in the Devil or heaven and hell, The Exorcist would be more frightening imo.
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My 0.2