Universal was really looking to create a vehicle for Deanna Durbin, not make a horror picture, which is why the end product is quite neutered. Like I said, Laughton had just co-starred with Durbin in her last picture, and the role in that film is also of the fatherly nature that was tailored for the remake of THE PHANTOM (apparently, audiences and critics liked the chemistry between the two, even if it was platonic). Durbin's reckless attitude and a number of suspensions at the studio no doubt nixed the original idea. Eventually she got her way, getting a free hand in whatever she wanted out of her films, which coupled with the merger in '48, I think ended up killing her career.

PHANTOM OF THE OPERA was a project that seemed to be kicked around as an idea at Universal every year, no doubt because of the standing opera house set. The 1943 version really finds lineage in a series of scripts that went back to the '30s that were being tailored for Karloff, and probably even earlier than that when Universal thought they could lure Chaney back for a talkie remake, which obviously never happened and became the hybrid sound re-issue. When U. made MAN OF A THOUSAND FACES, the comment cards for the "Phantom" scene in the film were so positive that they decided to do a remake then, which eventually morphed into the Hammer film when the two struck a deal with them in 1959. Similar to how the 1940 script was tailored for Durbin's image, Universal had some sort of idea they were going to fit Cary Grant into the picture, although it's been debated whether he would have played the hero or the villain. Kathryn Grayson was also attached to the Hammer version at some point, no doubt intended as a comeback after leaving MGM in '56.