Tied with To All a Goodnight for the title of first killer Santa film, Lewis Jackson's first-rate 1980 black comedy/suspense film You Better Watch Out (which, in an effort to find a wider audience was also released on video as Terror in Toyland as well as under its best-known moniker Christmas Evil) is NOT -- I repeat, NOT a slasher film!  It's the kind of film that works best if you watch it with absolutely no preconceived notions, allowing yourself to become engrossed in the schizophrenic world of the movie's tragic anti-hero Harry Stadling (brilliantly underplayed by Brandon Maggart), a child trapped in a man's body who doesn't just believe in Santa Claus -- he thinks he is jolly old St. Nick himself.  Year round, Harry starts each and every day by playing Christmas jingles from his 45 player, dancing blissfully around his Christmas-decorated apartment in red Santa cap and pajamas.  He even keeps a written record of the good and bad children in the neighborhood, spying on them during his free hours with binoculars and documenting their behavior on their own individual page in his archive, which includes marking naughty Moss Garcia's already filled up page with "impure thoughts" and "negative body hygiene"  when he spies the tyke cutting nudes out of a Penthouse magazine. 

Fittingly enough, Harry works in a toy factory where he has just been promoted from assembly line worker to a cushy desk job in the office shortly before you-know-what time of year.  Harry misses the joy of making toys by hand now that he's landed the more prestigous but unfulfilling new job and, after being conned into working a double shift on the assembly line by a lecherous coworker, begins to really unwind, sneaking out at night to play pranks on naughty children in the neighborhood like Moss Garcia, even spying nervously on his younger brother Phil (well-played by Jeffrey DeMunn of The Hitcher) and his wife Jackie (lovely Dianne Hull) having sex through the windows of their comfortable suburban home.  Harry himself is essentially impotent, perceiving himself as a sexless character who upholds "righteousness," so voyeurism is his only available sexual outlet.  Keep in mind that Harry's emotional problems were ignited after an incident as a child (which is featured in the film's prologue) during which he saw his mother and his father, dressed in full Santa suit and beard, stripping each other of their clothing and fondling each other.  Young Harry, convinced that the man feeling up his mother is not his father but Santa Claus, is shocked and confused by his role model's behavior and, as a result, takes on the role of Santa Claus himself in order to live out his own ideal of St. Nick.

 I imagine another reason Harry spies on Phil and Jackie is to get a glimpse of what a so-called "normal" married life is like, having never had one himself and being incapable of one.  Phil has always given Harry a hard time about his emotional handicaps in general, particularly at Christmas, and it's made clear that Phil considers his older brother a loser, "an emotional cripple," and a disappointment as a role model -- which no doubt makes Harry all the more willing to embrace his fantasy life as Kris Kringle.  Jackie is sympathetic to her "emotionally crippled" brother-in-law and tries to convince Phil to take it easy on Harry and not deride him when he shows up for Christmas dinner, but when Harry calls to let them know he won't be able to attend (after all, Santa Claus has a very busy schedule on the 25th!), Phil starts to worry about his brother's mental health even more and fears the worst.

When Christmas Eve finally does arrive, anything but an ordinary slasher film occurs, and this is where the film really breaks apart from its splatter film kin and becomes something more, something that truly creates and stays true to a unique world of its own.  Rather than pick up the nearest axe and start hacking away at every nearby naked teenager, Harry -- after transforming himself physically into Santa via red suit, fake beard and Krazy Glue -- diligently sets upon accomplishing his most important and beloved task:  Rewarding not only the good children on his list with gifts but donating a van full of handmade toys to the orphans at the local shelter (an amazing scene thanks to Maggart's great performance). 

After that is a haunting journey through the night during which Harry finds himself in one odd, darkly comic situation after another, occasionally horrifying (the scene where Harry retaliates against a crowd of taunting churchgoers with an axe, for instance), usually haunting (that fabulous scene wherein Harry/Santa is dragged into an indoor Christmas party and ends up dancing and drinking wine), always entertaining and original, and with one of the quirkiest, most misunderstood endings thematically that I've seen in any Christmas horror film before or since -- "And I heard him exclaim as I drove out of sight...Merry Christmas to all, and to all a goodnight!"  Just classic, very unexpected, and I'll leave it at that without spoiling any more about it for those who haven't seen the film.

Christmas Evil is a film that many will hate, but many will love.  There's no other way to put it.  My best advice for those wanting to see something a bit different, a bit more creative and a bit more restrained gore-and-guts-wise than the norm is to seek out Christmas Evil.  Love it or hate it, it has no true equal in the history of cinema and is what I'd call a classy folk horror tale as opposed to a slasher, and I rate it a well-earned 9 of 10.