First, let me start by saying yes, I do tend to have a habit of defending movies that I think get a bad rap. The same sort of thing promted my review of "Stay" with Ewan Mcgreggor. Also, yes; I am an avid Shyamalan fan. So based on that you can dismiss this defensive review, or you can hear me out.
Lady in the Water is without a doubt the strangest of M. Night Shyamalan's thrillers (if that's what you would call this). The strangest, and most original; In fact, it's probably the most original movie to see mainstream release this year (I cannot speak for all the strange art-house flix that I'm sure have been put out). That being said, it is also the funniest, and the saddest. I can understand why people don't get this film. I'm not going to pretend like it's a perfectly normal movie that everyone and their brother should like. My only objection to the public reaction is the unwillingness to allow a movie that breaks the mold of what movies are "supposed to be about" to be called "good".
I cannot think of one American movie in the past decade that is as daring as this one. The only thing that remotely comes close to being similar to the theme of the movie is Narnia, in that they're both a story in which a fantasy world and the real world collide. Only in Narnia, I guess they never actually collide, so that doesn't count. We've seen enough movies where the "world of the living and the world of the dead" collide, hell...Shyamalan's most famous movie is about that. The story only focuses on the "what if fairy tails were real" theme to an extent, because truly that's not a story in and of it-self (unlike how most ghost movies focus on this). Instead it focuses on the character's willingness to accept this strange woman who appears seemingly from nowhere from the swimming pool in their apartment complex. Not once do the residents claim she's a fraud or a crazy person, they simply see a girl in trouble and they do whatever they can to help her. I think that this added to the fantasy aspect of the film. In a fantasy, nobody asks "How can that wizard cast spells?", it is assumed as much can happen, and a story based on those basic rules is allowed to unfold.
Many people say that this is shyamalan's most ego-centric movie, and I can see that point of view. Night himself plays a writer who's work will inspire and leader and change the world. It is the title character's mission to unlock his potential and relieve him of his fears and insecurities. There is also a movie-critic who lives in the building who says that there's no originality left in the world and that pretty much every movie sucks. It is his advice about movie cliches later on that will lead the characters down a wrong and dangerous path. Those things being true, I think Night has a little bit of room to be egotistical, especially considering the reaction this movie had. Again, the critic is wrong about how events will play out because he assumes "all movies are the same", ergo this is an original story, ergo the masses don't like it. (It's worth mentioning there's another amusing part where the critic is killed because of his assumtions)
For those who don't know, there's some back-story on trying to get this film made. Long stroy short, Disney didn't like the script. They basically told Night, "We don't get it, and we don't want to make it how it is". And again, another long story short, Night replied "Screw you guys, there's plently of other movie studios that would love to finance my script as-is."
If Night ever reads this, which I doubt he will I'd like to send a simple message to him because I know how famous he is for being neurotic and insecure about his movies (even the ones that do well). My message is this: Don't let it detour you, stay the course. This movie may have not been a commercial or even critical success, and yes it may even end up losing money, but Disney owed you this movie after all you've given them. But they didn't give it to you, and right now they might be patting themselves on the back for it. It doesn't matter, they owed you the risk. I can assure you this however, they'll be kicking themselves in the ass when a future film of yours with WB (or whoever) triples it's production and marketing costs. And will the masses ever come around and see that Lady in the Water is a great film? I'm sure some will, but even if they don't when all is said and done, you'll still be remembered as a great auteur.