In 1919, a public auction is held to clear an abandoned opera theatre's vaults in Paris. Viscount Raoul de Chagny, bids against the elderly Madame Giry for a papier-mâché shaped like a barrel organ monkey. The auctioneer presents a shattered chandelier, relating it to "the strange affair of the Phantom of the Opera". As it is hoisted up to the roof, the story moves back to 1870.
The theatre prepares for the performance of the grand opera, Hannibal, headed by soprano Carlotta Giudicelli. Theatre manager Monsieur Lefèvre plans to retire, leaving the theatre to Richard Firmin and Gilles André. Carlotta refuses to perform after three years' worth of torment by the theatre's resident "Opera Ghost", a mysterious figure said to live in the catacombs below. Facing the performance's cancellation, Madame Giry, the ballet instructor, suggests dancer Christine Daaé, stands in as the lead actress. Christine displays her singing talents and is a huge success on opening night.