The story that Leroux saw the silent film and started writing a film is not actually true. It was a sham story that Universal, which made the silent film, concocted when they were planning to their own sequel -- which never really quite worked out and sort of morphed into another project which ended up being a film called The Climax starring Boris Karloff and Susanna Foster (who played Christine in the 1943 Phantom).
It's quite clear that Leroux never intended a sequel for the Phantom - I know this, because I've seen his notes and the original manuscript for his novel, and one of the ideas he was most fascinated by was the idea of having a skeleton lying beneath the Opéra. Ergo, Erik had to die at the end of the novel. The only kind of "continuation" Leroux envisaged was in terms of theme -- not story -- which he ended up doing in a novel called Le Fauteuil hanté.
I think ALW realises now that no-one really wanted a sequel to Phantom and that the story doesn't lend itself to one. Pity his yes-men didn't tell him that at the time. The reason he plunged into the project was because he was dying to write a musical but had run out of story ideas.
Seeing Ward the night after opening night. I liked the 'Human Sacrifice' song but haven't been enthralled by anything else I've heard. Some of these comments have me a little worried...