If I ran Fright Fest at Magic Mountain (which mercifully, I do not), I'd be leaning heavily into concepts, themes and ideas that have worked at Knott's Berry Farm. You're not going to compete with Horror Nights on IP integration and win. But my hunch is the crossover audience between Knott's Scary Farm and Fright Fest is very small given how far apart they are geographically.
Of course, if I'm wrong and the crossover is actually large enough to make a difference... well, I'd still think about going this route and perhaps even create a pass that gets you into both events for the whole season. I don't know what they paid to acquire the IPs in the past few years, but if the goal is to create a solid event with a fan base that comes back every year, I think there's better ways to spend that money.