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Instant Analysis: Will Lions Gate's Last "Divergent" Film Be A TV Movie?

Lions Gate Entertainment (NYSE: LGF) could launch its final Divergent film, Ascendant, as a TV movie instead of a theatrical release, according to Variety. The franchise would then reportedly evolve into a spinoff series. If the report is true, it would mark a weak ending for the young adult dystopian series which was once hyped as the next Hunger Games.

Allegiant. Image source: Lions Gate.

What happened?

The first two Divergent films, Divergent and Insurgent, were solid box office hits. The first film grossed $289 million on a production budget of $85 million, while the second grossed $297 million on a budget of $110 million. However critics panned the second film, which earned a 28% score on Rotten Tomatoes, compared to a 41% rating for the first film.

The third film, Allegiant, fared even worse with a 13% rating, and grossed just $179 million on a budget of $110 million. After deducting the estimated prints and advertising budget of $45 million and the cut of ticket sales to theaters, it's likely that the film failed to break even.

The overall impact on Lions Gate's earnings shouldn't be devastating, since the studio sold the film's overseas distribution rights before the release to cover most of the production costs. However, Allegiant's failure at the box office meant that it was probably a mistake to split the final book into two films -- as it previously did with The Hunger Games and Twilight -- and that the young adult dystopian craze was over.

Starz to the rescue?

In late June, Lions Gate agreed to buy Starz (NASDAQ: STRZA) for $4.4 billion. Acquiring the premium cable channel will give Lions Gate a platform of 17 channels to launch its own TV shows worldwide. In the past, Lions Gate's TV division merely produced shows for other networks. Therefore, launching Ascendant and its subsequent spinoff series on those premium channels worldwide might boost Starz's subscriber numbers.

While that strategy makes sense, it's unclear if the series still has enough momentum to evolve into a final film and TV series. To make matters worse, it's unclear if the film's stars Shailene Woodley, Theo James, and Ansel Elgort will even return for a TV film. Therefore, Lions Gate investors should follow this story closely to see if it can salvage its former tentpole franchise to support its TV business instead.

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Leo Sun has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Lions Gate Entertainment. The Motley Fool recommends Starz. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.