When “Divergent,” “Insurgent’s” predecessor, debuted in 2014, investors weren’t sure what to expect. That caused Lionsgate’s stock to dip 14% in the week leading up to its debut after the picture suffered a spate of bad reviews. Its box office results also failed to reach the high bar established by the studio’s other major franchises, “The Hunger Games” and “Twilight.”
“Investors have held these other potential franchises up to ‘The Hunger Games’ as the ultimate benchmark, and it’s an unfair comparison,” said Marla Backer, an analyst with Research Associates. “Those films are juggernauts, and their box office grosses are spectacular. With ‘Divergent’ you still have a very profitable franchise.”
Indeed, “Divergent’s” $288.7 million worldwide is nothing shabby, even if it’s a fraction of the $752 million haul enjoyed by the most recent “Hunger Games” film. Domestically, it ranks as Lionsgate’s fifth highest-grossing movie.
Going into this weekend, “Insurgent” is expected to make $57 million-$60 million at the Stateside box office. Internationally, analysts expect the film will have a stronger showing, because the Veronica Roth books that inspired the series have grown more popular overseas. It also helps that star Shailene Woodley’s profile is on the rise after last summer’s hit “The Fault in Our Stars.”
“Insurgent” carries a $110 million budget, compared with $85 million for “Divergent.”
Analysts tell Variety that unless “Insurgent” falls far short of the $54.6 million “Divergent” opening weekend or trumps that figure by a wide margin, Lionsgate’s stock won’t rise or fall materially.
“Over time, people become more comfortable with what these films are doing,” said Ben Mogil, an analyst at Stifel Nicolaus. “Unless it’s dramatically, it won’t be much of an event.”
The roller-coaster ride that Lionsgate has had to endure when major films such as “Divergent” or “The Hunger Games” kick off in theaters illustrates the difficulty of being a smaller-scale television and film business in an era of sprawling media conglomerates. Comcast or Disney can suffer tens of millions of dollars in writedowns on films without it making a blip in their share price because they are so heavily diversified across the cable, digital and consumer products businesses.
However, the company has taken certain steps to temper that volatility. This week, Lionsgate sealed a co-financing and co-production pact with Hunan TV, a leading Chinese broadcaster, to back $1.5 billion worth of television and film projects. It also helps the company nudge open the door to China, the world’s second-largest market for film and a potential valuable source of future revenue.
Even more important, Lionsgate and Starz entered into a stock exchange agreement in February that brings media mogul John Malone onto the studio’s board of directors. Because Malone is such an active media consolidator and provided the Starz shares used in the deal, there has been feverish speculation that the relationship will deepen and that the two companies could move from what Starz chief Chris Albrecht called “kissing cousins” into marriage.
Despite Wall Street’s ardor, Tuna Amobi, equity analyst at S&P Capital IQ, said he does not expect any imminent moves by Lionsgate and Malone to increase their stakes.
“I would not expect any new development this year,” he added. “The most important thing is that the relationship has been initiated. It’s a small step but it’s very important.”
Strengthening those ties could grow more important given that “The Hunger Games” comes to an end this year. Although Lionsgate has other promising films such as “Gods of Egypt” and a “Power Rangers” reboot, it’s hard to replicate the financial windfall of that franchise. Just look at “Divergent,” a successful film series whose only sin is that it has never hit the stratosphere.