Lionsgate was propelled into the ranks of the major Hollywood studios by young-adult franchises such as
The third installment, "Allegiant," starring
"It's disappointing," said Matthew Harrigan, a media analyst at Wunderlich Securities. "It shows the young-adult audience is fickle for everyone, including Lionsgate. They do a very good job with marketing and controlling costs, but at the same time the product has to be there."
Investors have been unimpressed. Lionsgate's stock has declined 3% to $21.89 in the two trading days since the release of "Allegiant." The shares have tumbled 47% since their 52-week high of $41.41 in November amid a box-office slump.
It's not just the young-adult adaptations that have stumbled. The $140-million special effects epic "Gods of Egypt" flopped with $29 million in domestic ticket sales so far. The studio has released a series of recent lower-profile misses such as "Norm of the North" and "The Choice."
Analysts expect "Allegiant" to eventually reach about $70 million in U.S.-Canada ticket sales, much lower than the $130-million domestic total for "Insurgent" and the $151 million peak for 2014's "Divergent." Although the studio may still break even on the new movie, industry experts agreed that Lionsgate was hoping for higher profit in line with its predecessors.
"It's got to be very stressful over there, because it will clearly not reach the potential they have been projecting," said Jason E. Squire, a film business professor at USC.
Lionsgate, known for its savvy choices and thrifty ways, hasn't always relied on teenagers fighting authoritarianism to drive its revenue. The company, founded in Vancouver, Canada, caught Hollywood's attention with successes such as 2004's highly profitable low-budget horror film "Saw" — and the multiple sequels in its wake.
But it found a box-office boon with 2012's "The Hunger Games," which took in nearly $700 million worldwide. That year, Lionsgate bought rival production company Summit Entertainment, best known for the "Twilight" movies, for $412.5 million. Lionsgate finished 2012 in fifth place at the domestic box office, ahead of 20th Century
For the fiscal third quarter that ended Dec. 31, Lionsgate's profit fell to $40.7 million, down 59% from the same period a year earlier. Lower revenue from the motion picture segment was a drag on earnings.
Investors and executives hope the slate of upcoming films will improve results. The company expects to benefit from the kind of wide-ranging film lineup — including potential franchises, ambitious tent pole projects, and awards-friendly fare — that drove profitability prior to the studio's young-adult boom.
Lionsgate did not make executives available for comment. However, Chief Executive Jon Feltheimer touted the studio's planned releases in a recent conference call with analysts, citing "a diverse portfolio of franchise properties, branded event films and importantly, movies that return to the core strengths on which our company was built." The studio will have 17 wide releases this fiscal year, compared with 13 last year, he said.
Analysts anticipate solid performances from movies such as "Now You See Me 2" and a sequel to the 2014
Lionsgate's TV operations, behind hits such as "Orange Is the New Black" on Netflix, "Casual" on
In another bright spot, the studio's film library continues to provide reliable revenue by licensing to television and online streaming video outlets.
Still, some observers remain concerned about the uneven box-office performance. Stifel media analyst Benjamin Mogil lowered his rating of Lionsgate's stock to "hold" this week, writing in a research report that the lackluster opening for "Allegiant" portends lower earnings.
"While the company's television and library businesses continue to be strong, there is no offsetting a weak new release slate," he said. "With 'Allegiant' now faltering, the impact going forward is material and more importantly brings into question how deep the young adult market is."
Lionsgate remains one of the only big studios not owned by a major media conglomerate, making it more vulnerable to the unpredictable whims of the moviegoing public. That could change if the company combined with another firm.
In February, Lionsgate said it would explore a merger with premium cable channel Starz, a move foreshadowed last year when billionaire media mogul
A Lionsgate-Starz merger would mark a major step in Malone's ambition to create the next big media company, but no such deal has materialized. Lionsgate has historically been cautious about spending too much on acquisitions. In a research note, Mogil speculated that Lionsgate's film troubles could accelerate a Starz merger.