Just because you base a movie on a hugely popular young adult series does not mean you have a guaranteed hit. In fact, for every Hunger Games, Twilight, or Harry Potter blockbuster franchise, film companies usually deliver a handful of failed attempts like Beautiful Creatures, Ender's Game, I am Number Four, Vampire Academy, and The Mortal Instruments: City of Bones, to name just a few. 

That makes the prospects for Lions Gate Entertainment (NYSE:LGF) subsidiary Summit Entertainment's Divergent mixed at best. 

What is Divergent?
Not being a teenage girl, I had to turn to Amazon.com (NASDAQ: AMZN) to learn what Divergent is about. After reading the description below, I'm still not sure I understand, but I'm pretty sure 40-year-old financial writers are not the target audience. Still it appears that like Twilight and The Hunger Games the series stars a teenage girl who is heroic and admirable. There' also appears to be romance, danger, and plenty of intrigue.

In Beatrice Prior's dystopian Chicago, society is divided into five factions, each dedicated to the cultivation of a particular virtue—Candor (the honest), Abnegation (the selfless), Dauntless (the brave), Amity (the peaceful), and Erudite (the intelligent). On an appointed day of every year, all sixteen-year-olds must select the faction to which they will devote the rest of their lives. For Beatrice, the decision is between staying with her family and being who she really is—she can't have both. So she makes a choice that surprises everyone, including herself.

Female leads do not guarantee teenage girls will show up

The success of the movies based on Twilight and The Hunger Games gave Hollywood hope that films based on young adult novels -- specifically ones with female leads -- would be sure-fire hits. That formula of having a strong young woman as the protagonist surrounded by plenty of dreamy teenage men/boys has not worked as well as Hollywood would have hoped.

Here are some recently released attempts at exploiting this formula and their costs, according to IMDB, and their global box-office take, according to Box Office Mojo.

  • Beautiful Creatures, 2013, $60 million budget, $60 million global gross 
  • The Host, 2013, $40 million budget, $48 million global gross 
  • The Mortal Instruments: City of Bones, 2013, $60 million budget, $90 million global gross 
  • Vampire Academy, 2014, no budget estimate at IMDB, $9 million global gross.
By any standards, all of these films were bombs that killed any potential for a future series. In general, films intended to kick off a series are either massive hits that make green-lighting the sequel obvious or clearly failures. Yes, the first move based on the Percy Jackson books was a tweener bringing in $226 in global box office, according to Box Office Mojo on a budget IMDB pegged at $95 million. But the relative failure of its sequel $199 million globally on a $90 million budget likely answered any questions about making sequels to young adult movies that are not clearly hits.  
The Percy Jackson movies weren't bombs -- they likely eeked out a profit -- but spending $90 million plus for a tiny upside is too big a risk for the reward.

Divergent does not need to be a huge hit
"Divergent doesn't need to be the next Hunger Games or the next Twilight to be successful," according to Forbes contributor Scott Mendelson.  

At a cost of $85 million, even a $40 million opening weekend, leading to a $120 million domestic/$200-$225 million worldwide total would qualify as a relative success. The tracking says that "Divergent" is going to open at around $65 million. But don't you dare call it a flop if it opens under $50 million.

If Divergent brings in $200 million with an $85 million budget plus at least half that in advertising, it falls into the tweener category where launching a sequel is a very risky proposition. Since the studio receives about half the revenue a movie pulls in at the box office, even a $225 million global take nets only $112.5 million for Summit.

That's a loss on costs that on the low side are around $125 million (including budget plus marketing). Revenue beyond the box office may nudge the film into profitability but box office returns below $300 million globally makes sequels a big risk.

BoxOffice.com is predicting a domestic opening of $68 million with a final U.S. haul of $159 million for the film. Projecting gross is hardly an exact science, but if Divergent hits those numbers and does a similar amount overseas, the movie will be a decent-sized hit that deserves a sequel.

Fans won't decide Divergent's fate
In general, box office projections are based on ticket pre-orders and other methods of gauging interest in the film. For Divergent -- or any film with a built-in fan base -- a strong opening weekend does not necessarily track out the same as other movies.

Most hit movies open strong and drop off between 40% and 50% from weekend one to two. Anything less than a 50% drop is pretty good and less than 40% generally foretells a blockbuster. Some movies -- horror films tend to be like this -- play to an eager fan base in week one, but by the second weekend, the dropoff is huge as anyone who wants to see the film has already seen it.

The exception -- and this is where Divergent's fate lies -- is when the movie is actually good. A strong teenage female lead won't make Divergent the next Hunger Games but a good movie could. Brand and built-in audience alone may open the film, but it will need strong word of mouth to become a hit franchise.

3 stocks to help you retire rich
It's no secret that investors tend to be impatient with the market, but the best investment strategy is to buy shares in solid businesses and keep them for the long term. In the special free report "3 Stocks That Will Help You Retire Rich," The Motley Fool shares investment ideas and strategies that could help you build wealth for years to come. Click here to grab your free copy today.

Compare Brokers