I'd rather them create a new IP to be honest. I actually think Monolith have done a good job with the Middle-earth games, sure they may not be for everyone, and they had a major fuck up with the microtransaction shenanigans in the second game, but hopefully they've learned from that and we'll see more from them, maybe even going further up and down the timeline to the point where we can play as other characters during events of the books/films or something.
Gonna be honest, I would actually love them to take the GoW engine and repurpose it a sequel to The Order so at least the story can be completed. At least this way money wouldnt need to be spent on building an engine. It could be akin to UC4 and Lost Legacy, granted it would take more work since some mechanics would need altering and a big visual change.
But yeah, i think LOTR is fine where it is. I dont think SMS needs to make something akin to GoW just with a different IP. Their other game needs to be more varied imho. It what makes ND and their U/ TLOU combo pretty satisfying imho.