It's a force of 'Hobbit' at NL, MGM

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J.R.R. Tolkien's "The Hobbit" is back on track and headed to the big screen.

New Line and Peter Jackson have resolved their differences over the filmmaker's profit participation in the $3 billion-grossing "Lord of the Rings" trilogy, paving the way for a two-film adaptation of Tolkien's children's masterpiece.

New Line and MGM, which hold the "Hobbit" feature rights, have pacted to co-finance and co-distribute the movies, with New Line handling North American and MGM international distribution.

Tuesday's announcement comes in the wake of a so-so performance from another potential New Line franchise, "The Golden Compass," which so far has only grossed $41 million domestically, leaving the possibility of two more installments up in the air.

For MGM, the deal represents a personal coup for chairman and CEO Harry Sloan and is a first step in the Lion's attempt to diversify its theatrical reliance on the James Bond franchise.

Because of his packed schedule that includes "The Lovely Bones" and "Tintin," Jackson is not directing or writing the movies, but will executive produce with partner Fran Walsh. New Line will manage production.

Jackson decided not to take on writing and directing roles because with his other commitments, he figured that he would not be able to complete the "Hobbit" films until around 2015. Jackson didn't want to keep the "Hobbit" fan base waiting that long, and New Line and MGM knew that if they moved ahead on the project without Jackson's involvement, they risked alienating fans. As executive producer, Jackson will have approval over creative elements of both films.

Preproduction will begin in January, and principal photography for the films, which will be shot simultaneously, is tentatively set for 2009. The production budget is estimated at $150 million per film. The release of the first film is slated for 2010 and the sequel in 2011.

New Line co-chairman and co-CEO Bob Shaye described his feelings as "energized and gratified and pleased."

Jackson directed and co-wrote the "LOTR" movies, raking in billions for the studio and bringing Oscar gold, with the intent of next making the "Hobbit." The filmmaker, however, clashed with the studio about profit sharing, putting "Hobbit" in doubt. The dispute escalated and became public, with both sides airing their dirty laundry in the media.

"I think that we all realized that we were getting nowhere, and in some ways it's possible that the lawyers and the accountants and everyone that got in the middle of this were not serving the objective," Shaye said. "We had to start listening to our own conscience and our own objectives, which was to make this happen."

New Line co-chairman and co-CEO Michael Lynne said the dispute was about "very complicated documents, in same cases documents that were created many years ago, and differences of opinions that people could have about those documents. It was having that disagreement over financial situations that was of historical financial proportions that created a polarization."

The parties involved singled out MGM's Sloan for helping find common ground.

MGM got involved in the past six months, managing to get the parties to talk to one another. The deal for the new films was signed only in the past few days, after a settlement had been reached.

"You're talking about powerful men who had strong differences of opinion," Sloan said. "When you start with no one talking to anyone, someone has to come in to talk to both sides. We encouraged them to see the great possibility to create what could be in my opinion another masterpiece. We wanted them to see the possibility and not let that slip away."

It was during Sloan's talks that Jackson laid out his plan to turn "Hobbit" into two movies. Although Jackson might not write and direct the adaptation, it does not mean that he will be a passive executive producer.

"Jackson is not an agent or a hanger-on who took that title. He is going to be intimately involved with the creation of the script and all the creative elements," Shaye said. "Even though he has a lot of other things on his plate, I believe that he has an extraordinary capacity and ability to compartmentalize and to focus on issues that he cares about. We know that they didn't do this frivolously and that they care a lot about this. These two films are going to have Peter and Fran's fingerprints all over them."

Jackson and New Line plan to sit down in January to choose writers and directors. One name that continues to be mentioned is "Spider-Man" director Sam Raimi. Raimi has said he would not tackle "Hobbit" unless Jackson was involved. The settlement and resolutionopens the door for him to come aboard.

Jackson's Wingnut Films filed suit against the studio in February 2005, claiming New Line owed millions to him in profit participation for the first of the "LOTR" movies.

In September, New Line was dealt a major blow when the federal court slapped it with a $125,000 fine for refusing to provide court-ordered documents to Jackson's lawyers. New Line did not protest the fine and agreed to pay it.

Although $125,000 is not a significant amount of money by industry standards, it is in the legal community and gave Jackson's team some leverage in the case. The sanctions also might have played a pivotal role in getting both sides to settle.

Jackson's legal battle with New Line is not the only one involving "LOTR." Last week, the Saul Zaentz Co., which is the ultimate holder of film rights for "Hobbit" and "LOTR," filed suit claiming New Line has refused to allow it to audit the books relating to the "LOTR" trilogy.

Zaentz licensed the rights to Miramax, which sublicensed them to New Line.

An attorney for Zaentz declined comment on what affect the settlement with Jackson will have on his case.

Borys Kit reported from Los Angeles; Gregg Goldstein reported from New York. Leslie Simmons in Los Angeles contributed to this report.
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