Ring Up The Hobbit, Times Two

(page 2 of 2)

Sloan took Jackson's ideas to New Line, which was in the final stage of hammering out the legal settlement with the director, says Lynne. "Harry was very helpful in getting past some of the last points," says Lynne. In a press release, Jackson, who was not available for an interview, credited Sloan "and our new friends at MGM for helping us find the common ground necessary to continue the journey."

That journey is hardly over. New Line and MGM will share the costs for making the film, which at the moment doesn't have either a director or a script. Jackson, who has a commitment to make The Lovely Bones for DreamWorks, will act as executive producer and will be the creative font for the two films that he pitched to MGM. Those films, which are likely to cost $150 million apiece, will be shot in New Zealand, where Jackson lives and runs the successful special-effects shop Weta Digital that created the creatures for The Lord of the Rings. The studios hope to start production in 2009, but that depends on how soon the current writers' strike is settled and the usual death-by-a-thousand-rewrites process of getting approval for a script for that much money. (New Line also must contend with a just-filed lawsuit from Lord of the Rings producer Saul Zaentz, who wants the studio to open its books to him, but that suit isn't likely to affect the Hobbit deal.)

Still, there are winners abounding with the announcement that the film is at long last up and, if not running, starting a slow trot. MGM gets the foreign rights, which were the most lucrative for the Lord of the Rings trilogy. New Line, desperate for its next act, gets the U.S. rights to the film. The two studios each get 50% of the proceeds, after distribution fees. MGM, in the midst of a turnaround, likely will use its foreign rights to help raise outside money to finance its half of the production costs. "It's a great day for MGM," says Sloan. It's also a swell day for Peter Jackson, who gets a pretty hefty payday even before turning his attention to Tolkien's four-foot-tall heroes.

Grover is Los Angeles bureau manager for BusinessWeek.