After several years of delays that have frustrated eager fans, moviegoers might soon be able to return to Middle-earth.
Warner Bros., its subsidiary New Line Cinema and partner Metro-Goldwyn-Mayer appear to be close to greenlighting the hugely anticipated two-part "Lord of the Rings" prequel "The Hobbit," according to several people familiar with the matter who spoke on condition of anonymity because they were not authorized to discuss it publicly.
Barring a last-minute glitch, production could begin in mid-January so that the first of the two movies would be ready for a holiday 2012 release, according to people close to the project. The second film is planned for a December 2013 opening. If production doesn't begin by the first quarter of next year, the people said, "The Hobbit" will miss its planned release dates and likely will have to once again be delayed.
The one remaining hurdle is getting an official go-ahead from MGM, which for more than a year has been virtually out of cash and whose debt holders have been trying to decide upon a plan for reorganization. Under a long-standing agreement, MGM owns half the rights and controls international distribution. MGM is eager to co-finance the films, people close to the situation said, and could give Warner Bros. the official OK in the next few days.
The studio partners also have nearly finalized a deal with director, producer and co-writer Peter Jackson to make the two movies and have resolved most other key issues that have long held up the project, including those related to underlying rights from the estate of author J.R.R. Tolkien. Jackson has long planned to shoot the movies in his home country of New Zealand, but this week he ran afoul of various performer unions, including the Screen Actors Guild, which are advising their members not to work on what they allege is a non-union production. One person close to the situation said that dispute also is close to being resolved, further clearing the way for a greenlight.
Jackson took on directing duties after "Pan's Labyrinth" director Guillermo del Toro, who had been set to handle the job, backed out earlier this year because of the ongoing delays.
The two "Hobbit" films, which will be shot together, are expected to cost close to $500 million to produce.
Warner and New Line, which produced the blockbuster "Lord of the Rings" trilogy and control domestic distribution for "Hobbit," are ready to commit their half of the money, said people familiar with the matter.
Negotiations between MGM and Warner are at a very tenuous stage. MGM needs to reach agreement among its more than 100 debt owners, which control the future of the studio. MGM's creditors are scrambling to finalize a reorganization plan through which Spyglass Entertainment chiefs Gary Barber and Roger Birnbaum are expected to take over management. Barber has been leading negotiations on "The Hobbit" for MGM with top Warner executives, including home entertainment group president Kevin Tsujihara.
MGM will need to secure its half of the financing. Barber is expected to approach a number of potential investors, among them studios including 20th Century Fox, which has an existing deal with MGM to release its movies overseas. Other possibilities include outside financial investors or Warner Bros., which could loan MGM its share in exchange for additional distribution rights to the pictures.
In recent weeks, Warner and New Line have been scrambling to clean up some underlying rights issues with the Tolkien estate that partly stem from earlier litigation between the studios and the late author's heirs. After intense negotiations between lawyers, the studios have agreed to pay millions of dollars to the estate to resolve matters, said people with knowledge of the situation.
Last year, Warner/New Line reached a settlement of reportedly more than $100 million with the Tolkien heirs, who in 2008 had sued the studios over royalties to Jackson's three "Lord of the Rings" films, saying the studio owed the estate more than $150 million in profits. The studio also has settled lawsuits over profit participation with Jackson and his partners as well as producer Saul Zaentz.
The estate, Zaentz and Jackson will participate in the gross revenues of "The Hobbit," as well as Walt Disney Studios and Bob and Harvey Weinstein. The Weinsteins had originally developed the "Lord of the Rings" movies when they ran Miramax Films, which was at the time a division of Disney.
Warner and MGM have each sunk tens of millions of dollars into preproduction on "The Hobbit," including script fees, visual effects work, set preparations and casting meetings.