Jackson's Frodo Farewell

Has the ringmaster lost his precious for good?

In a blow to Frodo fans everywhere, the Oscar-winning tandem of Peter Jackson and Fran Walsh announced in an open letter posted Tuesday on theonering.net that New Line Cinema has decided not to bring them back to make the hugely anticipated film version of J.R.R. Tolkien's novel The Hobbit and possibly a second Lord of the Rings prequel due to the couple's insistence that the studio first resolve a lawsuit over disputed profits from the original trilogy.

"Last week, [New Line exec] Mark Ordesky called Ken Kamins [Jackson's manager] and told him that New Line would no longer be requiring our services on The Hobbit and the LOTR prequel," the filmmakers wrote. "This was a courtesy call to let us know that the studio was now actively looking to hire another filmmaker for both projects."

Jackson's Wingnut Films sued New Line last year after an audit of the books for The Lord of the Rings: The Fellowship of the Ring supposedly determined the couple were being shortchanged—allegations which New Line denies.

The lawsuit involved a potentially huge sum, especially considering the action only covered the first entry in a saga that grossed a combined $3 billion in worldwide ticket sales and hundreds of millions more in DVD sales and merchandising.

Jackson, who had repeatedly stated he wanted to helm The Hobbit, nonetheless said he would not discuss a deal until the LOTR money situation was settled.

New Line controls the film rights to The Hobbit, which was the first Middle Earth book written by Tolkien, as well as other material the famed author wrote about the events preceding those depicted in the Lord of the Rings, while MGM owns the distribution rights.

In his letter, the 45-year-old New Zealander said he and his longtime collaborator had "always assumed" they'd be invited to take the reins on the prequels and shoot them back-to-back, as they had with LOTR. Jackson said he felt especially indebted to New Line for championing his involvement in LOTR in the mid-'90s, when he was considered a box-office liability best known for the art-house hit Heavenly Creatures and the commercially unsuccessful Michael J. Fox horror-comedy The Frighteners.

Per the posting, New Line's copresident, Michael Lynne, suggested to Kamins that Jackson and Walsh "would stand to make much money" if they linked the resolution of the lawsuit together with a movie deal for The Hobbit.  But the two rejected the idea outright, saying a movie should be made "from the heart," not as a "matter of business convenience."

The 45-year-old filmmaker said Ordesky informed them that New Line had a "limited time option" for the film rights, which they purchased from legendary producer Saul Zaentz. But as Jackson and Walsh preferred to wait until their suit was settled, the studio purportedly felt it needed to move forward on both new projects with another director.

While the Lord of the Rings mastermind apparently won't be revisiting Middle Earth, he and Walsh say they don't harbor any ill will and felt they owed it to Ringers to explain why they're no longer aboard.

"This outcome is not what we anticipated or wanted, but neither do we see any positive value in bitterness and rancor. We now have no choice but to let the idea of a film of The Hobbit go and move forward with other projects," Jackson wrote. "We send our very best wishes to whomever has the privilege of making The Hobbit and look forward to seeing the film on the big screen." 

New Line declined to comment. However, a rep for MGM told E! Online that "the game is not over" and that Peter Jackson is still a possibility to direct The Hobbit films. That echoed the sentiment of studio chief Harry Sloan, who at last week's London premiere of Casino Royale, noted that MGM was still in talks with Jackson.

Meanwhile, upon reading Jackson's missive, peeved fans on theonering.net have started preparing for battle and have launched a letter-writing campaign urging New Line coheads Bob Shaye and Lynne, owner Time Warner, MGM and its parent company, Sony, to work out a deal with Jackson and Walsh or else face a potential boycott.

Even if Jackson doesn't return to the Shire, it's possible he might have a hand in The Hobbit and the other prequel. 

"We're hopeful that we may be invited to work on The Hobbit. There's nothing more that we would like to do in our careers," said Oscar-winning effects guru Richard Taylor, who heads Jackson's WETA production facility. 

In the meantime, Jackson and Walsh have plenty of other ventures to keep him busy, including his next directorial effort, an adaptation of Alice Sebold's ghost story, The Lovely Bones, due out in 2007. He also recently optioned Temeraire, a set of fantasy novels about dragons in the Napoleonic Wars, and is producing Dambusters, an effects-heavy remake of the World War II aerial battle drama.

One movie that's temporarily off the drawing board, however, is a feature film Jackson was slated to produce based on the popular video game Halo. That project was indefinitely shelved after its studio backers, Universal and 20th Century Fox, unexpectedly pulled financing, citing rising production costs and Jackson and Walsh's unwillingness to take a pay cut.