Originally from http://www.theonering.net/perl/newsview/8/1163993546
which was slashdotted at the time this was posted.

11-19-06 Latest News
Peter Jackson and Fran Walsh Talk THE HOBBIT
Xoanon @ 10:32 pm EST

Moments ago we received this email from Peter Jackson and his crew down in New Zealand, take a look...

Dear One Ringers,

As you know, there's been a lot of speculation about The Hobbit. We are often asked about when or if this film will ever be made. We have always responded that we would be very interested in making the film - if it were offered to us to make.

You may also be aware that Wingnut Films has bought a lawsuit against New Line, which resulted from an audit we undertook on part of the income of The Fellowship of the Ring. Our attitude with the lawsuit has always been that since it's largely based on differences of opinion about certain accounting practices, we would like an independent body - whether it be a judge, a jury, or a mediator, to look at the issues and make an unbiased ruling. We are happy to accept whatever that ruling is. In our minds, it's not much more complex than that and that's exactly why film contracts include right-to-audit clauses.

However, we have always said that we do not want to discuss The Hobbit with New Line until the lawsuit over New Line's accounting practices is resolved. This is simple common sense - you cannot be in a relationship with a film studio, making a complex, expensive movie and dealing with all the pressures and responsibilities that come with the job, while an unresolved lawsuit exists.

We have also said that we do not want to tie settlement of the lawsuit to making a film of The Hobbit. In other words, we would have to agree to make The Hobbit as a condition of New Line settling our lawsuit. In our minds this is not the right reason to make a film and if a film of The Hobbit went ahead on this basis, it would be doomed. Deciding to make a movie should come from the heart - it's not a matter of business convenience. When you agree to make a film, you're taking on a massive commitment and you need to be driven by an absolute passion to want to get the story on screen. It's that passion, and passion alone, that gives the movie its imagination and heart. To us it is not a cold-blooded business decision.

A couple of months ago there was a flurry of Hobbit news in the media. MGM, who own a portion of the film rights in The Hobbit, publicly stated they wanted to make the film with us. It was a little weird at the time because nobody from New Line had ever spoken to us about making a film of The Hobbit and the media had some fun with that. Within a week or two of those stories, our Manager Ken Kamins got a call from the co-president of New Line Cinema, Michael Lynne, who in essence told Ken that the way to settle the lawsuit was to get a commitment from us to make the Hobbit, because "that's how these things are done". Michael Lynne said we would stand to make much more money if we tied the lawsuit and the movie deal together and this may well be true, but it's still the worst reason in the world to agree to make a film.

Several years ago, Mark Ordesky told us that New Line have rights to make not just The Hobbit but a second "LOTR prequel", covering the events leading up to those depicted in LOTR. Since then, we've always assumed that we would be asked to make The Hobbit and possibly this second film, back to back, as we did the original movies. We assumed that our lawsuit with the studio would come to a natural conclusion and we would then be free to discuss our ideas with the studio, get excited and jump on board. We've assumed that we would possibly get started on development and design next year, whilst filming The Lovely Bones. We even had a meeting planned with MGM executives to talk through our schedule.

However last week, Mark Ordesky called Ken and told him that New Line would no longer be requiring our services on the Hobbit and the LOTR 'prequel'. This was a courtesy call to let us know that the studio was now actively looking to hire another filmmaker for both projects.

Ordesky said that New Line has a limited time option on the film rights they have obtained from Saul Zaentz (this has never been conveyed to us before), and because we won't discuss making the movies until the lawsuit is resolved, the studio is going to have to hire another director.

Given that New Line are committed to this course of action, we felt at the very least, we owed you, the fans, a straightforward account of events as they have unfolded for us.

We have always had the greatest support from The Ringers and we are very sorry our involvement with The Hobbit has been ended in this way. Our journey into Tolkien's world started with a phone call from Ken Kamins to Harvey Weinstein in Nov 1995 and ended with a phone call from Mark Ordesky to Ken in Nov 2006. It has been a great 11 years.

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.

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.

Warmest regards to you all, and thanks for your incredible support over the years.

We got to go there - but not back again ...

Peter Jackson and Fran Walsh