New Line settles dispute with Jackson

“The Hobbit” is finally happening.

After settling a lawsuit with Peter Jackson on “The Lord of the Rings,” New Line co-chairmen/co-CEOs Bob Shaye and Michael Lynne announced jointly with MGM chairman Harry Sloan that the way is clear to turn J.R.R. Tolkien’s “Hobbit” into two live-action films.

The resolution clears the way for “Spider-Man” helmer Sam Raimi to direct. While Shaye said no creative alignments have yet been made, Raimi has long been interested — as long as Jackson was involved or gave his blessing.

The studios hope to start production in 2009, shooting two films simultaneously and releasing them in December 2010 and December 2011. New Line will run production and distribute domestically, while MGM will release internationally. The studios will co-finance the films.

Jackson’s Kiwi stages, post-production and visual effects facilities — which he built to accommodate “LOTR” — likely will be used to mount “The Hobbit.” And New Zealand once again will be used as the visual backdrop for Middle-earth, this time to tell the story of how Frodo’s uncle, Bilbo Baggins, ventured from the Shire and wound up taking the Ring of Power from Gollum.

The key to moving forward was settling all litigation between Jackson and New Line over funds owed the filmmaker for “LOTR.”

Jackson and partner Fran Walsh filed suit in Los Angeles Federal Court in 2005, charging they were shortchanged in profit participation on “The Fellowship of the Ring.” A bitter war of words set Jackson and Walsh in one corner, Shaye and Lynne in the other.

Jackson’s next two directing gigs are both for DreamWorks. He optioned Alice Sebold novel “The Lovely Bones” and wrote the script with his “LOTR” partners Walsh and Philippa Boyens. He’ll also team with Steven Spielberg to co-direct “Tintin.”

While those commitments will keep Jackson from directing “The Hobbit,” the settlement deal is helpful not only for Shaye and Lynne but also for MGM’s Sloan, who helped put the parties together.

The contracts of Shaye and Lynne expire next fall. The studio has weathered several tough post-“LOTR” years, and its latest attempt at a fantasy trilogy, “The Golden Compass,” has proved tepid. Pic has so far grossed just north of $40 million domestic, while drawing $90 million in offshore ticket sales. Though Hossein Amini has scripted sequel “The Subtle Knife,” it’s unclear whether the second installment of Philip Pullman’s “His Dark Materials” trilogy will go into production.

At MGM, Sloan planned to revive the studio with franchises. Dealt a setback when “Terminator Salvation: The Future Begins” went to Warner Bros. (MGM is suing financier Halcyon, claiming that its negotiation rights were violated), Sloan now has two plum titles to use as building blocks. Though Columbia distributes the James Bond film about to begin production, MGM gets the 007 franchise back after that, and Sloan said Daniel Craig is signed to a multipicture dseal.

“I give a lot of credit to Peter, Bob and Michael for putting their differences aside for a tremendous property that has an enormous fan base,” Sloan said. “Between ‘The Hobbit’ and Bond, we’re involved in two of the best-known franchises in the world.”

Shaye and Lynne said while they have not yet gotten to shake hands with Jackson and Walsh, they consider the legal matter to be history.

“This is a complete resolution of all the disputes between us,” Lynne said. “Obviously, there is extensive auditing on pictures that are successful. In our business, you can have differences of an accounting and legal nature that polarize people and get in the way of personal and professional relationships.”

Shaye, whose barbed public comments toward Jackson once widened the gulf between them, said he was also relieved.

“Nobody likes contention,” Shaye told Daily Variety. “None of us, not me, Michael, Peter or Fran, were happy that a dispute was destroying a fruitful and prosperous enterprise.

“All these lawyers were going crazy not letting the principals communicate directly, when we might have been able to solve this years ago. Movies are difficult enough to make without having a war going on,” Shaye continued. “The settlement was done with the idea that the good spirit that nurtured the first three films can continue. I hope we can revive what was once a wonderful relationship.”

Jackson was unavailable to comment beyond a statement and there was no comment about the size of his “LOTR” settlement.

“I’m very pleased that we’ve been able to put our differences behind us, so that we may begin a new chapter with our old friends at New Line,” Jackson said in the statement. “The Lord of the Rings” is a “legacy we proudly share with Bob and Michael, and together, we share that legacy with millions of loyal fans all over the world. We are delighted to continue our journey through Middle-earth.”

(Janet Shprintz in Hollywood contributed to this report.)

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