EXCLUSIVE: My recent scoop that Peter Jackson is negotiating to direct the two installments of The Hobbit is probably the best news for debt-laden MGM in years. But the development has put extra pressures on the beleaguered studio backers. Because making a 2-picture directing deal with the Lord Of The Rings director is no easy feat. I’m told that 30% of the gross is already committed to various participants, including Jackson (just for writing and producing!). He and Fran Walsh don’t work cheap, and they once got $20 million against 20% of gross from Universal to direct King Kong (Jackson, who can’t get enough of Kong and just oversaw the renovation of the ape attraction on the Universal backlot). Insiders tell me that gross participants are right now being asked to make adjustments so that MGM and its partner, Warner Bros, can finance the film and make money. Creative deals are becoming routine on sequels like Men in Black, but they aren’t easy. There’s no certainty that MGM creditors will respond to the urgency that Jackson’s reps are ready to make a deal.
After all, this is the same group that reacted to its debt stranglehold by benching its production and marketing executive teams, halting progress on a promising homegrown slate of films, and staging a desperate auction that resulted in a predictable batch of bottom-feeder bids that were too low to be seriously considered. The result is it’s brought MGM to a screeching halt and allowed the library to languish.
Now the MGM creditors also must decide either to commit MGM’s half of the production costs for the two films or take available outside funding, all before the studio works out its future ownership strategy. If the creditors don’t seize on the momentum, MGM risks losing its chance to release the first film in December 2012. (The second film would follow a year later.) And there is a good chance that Jackson will change his mind, meaning that inaction costs the studio an enormous opportunity.
Whatever course of action the creditors take, execs like Parent and Vollman will certainly move on as MGM goes through the pre-packaged bankruptcy proceeding necessary to keep in place existing rights deals on franchises like James Bond. That process isn’t expected until late July at the earliest. But decisions on The Hobbit cannot wait that long.