Lord of the Rings director Peter Jackson wrote a letter to his fan base over the weekend stating that he was walking away from negotiations with New Line Cinema regarding filming of The Hobbit.

According to the letter, Jackson was not interested in discussing terms of the new film until his lawsuit with New Line concerning DVD proceeds from The Fellowship of the Ring was settled.  Also according to Jackson, New Line offered to settle the lawsuit if he agreed to commit to The Hobbit film. 

News sources report that New Line's interest in moving on the film production, with or without Jackson, is due to a limited time offer on the rights from producer Saul Zaentz. Other sources speculate that New Line was hoping to score a smaller settlement with Jackson, using his passion for The Hobbit material as leverage.

Hollywood news sources suggest that Jackson's popularity with fans, the proprietary Gollum 'code' developed by his special effects studio, and the rumor that key actors from the trilogy may refuse The Hobbit gig in allegiance to Jackson, may mean that these negotiations are not necessarily over.  Jeff Pryor, speaking on behalf of MGM, which has distribution rights to The Hobbit, stated, 'We still believe this matter of Peter Jackson directing The Hobbit is far from closed.'