Variety is reporting that Universal and Fox have abruptly backed out of their agreement to co-finance a movie based on Microsoft's popular Halo videogame (see 'Halo Helmer Named').  According to Variety the studios pulled the plug after an unsuccessful attempt to get the filmmakers and Microsoft to reduce their gross points participation.

Much in the same way that Microsoft packaged its highly successful Halo Graphic Novel and then sold it to Marvel, Microsoft and Bungie studios hired Alex Garland to write a Halo script and then pitched it to the studios with Peter Jackson and Fran Walsh (Lord of the Rings) on board as producers.  In addition to a $5 million payment for the script, Microsoft was supposed to get 10% of the film's gross receipts.

Although rumors indicated that the studios were upset over the film's budget projections, Jackson's representative told Variety that the film could be made in New Zealand for about $128 million.  In fact work is continuing on the project at Weta Digital and Weta Workshop in New Zealand, since the filmmaker's and Microsoft are convinced that they can secure other financial backers and distributors for the project.