The big news sweeping through Tinseltown this morning is the settlement of the dispute between New Line Cinema and director Peter Jackson that clears the way for Jackson and his partner Fran Walsh to produce two Hobbit films for New Line/MGM.  Jackson, who has commitments to Dreamworks to direct Lovely Bones and a Tintin movie, is only listed as a producer on the Hobbit, at least so far.  However, the Hobbit is being made as two films (shot back-to-back) as Jackson had envisioned and will likely be produced in New Zealand with the WETA team that worked so effectively on Jackson's LOTR trilogy.  If Jackson does not direct the Hobbit films, there are plenty of other good options including Spider-Man helmer Sam Raimi who has indicated that he would love to direct the Hobbit films, if Peter Jackson was producing.

New Line's settlement with Jackson reportedly includes a major payment to the director along with the right to closely examine the earnings of the second two LOTR films.  The announcement of the settlement in the wake of the disappointing opening of New Line's The Golden Compass (see 'The Golden Compass Points in the Wrong Direction'), which, even though it is doing well overseas, will have a hard time earning back its enormous cost ($200 to $250 million), is hardly coincidental.  New Line's Bob Shaye, who categorically ruled out Jackson ever working for New Line again, has had to eat a large and expensive helping of humble pie to get the Hobbit project back on track (and most likely to keep his job as the head of New Line).

Once the current writers strike is settled, New Line and MGM are planning to get a script done in time to begin production in 2009.  MGM and New Line are co-financing the films with New Line supervising production and handling domestic distribution and MGM distributing the films internationally.