According to New Stir in the Shire: ‘Hobbit’ Rights Fight, MGM still holds the distribution rights to The Hobbit — and is effectively holding New Line hostage:
Mr. Tolkien, an Oxford professor who dreamed up the idea of the hobbits while marking exam papers, sold the rights to his Middle-earth tales, including ‘The Hobbit,’ to MGM’s United Artists in 1969 for an estimated $10,000 to pay off a tax bill. MGM subsequently sold most of the film rights to Hollywood producer Saul Zaentz, who made an often-derided animated ‘Lord of the Rings’ in 1978.
After a series of twists and turns that included settling a lawsuit with United Artists, Mr. Zaentz eventually sold the rights to New Line after approving a treatment put forward by Mr. Jackson. However, MGM retained the distribution rights for “The Hobbit.” It’s unclear what rights Mr. Zaentz has going forward; he declined to discuss the matter.
MGM is no “shireling” when it comes to negotiating such deals. Owning one of the biggest film libraries in Hollywood, MGM often has found itself at the center of disputes over movie rights, including an eight-year legal battle over “Spider-Man,” which it eventually settled. This time, the rights to “The Hobbit” present a potential gold mine at a moment when the studio may be looking for a merger partner.