Peter Jackson and New Line part ways on "The Hobbit"

In an open letter to fans, Jackson and partner Fran Walsh describe why they won't be doing a feature film version of The Hobbit. It mostly hinges on a lawsuit they brought against studio New Line when there was an accounting audit on The Fellowship of the Ring - apparently there was some question as to whether New Line was treating Jackson's company, Wingnut Films, equitably. Here's the nut of it:

In other words, we would have to agree to make The Hobbit as a condition of New Line settling our lawsuit. In our minds this is not the right reason to make a film and if a film of The Hobbit went ahead on this basis, it would be doomed. Deciding to make a movie should come from the heart - it's not a matter of business convenience.

I've always been skeptical that this project was ever going to come together, and frankly I'm not convinced that it should. The Lord of the Rings is a story deserving of the epic style with which those films were imbued – The Hobbit is a smaller story that needs the sort of treatment it's already been given in the animated version.