How the Wall Street crisis hit ‘The Hobbit’

Last weekend an object lesson in that truism hit the film world, as fan boys and the rest of us suddenly found ourselves the unexpected victims of Wall Street woolliness.

For the last two years, Guillermo del Toro had been keen to direct “The Hobbit,” the much salivated-over two-picture adaptation of J.R.R. Tolkien’s mystical epic — so keen that he uprooted his family and life for it. Del Toro turned down every other film and spent nearly two years prepping a shoot that was to begin later in 2010, for a pair of movies that would be released over the holidays in 2012 and 2013.

But that all changed — or, rather, a change that had been brewing for months finally bubbled to the surface. What seemed like so much doomsday speculation last year, back when it first became apparent that co-financier/co-producer MGM was hitting the rocks, became a very tangible reality. It didn’t happen with high drama — MGM didn’t pull the plug on a “Hobbit” movie the way venture-capital projects were suddenly stopped in their tracks by the credit and investment freeze. It didn’t have to.

The current incarnation of MGM was formed six years ago thanks to an influx of Wall Street money and lending that was rampant at the time.

But six years later, MGM now labors under nearly $4 billion in debt, which has both hampered its ability to finance new productions as well as made the company unattractive to prospective buyers. So deep is the uncertainty (and the debt) that the studio’s production schedule has been significantly slowed — so much so that it finally caused del Toro to walk away.

“In light of ongoing delays in the setting of a start date for filming ‘The Hobbit,’ I am faced with the hardest decision of my life. After nearly two years of living, breathing and designing a world as rich as Tolkien’s Middle Earth, I must, with great regret, take leave from helming these wonderful pictures,” del Toro said in a posting on Tolkien fan site TheOneRing.net.

It shouldn’t have been a complete surprise. MGM has been clinging to “The Hobbit” like a last-ditch lifeline even as its other projects have skittered away. The 23rd James Bond movie went from an MGM-centric enterprise with a big directorial name (Sam Mendes) to a film that was indefinitely on ice. A movie that had already been completed and earning high test scores, “The Zookeeper,” was handed over to Sony. Several other development projects were frozen in place. It was only a matter of time before some kind of unfortunate fate hit “The Hobbit.”

The world of independent-film financing has until now born the brunt of the crisis, as those less expensive, one-off pictures are, paradoxically, the ones that needed the cash from this more slippery world. With this news, one of the most anticipated and reliable franchises — a Tolkien adaptation from an A-list group of creators — is getting hit, too.

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