Nov. 22, 2006 -- The creative force behind the wildly popular "Lord of the Rings" films says he will not take part in the filming of the eagerly anticipated JRR Tolkien story "The Hobbit" or another Lord of the Rings prequel -- leaving legions of fans worldwide shocked and disappointed.
It's not that director Peter Jackson doesn't want to make the films -- something he says he fully expected to do until very recently.
But Jackson says a bitter legal dispute with film company New Line has now made that impossible.
On the fan Web site theonering.net, Jackson and producing partner Fran Walsh write that New Line contacted them to say the company "would no longer be requiring our services on the Hobbit and the LOTR 'prequel.' This was a courtesy call to let us know that the studio was now actively looking to hire another filmmaker for both projects."
At its heart, the dispute is about money.
The three Lord of the Rings films reportedly brought in global box office profits of nearly $3 billion. The Oscar-winning director claims New Line withheld profits from the first part of the "Lord of the Rings" trilogy.
In his ongoing lawsuit with New Line, Jackson says the two parties have a difference of opinion about certain accounting practices and he has asked a third party to intervene.
Until the issue is resolved, Jackson says he could not in good faith move forward on the project.
"It's that passion, and passion alone, that gives the movie its imagination and heart," Jackson writes. "To us it is not a cold-blooded business decision."
A spokesman for New Line refused comment on the matter to ABC News and others, but according to Jackson the company says the reason for moving forward is that the studio's rights to the film are about to expire and so the clock is ticking to get the film into production.
Industry watchers say it may not be that clear cut.
"It's just Hollywood blustery. This is Hollywood, if you can make up with someone you try to make up with someone," says Michael Speier, managing editor at Variety.
At the same time, Speier says it is possible New Line could move forward without Jackson.
"There's a lot of name directors they could get," Speier says. "Something like 'Harry Potter' succeeded with a different director every time."
Entertainment writer Ross Johnson agrees. He's written extensively about money squabbles between Jackson and New Line for the New York Times.
"I think New Line doesn't want to look like it's being insensitive to Peter Jackson, but they have to be prepared to move on," Johnson says. "The loyalty is not to Peter Jackson -- even though he has a tremendous amount of fans -- the loyalty is to the story."
Jackson seems to think that will be the case.
"This outcome is not what we anticipated or wanted, but neither do we see any positive value in bitterness and rancor," Jackson writes. "We now have no choice but to let the idea of a film of The Hobbit go and move forward with other projects."
For New Line, finding a director to fill Jackson's shoes will not be easy. "Lord of the Rings" fans are already launching an online campaign to pressure the studio to reconsider.
One fan writes: "I feel like there has been a death in the family. There are a lot of questions that will remain unanswered for the time being."
Could such online outrage could be part of a larger strategy?
"Jackson's doing the smart thing in getting the fan base," Speier says. "If he can get them on his side, no one's gonna try to make this thing without him."
And the final chapter certainly hasn't been written yet. While New Line owns the rights to make "The Hobbit," MGM owns the distribution rights and that studio is reportedly still interested in getting Jackson onboard as the film's director. That could mean more trouble for New Line, which now risks upsetting the film's fan base and its own production partner in what is sure to be an expensive endeavor.
With so much uncertainty, Jackson isn't holding his breath.
"We send our very best wishes to whomever has the privilege of making The Hobbit," he writes. "And look forward to seeing the film on the big screen."