JACKSON'S VISION

Fantasy novel "The Hobbit" tells of a world inhabited by wizards, dwarves, elves and little people called hobbits, including the central character, Bilbo Baggins. "The Hobbit" preceded Tolkien's "Lord of the Rings" trilogy.

The Ring films were released from 2001 through 2003.

Jackson and Walsh envision the first film covering the events of "The Hobbit" and the second bridging the 80-year gap between that novel and the first book of the trilogy.

Much of the plot for the second film would be gleaned from footnotes in "The Hobbit" that address that gap, Kamins said.

It was that vision that led MGM, which holds film rights to the book, to insist Jackson and Walsh make the movies.

"Once (they) played out their vision for 'The Hobbit' as two movies ... MGM just took the position that we wanted to deal with Peter and it was not an option to do it with anybody else," Sloan said.

He added the studios "would welcome as much of the original ('Rings') cast as possible," adding that "some of them have even said they are interested."

For years, the making of a Hobbit movie had been delayed while Jackson and New Line wrangled over profits from the "Rings" films. The director had sued New Line claiming it owed him money. Jackson and New Line have now settled that suit.

MGM and New Line, a unit of Time Warner Inc, will co-finance the films, with New Line distributing in the United States and MGM internationally. MGM is a closely held company owned by private equity firms and media divisions of Sony Corp and Comcast Corp.