Peter Jackson is in negotiation to direct The Hobbit; the much anticipated prequel to the Lord Of The Rings that will be split into two films, Guillermo Del Toro was to direct and is currently finishing the screenplay for both movies but has decided to walk away from the production after many delays caused by MGM's financial issues.
MGM owns 50% of the rights to The Hobbit and have much debt and until a buyer for the studio can be found this debt is holding up many productions including the next Bond 007 movie.
Another reason that Del Toro is not going to direct The Hobbit is family reasons and other film commitments, he has already spent considerable time working on these movies and coupled with the frustration of the ongoing financial issues at MGM he may have felt the production could well be delayed yet again.
There will be many who will be pleased with the news that Peter Jackson could direct these prequels but i personally think that Guillermo Del Toro is a fabulous director with great vision, an eye for detail and an amazing imagination, Del Toro would have made these films special and very memorable, It is a loss to the production that he will not be directing anymore.
Bids for MGM have all been lower than necessary to complete the sale of the studio, one hope could be Warner Bros who may increase their bid, Warner bought many of the MGM back catalog back in the eighties and also own New Line who are one of the other studio's involved in the production of The Hobbit, if Warner does buy MGM this will not only ensure that The Hobbit starts filming this year but will also ensure the next Bond movie gets back on track.
Peter Jackson has with Del Toro, Fran Walsh and Philippa Boyens been putting the finishes touches to the script but he has a film deal with Universal which means in order to direct The Hobbit films he must now sit around the table and reach agreement with Universal to let him out of his movie deal and also reach a deal with New Line/MGM/Warner and that will not be easy, indeed these negotiations could be difficult as Jackson will surely want a percentage of the profits to direct and Universal may not want to release him from his contract.
If they go ahead with the film and start shooting before MGM is sold off then this could be a problem as the studio may face bankruptcy which would endanger the whole production and be a costly mistake.
The Hobbit has Bilbo Baggins being recruited by dwarves to defeat a dragon and recover treasure, there is a lot more going on which includes battles with trolls, elves and spiders, this being a Lord Of The Rings prequel you won't be surprised to hear there is a large scale battle called the battle of five armies, these films lead up to the start of Fellowship Of The Ring and will feature Gollum, the one ring and the cave scenes shown in flashback from the first and third movies.
Hopefully Warner or some other studio will buy MGM and this production will go ahead, any more delays could see these films pushed back to 2013/2014. Peter Jackson is hoping to release the first prequel in December 2012 and the second Hobbit movie in December 2013.
:UPDATE: They started shooting the film early 2011 and the first of the movies should hit cinemas as planned in 2012.