Finance and fan boys: How the Wall Street crisis hit Guillermo del Toro’s ‘The Hobbit’


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If there’s one message that “Inside Job,” Charles Ferguson’s new documentary about the financial crisis, imparts to audiences, it’s that even the most far-flung factors can give rise to serious real-world consequences.

On Sunday 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.
On Sunday, 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. Several private equity groups, along with Sony and Comcast, sank in hundreds of millions of dollars, and rich credit facilities with the likes of J.P. Morgan Chase were set up.

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. (For a complete examination of where the situation at MGM currently stands, check out this excellent story from my colleagues Claudia Eller and Ben Fritz.) So deep is the uncertainty (and the debt) that the studio’s production schedule has been significantly slowed -- so much so that, on Sunday, 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

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.” And while technically neither MGM nor co-financier and co-producer New Line was shutting down production, few could blame del Toro, watching all of this happen and feeling like his own production schedule was clouding up to the point of murkiness.

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.


Some would say that it’s all a little unfair. MGM’s business plan was a long-term one, a plan that required the development of franchises; the “Hot Tub Time Machine’s” and “Valkyrie’s” of the world were never going to be enough. If it was to succeed, it would need to take control of James Bond and, especially, “The Hobbit.” There’s truth to that, but there’s also a kind of karmic fairness to how this all has gone down. MGM was created as part of the financial froth of the mid-2000s. And if there’s one thing the last sobering 18 months has taught us, it’s that if you live by the bubble, you die by the bubble.

No one knows what kind of “Hobbit” del Toro would have made, or if the years the eminently talented director dedicated to it would have been worth the films he wasn’t working on during this time. What we do know now is that we’ll get a chance to see the other side of that coin. There could be some significant del Toro output over the next few years. The “Hellboy” and “Pan’s Labyrinth” director, after all, has plenty of options -- he’s kept some development irons in the fire and pretty much every studio is chomping to get him. (More on his possible new directions in a later post.)
Meanwhile, Peter Jackson and the others developing the tale of Bilbo Baggins say that it will continue to move forward. It’s hard to imagine how that happens with the same intensity. Even if the financial and scheduling issues somehow begin to clear up -- almost overnight, like a mystery rash -- there’s still the small matter of getting a top-flight director who isn’t spooked by the same things that scared del Toro. And then there’s the question of whether said director picks up where del Toro left off (unlikely for anyone of a certain stature) or starts over from scratch. That could take even more time, enough time for MGM to have found its way out of trouble -- or for a new bubble to burst.

-- Steven Zeitchik

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