Return of the Hobbit

"Ash nazg durbatuluk, ash nazg gimbatul, ash nazg thrakatuluk, agh burzum-ishi krimpatul."

Or in English:

One Man to rule them all,

One Man to find them,

One Man to bring them all

and in a dark theater spellbind them.

Now, my translation could be off -- I'm not entirely fluent in Old Mordorian -- but it seems to me that the throat-scratching prophecy you see above foretold this week's news: Metro-Goldwyn-Mayer Studios (MGM) and Time Warner's (NYSE: TWX  ) New Line Cinema have confirmed that Peter Jackson will executive produce (and quite possibly direct) The Hobbit.

"And what is a Hobbit?"
Author J.R.R. Tolkien relates in the introduction to my 1966 edition of The Hobbit: "Hobbits are little people, smaller than dwarves. They love peace and quiet and good tilled earth ... " More apropos to today's column, though, The Hobbit is the long-awaited prequel to The Lord of the Rings trilogy. I'm betting that even non-Tolkien fans have heard of that one. Since its cinematic release in 2001, the Rings trilogy has grossed just under $3 billion in box office receipts worldwide, according to

  • The first movie, The Fellowship of the Ring, grossed $871 million.
  • It was soon followed by The Two Towers, which pulled down $926 million.
  • Which was in turn displaced by Oscar-winning The Return of the King at $1.1 billion (yes, with a "b").

And that doesn't count the money Rings earned for Electronic Arts (Nasdaq: ERTS  ) in video games, Marvel (NYSE: MVL  ) in toy action figures, or Topps (Nasdaq: TOPP  ) in trading cards. In short (pun intended), Rings made a mint for corporate America. And as a result, a backward extension of the franchise into Hobbiton promises the chance to make even more.

A dark cloud rising in the east
Or so you might think. For much as the four nations (Dwarves, Elves, Goblins, and Men) fought over Smaug's treasure, there came a falling out among the key beneficiaries of the Rings' success. Sued by Peter Jackson over a royalties dispute, New Line banned Jackson for life, vowing that Jackson would play no role in the making of The Hobbit.

Return of the sanity
Fortunately, this decision wasn't New Line's to make -- or at least not entirely. You see, in a fortuitous coincidence, New Line didn't own all the movie rights to The Hobbit. Those partially belonged to MGM as well, where Sony (NYSE: SNE  ) and Comcast (Nasdaq: CMCSA  ) both hold a stake. They probably didn't think extending such a lucrative series without the original director was such a hot idea.

Turns out, reason (and Mankind's lust for gold) won the day. Jackson will executive produce not one, but two Hobbits. There's also speculation that Jackson will be chosen to direct the films, but that's probably unlikely.

Foolish takeaway
Fellow Fool Anders Bylund pointed out that New Line's most recent attempt to recreate the fantasy magic from its Rings success with Golden Compass didn't go over too well. So maybe there was more at stake here for New Line and the fantasy genre, but at least Tolkien fans will have two more movies to enjoy.

But we're not just fans here at the Fool. We're also investors -- and at our flagship investing newsletter, Motley Fool Stock Advisor, recommenders of Time Warner stock. So what does all of the foregoing mean to us in our capacity as rapacious capitalists?

Simply put, the goose has been reloaded with golden eggs, folks. Maybe The Hobbit would have minted some gold without Jackson. Maybe all it would have produced was silver. But with a proven performer and crowd-pleaser like Jackson at the helm, this thing's a lock. Come 2010 (and 2011 for the sequel-to-the-prequel), Time Warner's going to be rolling around in Smaug's stash, tossing gold coins in the air.

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