Warner Bros. to handle ‘Hobbit’ in most overseas markets, fund MGM’s half of budget

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Warner Bros. has struck a deal with Metro-Goldwyn-Mayer to handle distribution of the two upcoming movies based on ‘The Hobbit’ in most foreign countries in exchange for covering the entire budget of the productions estimated at $530 million to $550 million.

Production on ‘The Hobbit,’ which will be overseen by Warner Bros.’ New Line Cinema unit, is set to begin shooting in February in New Zealand. The first of the two movies will be released in December 2012, with the second one coming out the following December.

Under an existing arrangement, MGM was obligated to split the cost of ‘The Hobbit,’ which will be directed by Peter Jackson, with Warner Bros., and owned international distribution rights to the movies. Warner already controlled rights to the films in the U.S. and Canada.

MGM has just emerged from bankruptcy, however, and doesn’t have enough cash to cover its portion of ‘The Hobbit’ budget. In a bankruptcy filing, MGM said it would owe $265 million to $275 million for ‘The Hobbit,’ along with $40 million it has already spent on pre-production and development.

Under new leadership of co-chief executives Gary Barber and Roger Birnbaum, MGM recently closed a $500 million line of credit that will be used to produce other movies and cover its overhead.

While Warner will handle theatrical and home video distribution of ‘The Hobbit’ in the majority of markets overseas, MGM will sell the television rights abroad.

--Ben Fritz

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