The Los Angeles Times’ “24 Frames” blog has posted a story based on an interview with Guillermo del Toro. In discussing his decision not to direct The Hobbit, he had this to say:

The genre auteur says he has no regrets about departing the New Zealand production, but says that anyone who think that MGM’s financial mess was the main culprit for his departure is oversimplifying the issue.

“People kept misconstruing that it was MGM. It came from many factors,” Del Toro told 24 Frames in an interview at Comic-Con. “It wasn’t just MGM. These are very complicated movies, economically and politically. You have to get the blessing from three studios.”

Instead, he said, it was the cumulative effect of all of these problems that began to wear him down. “It was really the fact that every six months we thought we were beginning, and every six months we got pushed [back]. And before you could blink, it was a year, and then it was two years.”

So was there was a last straw in this bundle of woes? Some insiders have said that Del Toro and Jackson clashed over creative-control issues. The director said that in all their time working on the movie, he and the “Lord of the Rings” filmmaker were nothing but copacetic, though Del Toro didn’t entirely rule out that it one day could have become fraught. “We were at the stage where the collaboration was good. If there were going to be any issues, we never got to that stage [in development],” he said.

As far as I can tell, the main named person who said that MGM was holding up the greenlight on The Hobbit was Guillermo himself, who made a statement that seemed to imply such a thing on TheOneRing.net. That followed shortly upon an unnamed “absolutely reliable source” who told TORN that MGM was indeed the main factor behind the delay.

Well, not to say “I told you so,” but although I’ve been covering the MGM developments, I’ve also been opining that I didn’t think the studio’s financial mess could be the main factor in the delay. Warner Bros. would not walk into a deal with a studio known to be tottering on the brink of bankruptcy without multiple contingency plans. Still, it sounds like there is some sort of tangle among New Line, Warner, and MGM, “economically and politically.” I hope someday we find out what the real cause was.

On Friday the Financial Times posted a long story that give the best and most comprehensible rundown on the MGM financial mess that I’ve seen. There’s some history of the studio itself, but then a clear explanation of the people involved and how and why MGM got into such a mess. Also why it can’t get loans to make any more films, including The Hobbit, until some way is found to restructure the studio. Not surprisingly, the failure of the many creditors to agree on a solution is a big factor.

Yesterday TheOneRing.net linked to a story on stuff.co.nz written by Gordon Campbell, a veteran news and media analyst, called “On the making of The Hobbit.” It’s perhaps the most extensive attempt to sum up the current situation in terms of the MGM situation and the ramifications of Peter Jackson’s potential assuming of the director’s hat. For those who have not been following every little twist and turn of the drama for the past few months, it’s a good way to catch up.

It’s an excellent article, but let me make a few small corrections and clarifications.

First, Campbell writes that MGM’s current choice is “to sell out to Time Warner who made the highest bid in an auction in March, or soldier on and try to run the studio themselves with re-financing and hired help …” As I understand it, the recent Lionsgate meeting with MGM was to put forward a proposal for a merger. That’s how the Los Angeles Times reported it. If that were to go through, Lionsgate would not be “hired help” but a partner within the same overall company.

Second, Campbell says that MGM’s assets include “the next James Bond film.” Actually MGM owns the Bond franchise, which is considerably more valuable.

Third, he points out that the Wall Street Journal sees Spyglass as the leading contender to take over the running of a restructured MGM. That may well be the case. The Lionsgate meeting, however, involved what I believe was the first formal proposal put forward since the bidding process was closed months ago. That might seem to make Lionsgate the leading contender du jour. Yet, as Campbell points out, the merger would require the approval of Lionsgate’s main shareholder, Carl Icahn, who seems dead set against the idea. So it’s definitely complicated.

Fourth, Campbell also points up the tangle of players who have or have had some share in the Hobbit rights. This is basically accurate, but it might give the impression that Saul Zaentz and Harvey Weinstein would have the same sorts of rights as other parties like Warner Bros. and MGM. There’s a notable difference. What Saul Zaentz bought back in 1976 was the production and distribution rights to The Lord of the Rings and the production rights to The Hobbit. Had he but paid that extra fee and bought the Hobbit distribution rights as well, we would not be in this current situation. What he then sold Harvey Weinstein (i.e., the Miramax company) in 1997 was the same thing: LOTR production and distribution, Hobbit production. MGM retained the Hobbit distribution rights and does to this day. [July 16: Clarification. As Voronwë the Faithful has pointed out to me over on the TORN Message Boards, what Zaentz sold Miramax and Miramax then sold New Line was a limited-term control over those rights, subject to various conditions. Zaentz is still the underlying owner of the rights. As I said, it's complicated.]

So Saul Zaentz and Harvey Weinstein will be owed some money, though less than the other players. Disney might well get some as well, since Disney owned Miramax at the time when Zaentz sold it the various rights described above. (Still does, though the company may change hands any moment.) Michael Eisner unwisely shared the 5% of gross minus costs that New Line had to pay to get the rights from Miramax: Disney got 2.5%, the Weinstein brothers 2.5%. I suspect that’s how the deal will work this time, too, but maybe not.

Finally, it’s Lionsgate, not Lion’s Gate.

Campbell gives some interesting speculations on how The Hobbit would fit into Peter’s career if he chooses to direct it. Whether or not he turns out to be right, it’s interesting to get a Kiwi perspective on the situation.

Not surprisingly, MGM today announced that it has been granted a sixth extension on the principal and interest payments overdue on its $3.7 billion debt. The new deadline is September 15.

Today the Los Angeles Times reported that Lionsgate has taken a step toward a possible merger with debt-ridden MGM:

Independent studio Lions Gate Entertainment’s chief executive, Jon Feltheimer, and vice chairman, Michael Burns, on Tuesday made a formal merger presentation to the steering committee of creditors overseeing the future of struggling studio Metro-Goldwyn-Mayer, people familiar with the situation said.

The meeting marks a major step forward for the two sides since they started to engage in merger talks last month.

The meeting comes just days after Lions Gate agreed to a 10-day detente with activist investor Carl Icahn, who owns 37.3% of the movie and television studio and launched a hostile takeover of the company. The parties agreed that during the truce they would jointly explore potential mergers and acquisitions.

As the story points out, there are all sorts of problems with this proposal. Icahn, Lionsgate’s largest stockholder, objects to such a move, and Lionsgate has about half a billion dollars worth of its own debt.

Still, as far as I know, this is the first formal plan of any sort to be offered since the round of bidding for the acquisition of MGM fell short of the creditors’ demands (though Time Warner’s reported bid of $1.5 billion remains on the table).

Variety has a shorter story on the meeting, adding its own take on the situation:

Neither company confirmed the talks, first reported Tuesday by the Los Angeles Times, but a knowledgeable source indicated that a meeting had taken place.

MGM’s expected to announce a sixth extension of payments on its $3.7 billion in debt on Wednesday when the current extension expires.

Liongate has been in informal talks about an MGM-Lionsgate merger in recent weeks. A combined MGM-Lionsgate would include a library with more than 7,000 titles and the ability to produce and distribute MGM titles — such as new James Bond movies and the two “Hobbit” films, which MGM co-finances with New Line.

At this point, all this remains unconfirmed, but it could suggest that some movement may actually be occurring.

(The studio’s name is Lionsgate, not Lions Gate, as written in the LA Times story.)

Over the past several days there have been some hints that the Hobbit film project is not only being delayed but that there is a serious possibility that it may be abandoned.

On July 1, The Hollywood Reporter ran a story saying that MGM will request a sixth extension on its current July 15 deadline for a payment of $250 million principal payment on its debt, as well as $200 million in interest. The request would come about a week before the deadline. One bit of news here is that MGM might end up selling its rights in The Hobbit:

Meanwhile, speculation continues about whether the studio will sell off its share of rights to “The Hobbit” to co-production partner Warner Bros., whose New Line is overseeing project development with director Peter Jackson; shooting is set to begin in January. MGM executives would like to hold onto its share of the “Hobbit” rights as long as possible, but some lenders are lobbying for a sell-off to raise funds.

The story also points out that although a sale of MGM has seemed unlikely, Time Warner still has a pending bid in: “Before its restructuring talks, MGM held an auction that drew a handful of underwhelming offers to buy the studio outright. Warners placed a top bid of $1.5 billion that was deemed too low by lenders but remains on offer.”

I would think that allowing the Hobbit project to fail would cause a pretty serious decline in MGM’s value, since its share in the rights to the novel’s adaptation is one of its main assets. MGM’s owners reportedly have been holding out for a bid of $2 billion before they would consider selling–but maybe the studio wouldn’t be worth that if there were no Hobbit on the horizon. (Presumably no potential buyer thinks that even with the Hobbit project the studio is worth $2 billion, since no offer approaching that was forthcoming.)

On July 3, Ian McKellen caused a stir by mentioning on a morning talk show in New Zealand that he is not firmly committed to playing Gandalf. (The interview is posted on TheOneRing.net.) Further delays might cause him to move on to other projects: “Frankly, I would like to race after doing Waiting For Godot, get on with doing another play but we’ll have to see. I don’t give the producers the impression that I’m sitting waiting.”

Today stuff.co.nz posted a story about how the lack of major film projects in Wellington is causing some filmmaking talent to move elsewhere, notably to long-term contracts on television projects in Auckland. It includes this interesting quotation:

Jackson’s spokesman, Matt Dravitzki, said: “We are working very hard to get The Hobbit made.

“In the event that The Hobbit did not go ahead, [Jackson's] Wingnut Films has a number of other projects in development. Tintin is currently in post-production at Weta Digital and the second Tintin film will be shot in Wellington in the future.”

That might be of comfort to people in Wellington who need filmmaking jobs, but it certainly sounds ominous to those interested in seeing The Hobbit get made.

Of course, there is always the possibility of bringing in film personnel from elsewhere. Australians frequently work on Kiwi films, as when cinematographer Andrew Lesnie shot the LOTR trilogy. And although film productions are required to try and hire New Zealanders and people from abroad with work permits, if no such people are available within the country, the studio can hire from outside. That process, if needed on a large scale, could easily cause further delays.

Ian said in his interview, “An announcement is imminent, but what it will be I genuinely don’t know. It’ll either be that we’re going ahead or that we’re not.” We have heard that sort of thing for a long time now. (Things seemed pretty rosy at Comic-Con last year, and now that event has nearly rolled around again, and we’re still waiting for a greenlight.) Let’s hope he’s right and that we’ll get some real news soon.

There have been reports that Spyglass Entertainment and Summit Entertainment were in the lead to take over the running of a restructured MGM. Now Variety is reporting that Lionsgate is another candidate for that role. Since Variety is behind a subscription walls, here’s the story:

Lionsgate has re-entered the mix of possible partners for beleaguered MGM.

Informal merger talks between MGM and Lionsgate — which have been held off and on for years — have taken place recently, according to people with knowledge of the situation.

Both companies had no comment. Lionsgate CEO Jon Feltheimer and Vice Chairman Michael Burns, who would probably run the combined studio, have participated in the discussions but haven’t made a formal proposal.

The interest from Lionsgate comes with MGM seeking to survive, possibly via a partnership, as a way of dealing with its massive $3.7 billion debt. MGM’s believed to have met recently with other candidates who could run the studio and bring in production funds, including Spyglass Entertainment toppers Gary Barber and Roger Birnbaum and Summit Entertainment.

For Lionsgate execs, making an official offer for MGM would require that Carl Icahn support such a deal — even though Icahn’s promised a proxy fight for control of the Lionsgate board. Icahn has recently boosted his stake in Lionsgate to 31.8% via a hostile tender offer.

Earlier this year, Icahn criticized Lionsgate management for making an official bid for MGM, believed to be $1.4 billion. Lionsgate withdrew as a bidder in March when MGM asked for a sweeter offer and Time Warner remains the only official bidder.

Lionsgate also disclosed in a regulatory filing this year that it had held talks with Icahn last year about possibly combining forces for a takeover bid for MGM but those talks went nowhere.

The combination of Lionsgate and MGM would result in a studio with a library of more 7,000 titles. MGM’s assets include the James Bond franchise and half of “The Hobbit” films. Lionsgate, which is nearing $2 billion in annual revenues, would bring in a film production operation that focuses on low- and mid-budget projects such as Tyler Perry and “Saw” films with 13 to 14 titles a year; and a TV producing arm that includes “Mad Men,” “Weeds,” “Nurse Jackie”;

MGM put itself up for sale last November. Its debtholders are expected to need at least several more weeks to sort out MGM’s future, which will probably require the company to reorganize in a pre-packaged bankruptcy.

Lionsgate needed only three business days to persuade its lenders to amend terms of the revolving credit facility after Icahn increased his stake in the company to 31.8% through his tender offer. Icahn’s move had placed Lionsgate in the position of a possible default but the company was able to negotiate terms that carry a “favorable” interest rate of the London Interbank Interest Rate plus 2.5% with other key financial terms and provisions unchanged.

As the story mentions, Time Warner’s bid, apparently in the neighborhood of $1.5 to 1.7  billion, is still in play, in case MGM’s debt-holders decide to sell the studio rather than restructure it.

Today Variety posted a long story about the changes CEO Jeff Bewkes has made in Time Warner. No mention of The Hobbit, though the story does mention that Bewkes doesn’t seem inclined to raise its offer, rumored to be in the neighborhood of $1.5 billion, to buy MGM.

The summary includes a section on how Time Warner has been expanding into the video-game business:

Time Warner’s M&A activity mostly has focused on opportunistic, low-risk buys of videogame publishers and developers with creative talent and assets that Warner Bros. needs to expand its games biz. This year, it acquired a majority stake in London-based Rocksteady, which was had been working with the studio on a Batman game; and Boston-based online gaming outfit Turbine.

That company, through a quirk of licensing, controlled multiplayer online gaming rights to “The Lord of the Rings” franchise, while Warner Bros. had a lock on every other “LOTR” gaming format. Last year, it swooped in to buy “Mortal Kombat” maker Midway Games out of bankruptcy for $49 million after Sumner Redstone lost $800 million on the company. Warners also bought Bothell, Wash.-based Snowblind Studios last year.

The vidgame activity is a good example of the kind of strategic “tuck-in” deals that Bewkes is looking for to enhance existing operations. Time Warner’s revenue from vidgames rose from $100 million in 2007 to $510 million in 2009, according to the company.

The LOTR rights mentioned are, I believe, based on the novel (Turbine’s online game) and a combination of the novel and film (Warner’s holdings). It seems likely that eventually The Hobbit video-games will also be handled in-house. That business, including its LOTR component, seems to be doing very well for the company.

Yesterday TheOneRing.net scotched rumors that The Hobbit has been greenlit and is planned to be 3D. Guillermo del Toro had given an conference-call interview about Splice, a horror film he co-executive-produced. Today the full text of the interview went up on “Shock Till You Drop” with additional quotations from GdT:

Question: Do you know when production is going to begin on The Hobbit and when you’re actually going to get onset?

Del Toro: There can’t be any start date, really, until the MGM situation gets resolved because they do hold a considerable portion of the rights and it’s impossible to make a unilateral decision by New Line or Warner. We really believe that dates will be known after the fact of MGM’s fate. Whether they stay and get supported or they get bought or they transfer some of the rights, nobody knows. We’ve been caught in a very tangled negotiation. Now I’ve been on the project for nearly two years. We have designed all the creatures. We have designed the sets, the wardrobe. We have done animatics and planned very lengthy action sequences. We have scary sequences and funny sequences and we are very, very prepared for when it’s finally triggered, but we don’t know anything until MGM is solved.

Question: Just to absolutely clear, the story that was reported earlier that The Hobbit has been greenlit for 3-D, that is false?

Del Toro: In both counts, there is absolutely no final answers. It’s not greenlit. That’s categorical. It’s not greenlit. 3-D has been discussed literally once in the room. The budget and the schedule and everything we’re handling – the cost of the film and the number of days it would take to shoot – is being handled right now without looking towards 3-D. Is there a chance it would become 3-D in the future? Maybe. But right now it’s not being planned as such.

This confirms that a lot of progress has been made on the preparations for the filming. I’m not keen to see The Hobbit made in 3-D, since the idea is to make it blend smoothly in as a lead-in to the LOTR trilogy, so I was happy to hear that 3-D seems unlikely to be used.

The MGM financial crisis seems to be more involved in the delay in the greenlighting of the film than I would have expected. I’ve been assuming that the contract between Warner Bros./New Line and MGM would have been full of contingency measures to be taken in such a situation–especially given that the latter studio’s debt problems were well known. At this point, we can but wait. At least it’s good to hear from Guillermo after a long silence on the part of the filmmakers, who obviously are forbidden by their contracts to talk freely about the situation.

TheOneRing.net has alerted us to an LA Times story from May 24 that suggests a tangled situation indeed as MGM’s debtors try to find someone to take charge of restructuring the studio.

So it’s interesting to read a contrasting story posted yesterday by Variety that gives us some information about a question that has occurred to many of us: How has MGM kept operating during these tough times? What pays the bills?

Its major source of income, it turns out, is television. Though feature filmmaking has become almost moribund at MGM, its TV division is forging ahead:

Even as the Lion faces a very uncertain future, execs on the TV side of the studio are quietly working to set up new business and expand existing ventures, such as the This TV digital movie service. Feature activity at MGM is largely in limbo, save for a handful of long-gestating projects, because of the studio’s debt crisis and larger financing commitments required by movies.

But Jim Packer and Gary Marenzi, the industry vets who are co-presidents of MGM Worldwide TV, are still actively hunting for deal opportunities and partnerships to keep some level of activity going at the studio while its long-term situation is sorted out by the steering committee of creditors who hold the bulk of MGM’s $3.7 billion in outstanding debt.

Last week, MTV ordered 12 hourlong episodes of a smallscreen rendition of the Lion’s 1985 cult-fave pic “Teen Wolf,” to be co-produced by MGM and MTV, with MGM controlling worldwide distribution rights. The “Teen Wolf” pilot is being screened for international buyers in town this week for the L.A. Screenings.

On Tuesday, MGM announced a carriage extension agreement with Tribune Broadcasting for its 18-month-old This TV service, a 24/7 movie channel designed to be carried by local broadcast TV stations as a digital multicast offering. MGM was the most aggressive of Hollywood’s majors in developing a programming service for local stations as the nation made the transition to all-digital broadcasting.

This TV started slowly in its November 2008 debut, but it has since been picked up by stations covering about 85% of U.S. TV households. The new pact with Tribune gives This TV a clearance in New York for the first time, via Tribune WPIX-TV, as well as expanding to other Tribune stations in Miami, St. Louis, San Diego and Grand Rapids, Mich. The channel is also getting significant carriage on cable systems, as local stations push for the inclusion of their This TV subchannel as part of retransmission consent deals with cable operators.

MGM continues to produce new segs of the “SGU Stargate Universe” drama for Syfy. And execs are actively mining the Lion’s extensive film and TV library for remakes and reboots along the lines of the “Teen Wolf” model. MGM’s Chris Ottinger spearheaded the packaging and sale of the project to MTV.

MGM’s dealmaking ability is certainly compromised by the cloud of the debt problem that became acute for MGM late last summer, and the auction process that drew underwhelming bids from a handful of suitors. But Packer’s focus is on making the most of what they’ve got — and with a library of 4,100 pics and 10,000 hours of TV programming, they’ve got a fair amount to work with.

MGM also has TV assets abroad: “Beyond U.S. shores, the Lion has MGM-branded movie channels operating in 130 countries, with an aud base of about 75 million. It’s a steady source of income that has helped keep the lights on for Leo during its most recent rough patch.”

All this doesn’t mean that the filmmaking side isn’t in a messy state. Still, it’s nice to know that MGM isn’t a complete basket case.