[William Cloud Hicklin]

I have not seen the contract. Given what little I know about the through-the-looking-glass world of showbiz accounting terms, I would expect that 'production costs' is equivalent to what the industry calls 'negative cost'- ie what it costs to shoot and assemble the finished master print of the movie, before distribution, marketing etc. The usual figure reported for the 3 PJ films is about $300M.

Again, I haven't seen the contract; it might or might not include the notorious clause under which the studio gets to use whatever bizarre accounting methods it likes.

BUT

1) In at least one famous movie-percentage case, Buchwald v. Paramount, the court found that clause to be 'outrageous' when coupled with the studio's shameless accounting practices, and threw it out.

2) This contract is governed by New York, not California, law, and NY is a real stickler for 'accepted standards of accountancy.' I wouldn't be surprised if the court ordered NL to produce its tax returns and SEC filings- in which the books have to play by tight Federal accounting rules. After all, New Line was reporting record profits to its shareholders the whole time it was claiming the movies were losing money!

3) Greenberg, Glusker is a major-league LA entertainment-law firm, and I would reckon they know exactly what they're doing. Remember, New Line ignominiously settled the previous LR-share suits it's defended; and, like Peter Jackson and Saul Zaentz and unlike most authors, the Tolkien Estate (and HarperCollins) have the money to hire bigtime lawyers and fund bigtime litigation.

4) Interestingly, the plaintiffs are not asking the court to strip New Line of the Hobbit rights- they just want a ruling that they have the right to do so. This provides some wiggle room, as in perhaps the Estate agreeing to allow some studio not connected with NL to buy the rights.