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New Line on the financial defensive over film budgets, licensing? - Lord of the Rings news - J.R.R. Tolkien's The Lord of the Rings

December 24, 2000 at 21:06:58

Before 'Dungeons and Dragons' was clobbered by 'How the Grinch Stole Christmas', industry analysts were asking if New Line Cinema isn't spending too much money in the wrong places.

"Dungeons and Dragons" hasn't shown the box office results New Line hoped for. But at the beginning of December the L.A. Times was suggesting "Little Nicky" may herald the onset of another "darkest hour" for New Line Cinema.

New Line has been gambling quite a bit and spreading big money around, but they haven't really been bringing in the hits like industry observer feel they should be. Upcoming big budget projects include Warren Beatty's "Town and Country", Chris Tucker and Jackie Chan in "Rush Hour 2", and Peter Jackson's "The Lord of the Rings".

The first two movies don't sound very appetizing. It may come down to "The Fellowship of the Ring" vindicating the judgement of executives like Michael De Luca, whose boss Michael Lynne of Time Warner didn't allow the L.A. Times to interview him.

"In this business, you have times when the product works and when it doesn't," Lynne told the L.A. Times by telephone. But the Times article is quick to point out that New Line, despite posting its highest gross earnings ever in 2000, brought several other flops to the big screen this year: "Bamboozled", "Lost Souls", "Price of Glory", and "Turn it Up". More successful films like "The Cell", which grossed $60 million domestically but cost $45 million to produce, helped even the bar but not by much.

New Line Cinema does sell off foreign distribution rights early on, and merchandising deals struck for "The Lord of the Rings" are expected to bring in hundreds of millions of dollars and New Line and its licensees. Whether the LoTR merchandise extravaganza tops the Star Wars bonanza, which generated more than $1,000,000,000 in merchandising revenues for George Lucas for just the "Phantom Menace" alone, remains to be seen.

But New Line's quest for control over the merchandising empires of the world has been troubled by the pre-existing Tolkien-related contracts issued by Tolkien Enterprises prior to closing the film deal. The two most visible cases have involved Havas Interactive division Sierra Online, whose Middle-earth Online game now seems to be a dead project, and Toy Vault's Middle-earth Action Figures.

Sierra filed a lawsuit against Tolkien Enterprises earlier this year when Tolkien Enterprises, a division of the Saul Zaentz Company, informed Sierra that its contract was being rescinded for failure to perform. Tolkien Enterprises maintained that Sierra had effectively terminated its involvement with the contract when they cancelled a planned PC game, "Orcs: Revenge of the Ancient", and put development of a massively multiplayer online game called Middle-earth Online on hold. Sierra fired 100 employees, including the entire development team for Middle-earth Online.

The domain name Middle-earth.com, registered by Sierra, has reverted to Tolkien Enterprises but is currently in limbo. The IP address has been reassigned to a company with no connection to either J.R.R. Tolkien or New Line Cinema. Confused Tolkien fans who try to visit http://www.middle-earth.com/ find a splash page for a design studio. The Web site owner hasn't even capitalized on the unexpected bonanza of traffic by offering Tolkien merchandise for sale.

Sierra nonetheless claims it has developed a new Middle-earth Online game, but it has released no details about the alleged game and its second development team operated under a veil of secrecy and strict confidentiality. Unsubstantiated Internet entertainment industry rumors have repeatedly surfaced, suggesting that New Line Cinema was pressuring existing licensees to give up their contracts so that the film company could work out lucrative arrangements with new licensees based on the upcoming movies.

Toy Vault's situation came the closest to confirming the rumors, but the company has steadfastly refused to say "yea" or "nay" when asked for a public comment on its own circumstances. Claiming his attorneys had instructed him to say nothing, Toy Vault president Jonathan Huston refused to say much about what was going on, but he did concede that the future of the company's popular line of action figures was in doubt. Toy Vault did bring two more action figures, Galadriel and the Barrow-wight, to market, although months later than originally expected.

Toy Vault withdrew certain material from its Web site which had not been reviewed by Tolkien Enterprises but which was used to help market the action figures. They continue to sell their full line of action figures but there has been no word on whether the next two figures planned for the series, including Aragorn (a major character in the upcoming movies), will be issued. Most collectors seem to be of the opinion that Galadriel and the Barrow-wight are the last figures in the series.

Toy Vault has begun focusing more attention on newer product lines: Farscape, EverQuest, H.P. Lovecraft's Cthulhu mythos, and just this December they announced a line of action figures based on the immensely popular Monty Python's Flying Circus and the movie, "Monty Python and the Holy Grail".

So the playing field may be clear for New Line and its product licensees such as Toy Biz, which won the master toy license for the "Lord of the Rings" movies earlier this year. Initial reports indicate that all the major actors have already been digitally scanned for the new line of action figures which is about to go into production. Toy Vault's line will likely be overshadowed when the publicity machines start up in about six months.

Nonetheless, rumors of a New Line deal with Electronic Arts for a "Lord of the Rings" video or online game have yet to prove true. Several industry magazines have reported the deal was imminent over the past six months, but no official announcements have been made. The long lead time required for producing complex games may now preclude the delivery of a game when the first movie is released.

Other companies continue to produce merchandise through pre-movie contracts, such as commemorative plates, chess sets, pewter figures, and more. The existence of such contracts, unique in this day of big budget film-and-merchandising projects, may have forced New Line to rethink its merchandizing strategies.

Regardless of how successful the movies prove to be, "The Lord of the Rings" may go down in history as the most undermerchandized and lawsuit-encumbered film trilogy in history.