LOS ANGELES — LOS ANGELES--When it comes to power games, some in Hollywood are beginning to learn a basic lesson of digital politics: The Internet plays rough.
Such is the case with a growing spat between New Line Cinema and Peter Jackson, the A-list director of the Lord of the Rings movies and a savvy player when it comes to the power of the Web. Last week, Jackson posted a letter on a fan Web site, theonering.net, explaining that he had been dumped by New Line from The Hobbit, a movie based on the book by J.R.R. Tolkien and still in the planning stages.
"This outcome is not what we anticipated or wanted, but neither do we see any positive value in bitterness and rancor," Jackson wrote with his producing partner and wife, Fran Walsh. "We now have no choice but to let the idea of a film of The Hobbit go and move forward with other projects."
But to legions of avid Jackson and Tolkien fans, the news was a bombshell that went whizzing through cyberspace.
"This is a big blow to the LOTR community, I feel like there has been a death in the family," wrote a Web master called Xoanon, referring to the Lord of the Rings trilogy by its initials. "Why couldn't New Line come to an agreement with PJ? Is there really a time option on the film rights for New Line? Who will they get to direct?"
Within hours thousands of other fans weighed in on lordot rings.com, onering.com and other sites, worrying about the future of the Tolkien enterprise and asking New Line, which has an option to produce the film until 2009, to back down. Theone ring.net was among those calling for a boycott of any Hobbit film not made by Jackson.
"The fan community as a whole is up in arms about the way Peter Jackson has been treated," said Chris Pirrotta, a founder of the onering.net, which has faithfully followed Jackson for years, even posting his video diary during the making of last year's King Kong. "Fans are very distraught to see someone who's created something so wonderful being treated so poorly by the studio."
On the heels of the protest, reporters and entertainment bloggers called the studio to ask about the film's fate. In what was once an insular club of power brokers and back-stabbers, the voices of outsiders have begun to penetrate.
New Line declined to comment on The Hobbit, but said in a statement to The New York Times that the situation was complicated by the lawsuit of Jackson's company, Wingnut Films, against the studio over revenues from The Lord of the Rings, which New Line produced.
"We are in litigation with Wingnut Films, and have been unsuccessful despite a formal mediation, as well as discussions with Wingnut directly to settle the matter; therefore, we cannot comment at this point," the studio said this week.
But anxiety continued to reverberate in cyberspace. Ian McKellen, who played Gandalf in the Rings series, wrote on his Web site, mckellen.com: "I'm very sad as I should have relished revisiting middle Earth with Peter again as team-leader. It's hard to imagine any other director matching his achievement in Tolkien country."
And Saul Zaentz, the veteran producer who holds the underlying rights, was quoted on yet another Web site, this one in German, saying Jackson would indeed direct The Hobbit, which still has no script, no budget, no cast and no production date.
In an interview from Italy, Zaentz said he was misquoted, but that Jackson should be the one to direct The Hobbit. "We would like to see it done, of course with Peter Jackson," he said. "He's a good film director. He's the right guy. He knows it, too. But it's a hard thing to do when you feel you didn't get the money you were supposed to get."
The contretemps over The Hobbit, those involved say, is really about the lawsuit over revenues from the Lord of the Rings series, which has taken in a staggering $2.9 billion in box-office receipts alone.
In February 2005, Jackson sued New Line, saying he was owed money from the trilogy. Jackson has said he sued over profits from The Lord of the Rings: The Fellowship of the Ring, after he was unable to get New Line to submit to an independent audit of its books. The lawsuit, which was unsuccessfully mediated, still has no court date, and so far no audit has taken place. New Line executives have complained that Jackson has become vastly wealthy from the Tolkien trilogy and is unjustifiably portraying himself as a victim.
In his letter, Jackson said New Line was holding the new movie hostage to his lawsuit, saying that Michael Lynne, the New Line co-president, told Jackson's manager, Ken Kamins, "that the way to settle the lawsuit was to get a commitment from us to make the Hobbit because `that's how these things are done.'"
Jackson added: "Michael Lynne said we would stand to make much more money if we tied the lawsuit and the movie deal together and this may well be true, but it's still the worst reason in the world to agree to make a film."
Neither Jackson nor the studio would comment publicly on the lawsuit.
The final straw in continuing tensions between the two sides came last month, when Jackson declined to contribute a video salute to New Line for the celebration of the 40th anniversary of its founding, planned for next year, according to two people familiar with the matter. Days later, a New Line executive called Kamins to say that the studio would be seeking another director for The Hobbit.
So while New Line accused Jackson of trying to negotiate the lawsuit through the Internet, Jackson's camp accused the studio of brinksmanship in a fit of pique.
It was left to another studio entirely, MGM, which owns the distribution rights to The Hobbit, to step in and calm the raging waters - and the Web sites.
"We expect to partner with New Line in financing The Hobbit," a spokesman for MGM said. "We support Peter Jackson as a filmmaker and believe that when the dust settles, he'll be making the movie. We can't imagine any other result."