AFAIK, MGM wants to fund Hobbit themselves and take full domestic and international distribution right of the film and DVD, leaving New Line behind in the dust. It's a cunning move, letting another film production company take a huge gambling investment on producing LOTR's three films. Had those films bombed, MGM didn't have to pay one red cent. Now that they're successful, they can ride on New Line/Peter Jackson's coattails and safely invest on that one prequel film.