Jackson’s Lord of the Rings was fantastic, but even he couldn’t repeat his success. The Hobbit was a short kids’ book stretched into three overly long films. That just didn’t work. Not sure who to blame for that, maybe it wasn’t Jackson’s fault. Might have been the studio trying to squeeze every dollar from the franchise.
It wasn't. The studio demanded three "Hobbit" films.
Jackson knew that the Hobbit only needed two films to cover, but the studio demanded three films.