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Apparently both studios own partial rights, so any Hobbit movie will be some kind of joint venture, unless they agree to some buyout. Not sure how it all works.

On the other thread about this the "saving hollywood" thread, I posted a Variety article that had the MGM reaction to all this, saying it's "far from closed":

Variety.com - Inside Move: It's hard to be a 'Hobbit'

New Line, MGM, Jackson tussle over pic

By NICOLE LAPORTE, NICOLE LAPORTE, DAVE MCNARY, DAVE MCNARY

Jackson

Ordesky

Who's the boss of "The Hobbit"?
This question has been growing more heated in recent weeks as the principal parties involved in the film -- New Line, MGM and director Peter Jackson -- have been duking it out, each staking their claim as a key player in "The Hobbit" along with a prequel to "The Lord of the Rings."
Behind the jostling is the fact that while New Line owns the rights to produce the pic, MGM owns the distribution rights and Jackson is the creative force behind the franchise's staggering success.
In the most recent flurry of events, Peter Jackson and producing partner Fran Walsh posted a letter Sunday night on the "LOTR" fan site Theonering.net saying that New Line told them last week that it was going to make "The Hobbit" without their services.
The letter also reiterated in detail Jackson's stance on "The Hobbit" -- that he is not willing to have a serious conversation about directing the film until his ongoing lawsuit with New Line over what he considers improper accounting practices over "LOTR" profits is settled.
New Line's given reason for proceeding sans Jackson is that the studio's rights to the pic are about to expire, and seeing as the lawsuit with Jackson isn't moving ahead, well, the message was that New Line is.
All of this has riled MGM, which in recent weeks has been openly touting the fact that the newly revamped studio is serious about making "The Hobbit" -- with Jackson.
An MGM spokesman said that "the matter of Peter Jackson directing 'The Hobbit' films is far from closed."
Though New Line no-commented inquiries about Jackson's statement, the mini-major's move is a loud statement to both MGM and Jackson that the studio is in the driver's seat when it comes to "The Hobbit."
Jackson noted in his letter that New Line exec Mark Ordesky, who shepherded the "Rings" trilogy, explained that New Line is ditching Jackson because it has a "limited time option" on the film rights obtained from Saul Zaentz.
There are already online revolts from fans who can't fathom a "Hobbit" directed by anyone else, and Jackson makes clear in his letter that he's not budging on the issue of the lawsuit or "The Hobbit."