When New Line began planning to sell the LOTR props and costumes at auction, Jackson intervened and said that he'd like to have them, both for sentimental reasons and for a museum he hoped to set up one day. The studio balked. Jackson then pointed out that he had never signed a contract for the extended Return of the King DVD. He informed New Line that he'd be happy to accept the costumes and props as his fee — the suggestion being that he might not work on the DVD otherwise. Those extended cuts had become far richer revenue streams than anyone could have predicted. Jackson got his props. The relationship between the filmmakers and the studio at that point was said to fall somewhere between hellish and nonexistent.
Then there's the pressure New Line is under:
In fact, time may be running out to launch the movie. On some not-too-distant date, the rights to The Hobbit will revert back to Zaentz. Most insiders guess it's 2010. To make the movie then, New Line would have to renegotiate — assuming Zaentz would want to do business with them again — on much more expensive terms and with plenty of competition from other studios. And there may be another deadline: Shaye and studio co-chair Michael Lynne reportedly have only until late 2008, when their contracts with New Line are said to expire.
And then there's this:
In the past, Jackson has suggested that he would make two films, with the second one filling in the story arc between the end of The Hobbit and the beginning of Rings. Although Tolkien never wrote a novel bridging the eras, he did scatter clues in shorter pieces and epilogues that could form the basis of a screenplay.