Variety is reporting that both Universal and Fox have pulled out of the Halo project, citing high and rising costs as their primary reason for their actions whilst the relative inexperience of announced director Neill Blomkamp is another speculative cause.The two companies were set to co-finance the live action adaptation of the game series and had agreed a deal worth $135 million. The abrupt withdrawal of the finance came when the studios attempted to reduce the “profit participation” of Microsoft, Bungie and the filmmakers, Variety dubs this a hardball tactic. In order to continue with the film this demand had to be met, (a demand that was made at the very last moment before an agreed upon deadline). Peter and Fran, after liaising with Microsoft and Bungie, declined the proposal. And so the companies parted ways.

Rumors of the budget increasing to more than $200 million have been circulating also, although filmmakers state that they have been working towards and within the originally announced budget:

“The only budget the filmmakers ever spoke about was $145 million less the 12.5% rebate that you get from shooting in New Zealand, which would put it at about $128 million,” Kamins said. “That was the only number that was ever discussed.

Microsoft is already in talks with other distribution partners and preparation for the movie will continue. Most of this development is at Peter Jackson’s Weta effects studios in New Zealand, so delays should be small.

Is the dream of a perfect adaptation over? Kamins states that they expect the movie to continue into production with all “creative partners intact”.

New Zealand News Broadcast with comments by Peter Jackson:

The old agreement:
Funding and the companies involved: Towards the end of August ‘05 the precise deal Microsoft and the production studios had agreed to was announced. Many studios turned down Microsoft’s A-list offer, this was due to hefty requirements set by the software king: “$10 million against 15 percent of the gross (whichever is higher), a below-the-line budget of $75 million (budget before hiring actors and crew), near-immediate production ofand a large say in the creative development of the movie.” Fox and Universal studios agreed to co-operatively take on the project paying Microsoft $5 million against 10 percent of the gross. Universal will control the production and American distribution whilst Fox will oversee all international distribution.

Other news resources:
Voodoo Extreme: http://ve3d.ign.com/articles/740/740672p1.html
Aint it Cool News: http://www.aintitcool.com/node/30460
CinemaBlend: http://www.cinemablend.com/new/Halo-Is-Mostly-Dead-3675.html
CanMag: http://www.canmag.com/news/4/3/5472
Joystiq: http://www.joystiq.com/2006/10/20/game-over-for-halo-movie/