Universal Pictures and 20th Century Fox have backed out of their deals to co-finance Microsoft’s big-screen adaptation of the Halo video-game franchise, according to Daily Variety. The film’s producer, Lord of the Rings helmer Peter Jackson, recently hired South African filmmaker Neill Blomkamp to direct the pic, which is now an uncertain project.

The trade reports that Universal and Fox both petitioned for a reduction in the amount of profits earmarked for the filmmakers and Microsoft. When the request was denied by Jackson and producing partner Fran Walsh, the studios apparently refused to pay Microsoft the $5 million upfront fee that was supposed to have been paid on Oct. 15.

Further complicating the matter are reports of a budget that is swelling well beyond the initial $135 million estimate. Rumors have the film costing nearly $200 million, though the filmmakers are insisting the budget stands at $128 million with the 12.5% rebate that comes with shooting in New Zealand.

A spokesperson for Jackson and Walsh says Microsoft plans to move forward with the film and is in talks with other distribution partners. Pre-production is well underway in New Zealand at Jackson’s Oscar-winning vfx studios, Weta Digital and Weta Workshop.

Developed by Bungie Studios, The first Halo video game was released in 2001 and spawned a hugely successful sequel, Halo 2, in 2004. Together, the titles have sold more than 13.8 million copies worldwide and grossed more than $600 million. Halo 2 alone earned $125 million in first-day sales. The movie was supposed to be released by 20th Century Fox sometime in 2008.