Both of the studios that agreed to co-finance the screen adaptation of the popular Microsoft game have abruptly backed out of the picture. While rumors had the studios concerned over a budget that was rising above the original projected $135 million pricetag, the filmmakers said the double defection came after U and Fox played hardball and unsuccessfully tried to get the filmmakers and Microsoft to reduce their profit participation.

The studios made the pay cut demand as a Oct. 15 deadline approached. On that day Microsoft was to have received the bulk of a promised $5 million upfront payday. Software giant also stood to receive 10% of gross for rights to the game and a script by Alex Garland.

Rumors of a budget that could approach $200 million raged Thursday, but Ken Kamins, who reps Peter Jackson and Fran Walsh, vehemently denied that figure. The duo came aboard as exec producers, joining powerhouse producers Mary Parent, Scott Stuber and Peter Schlessel.

The reality here at Bungie towers is a feeling of optimism, satisfaction and happiness for reasons we can't go into. Frankly we're interested in making the best movie, and it's possible that a partner who's more concerned with numbers, might not be the best partner for what's more vitally a creative process. Suffice it to say that Peter, Neill, Fran and Microsoft are as excited and dedicated as ever and WETA continues the pre-production process. Actually, when you do finally get to see the stuff WETA has already made, you will probably pee a little.