''For example, with the third 'Austin Powers' movie that they're making now,'' he said. ''To make that, they are going outside their normal bandwidth of midbudget films, but because it's part of such a successful franchise, they made a case for the higher level of its production costs and we told them to go for it.''

Wall Street analysts have been cautiously and increasingly optimistic about the prospects for the Tolkien series. ''The relative performance of the first film will be very critical for setting the pattern for the rest of the trilogy,'' said Jill S. Krutick, an entertainment analyst for Salomon Smith Barney. ''Luckily for them, the buzz on this movie has been extraordinary, and it looks like it could really turn into another huge franchise for AOL Time Warner.''

Through it all, Mr. Shaye and Mr. Lynne have insisted that while it was a formidable challenge, the making of ''The Lord of the Rings'' trilogy was never reckless or big enough to put their company at risk.

The production costs on the first installment, including actors' salaries and extensive post-production special effects, were about $93 million, they said. This means that the special-effects and post-production costs for the other installments -- ''The Two Towers,'' coming next December, and ''The Return of the King,'' to be released in December 2003 -- will bring the full production cost of the series to somewhere north of $270 million, but still well below $300 million. On top of that, of course, will come tens of millions of dollars in marketing costs, about $50 million for the first film alone.

The project was ''well insured,'' as Mr. Lynne put it. New Line will distribute the films in North America, but the other regions of the globe have been licensed to foreign partners, bringing in about $55 million a film. Another $11 million a film came from Burger King, JVC Electronics, Barnes & Noble and other toy and merchandise companies. And a final $10 million a film came in tax incentives from the government of New Zealand, where the films were shot. ''All of that is cash money,'' Mr. Lynne said. And it means that New Line is vulnerable for less than 20 percent of each film's production costs.

Meanwhile, he said, the potential upside is much larger. New Line stands to make all of the profits of the films' North American runs, plus 50 percent of the profits from overseas runs, after the distribution fees are paid to foreign partners.