Universal and Fox have pulled out of production for the feature adaptation of Microsoft's Halo.

Reports have the studios concerned over a budget that was rising above the original projected $135 million pricetag, and the inexperience of director, Neill Blomkamp, a 27-year-old first-timer. Variety reports the filmmakers said the double defection came after Uinversal and Fox played hardball and unsuccessfully tried to get the filmmakers and Microsoft to reduce their profit participation. The budget apparently could reach the $200 million range, 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.

While the exit of two studios would seem to imperil Halo, Kamins said Microsoft is already in talks with other distribution partners. Prep work on the film continues, he said. One advantage is having Jackson and Walsh as exec producers: Most of the pre-production is being done at their visual effects studios in New Zealand, Weta Digital and Weta Workshop, so there will be no stoppage.

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No word on any other studio getting involved.