I understand that their budget was quite small, and they were even doubtful to get the voice actors they did. Animation (especially CG) is expensive, so I can understand poor animation quality. However, I do believe that such a film was a step in the right direction. I doubt that LOTR or the Chronicles of Narnia would have been made into big budget fantasy epics had not the original animated and live action versions been made. It's a simple fact that people like to and want to do something better than someone else. To be the first to venture into a different medium is difficult, and you are bound to make mistakes along the way. The next person to come along can see where you succeeded and failed to make it better.
I would love to see this story done live action, and taken seriously. As for director's, my first pick is Peter Jackson, of course. He knows how to handle this kind of material and does an excellent job when it comes to how to film the movie. He knows how to make the audience believe in and care about the characters, and immerse themselves in the story, which is very important.
My second choice for director's would be Chris Columbus. He directed the first two Harry Potter films, which can go on record as being the best two of the films, in my opinion. Sure, they're not perfect, but he had such an understanding of the story and timing and pacing, along with character development, which the later movies lacked. Before the movies, I hadn't heard of Harry Potter, and it was because of his movies that I started reading the books.
I also think Guillermo del Toro could be an interesting choice. He enjoys directing and producing fantasy films, and I think he's done a pretty good job so far with his work. A lot of his work has some fantastic non-human costuming work, but without taking away from the ability for the character to emote.
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