WE'RE NOT LIVING in a golden age of cinema. Most years there are fewer than ten good movies made and great movies are even scarcer. There are many reasons for this, but I blame the "Waterworld" effect.

In 1995, Kevin Costner's "Waterworld," a cross between "The Road Warrior" and Pirates of the Caribbean, became one of the biggest box office bombs in history. With a budget of $175 million, it made just $88 million in the United States. Universal expected to lose big money on the project. But when the foreign grosses came in, and the video rentals were counted, "Waterworld" made back its budget and even managed to turn a small profit.

The lesson is: Big-budget movies never lose money. Movies that cost upwards of $100 million have lots of special effects, and people who don't live in America will pay money to see them, no matter how dreadful they are. And when $100 million is being spent on a movie, it's almost always dreadful. Studios put relentless pressure on directors working with big budgets and the results are mostly movies by committee.

All of which makes "The Fellowship of the Ring" very interesting. This is the first of three movies which comprise the film adaptation of J.R.R. Tolkien's Lord of the Rings trilogy. All three movies were shot concurrently in New Zealand over the course of the last two years. Part two, "The Two Towers," will be released at Christmas 2002, and the final installment, "The Return of the King," at Christmas 2003.

As an enterprise, the Lord of the Rings is the most expensive project ever undertaken by a studio, costing somewhere in the neighborhood of $300 million (that number may go up depending on how much the studio, New Line, decides to spend on the post-production and marketing of the two sequels). And the suits at AOL-Time Warner, which owns New Line, will no doubt be sweating this weekend (they're so fidgety about the prospects for Lord of the Rings that they've already fired Mike DeLuca, the guy who green-lit the project). They're hoping that "Fellowship of the Ring" is an instant hit, and praying that at the very worst, the "Waterworld" effect will save them should it bomb.

And in truth, "Fellowship" doesn't have the feel of an instant success. It is a long, difficult, earnest movie, whose pleasures are not all immediately apparent. The story of swords and sorcery isn't very hip and may call to mind unflattering images of pimply adolescents clutching their Dungeons & Dragons manuals. It isn't clear that "Fellowship" will be embraced by audiences.

That said, it should be. "Fellowship" is the first truly epic movie to be made since "Titanic" and the first great movie in recent memory. Director Peter Jackson's pacing is superb and his screenplay--even with a three hour running time--is a marvel of economy. In scope and achievement it may fairly be compared with "Lawrence of Arabia," and while there is no predicting the actions of the Academy of Motion Pictures, it should win 10 or 11 Oscars.

Either way, shed no tears for Steve Case. As they say in Hollywood, even "Waterworld" made money.

Jonathan V. Last is online editor of The Weekly Standard.