Essentially what happened, is that the studio decided they were going to make another LotR trilogy out of the Hobbit. The problem is, the Hobbit is a VERY short book (304 pages) and even if you did a 1:1 adaptation, you wouldn't be able to come up with enough content, especially not nearly 8 hours worth. Add in considerable budget constraints compared to what they wanted and you have development hell.
Peter Jackson was originally approached to do the Hobbit trilogy but talks quickly fell through because Jackson understood that this was essentially an impossible task. So they brought in Del Toro without giving him the full information, and part way through pre-production he realized what an absolute disaster it was going to be and left.
Then they phoned up Jackson to offer it to him, he turned it down, they were going to go with some other shit director just to get it made and Jackson didn't want them to put out complete garbage to be a prequel to his masterpiece.
It still ended up being garbage so the producers wanted extra diversity bullshit to try and sell it to wider audiences, which pissed off the fanbase even more, and the Hobbit series was considered an abject failure