IV. The advent of Tolkien Enterprises into our story complicates things: most people do not realize that almost all the Tolkien-related items they see aside from books and (some) calendars are not approved by the Tolkien Estate but instead are part of "film licensing", over which the Estate has almost no control, due to the poorly defined licensing rights in the original contract Tolkien signed back in the 1960s. Among the things that fall under Tolkien Enterprises' control are not just the Peter Jackson movies (and the older Bakshi film), and obvious movie tie-in products such as posters, chess sets, and replica swords, but the entire MERP product line. That is, all officially approved Tolkien roleplaying games, collectable card games, boardgames, and computer games for the last thirty years have been licensed not from the Tolkien Estate but from Saul Zaentz as examples of "film merchandising".
V. One effect of TSR's transparent (but legally successful) attempt to genericize D&D and get it away from its Tolkien roots meant that after about 1977 there was no longer even an unofficial Tolkien roleplaying game on the market. The abject failure of the Bakshi film, financially and creatively, seems to have forestalled any attempt to officially license a Tolkien rpg for some five years, but by 1982 Iron Crown Enterprises had acquired the Tolkien license, launching MERP (Middle Earth Role Playing) in 1984.
However, while a long-running rpg line, MERP never won over the majority of Tolkien fans who were gamers, who continued to run D&D varients; despite a core of devotees it remained a game more collected than played. I think the reasons for this were threefold. First off, D&D's unofficial motto has always been "plagiarism is our friend"—that is, it has always stolen so widely, and been such a flexible system, that it's easier for most folks to tweak the game they already knew (which in any case originated as a pseudo-Tolkienian game in the first place, and still remained close to those roots) into a Tolkienian system than to learn a new game in order to play out Tolkienian scenarios within Tolkienian settings. Second, once they got the license Iron Crown did not create a new rules system from the ground up designed to capture Tolkienian roleplaying, but simply adapted their house system, ROLEMASTER (itself evolved from a D&D varient), to Tolkien's world—as may be seen from the fact that ICE began releasing Tolkien modules as early as 1982 (e.g., ANGMAR) while the actual MERP rules did not follow until two years later, in 1984. The decision to use a preexisting system rather than create a new Tolkien-centric game led to some disconnects—the most serious of which was the presence of Animist (Clerics) as one of the core player-character classes, when Tolkien's works are so resolutely devoid of clergy, spell-casting or otherwise (a problem that has bedeviled most Tolkien rpgs to date). Third, since this was an official license, its modules and sourcebooks could use names & places taken directly from Tolkien's books (no 'halflings' and 'mithral' here). But Iron Crown's decision, no doubt dictated by the terms of their license, to stringently avoid the actual story & time of Tolkien's familiar story, meant we got no adventures w. Aragorn, no epic boxed sets allowing us to play through Bilbo's journey or the various component quests that make up The Lord of the Ring. Instead, we get detailed sourcebooks set (for the most part) a milennium and a half before—which is interesting for die-hard Tolkien fans like myself, but lacks the mass appeal of, say, a 'Fellowship in Moria' adventure might have. (It's rather like having a Columbus-discovers-the-New-World game which focuses exclusively on Christopher C.'s early life and never touches on any of his four history-making voyages.)
Nevertheless, as I said, it was a fairly successful line, lasting for a full decade while other games came and went. But by 1991/92 it was at a low ebb, and when the license came up for renewal Tolkien Enterprises let it be known they were interested in negotiating with other companies to publish some all-new Tolkien rpg to replace MERP.