It was the first film he sued and I think he had a good point in claiming that the story was distorted. In a way it can be compared very well to Ralph Bakshi's "Lord of the Rings", for it stopped in the middle of the story.
Yes, but the filmmakers were intending on making the rest of the story as its own film when the studio took the film out of their hands. It didn't make enough money right away, and that was why it wasn't finished.
There was only Atreju's search in the movie and even that one was cut down painfully (Where was Ygramul for instance?). There was nothing about what Bastian experienced in Phantasia while this is the better (the longer) part of the book. No mention at all of the inscription of Auryn (which to understand is perhaps the central theme of the book). No Graograman, no Xaide (in the first movie), no Hynrek, no Yor, no Ayola, no battle for the Ivory Tower, no Old man of the wandering mountain... I could go on like this for hours.
Again, things that were the studios fault, not the filmmakers. In any case, name me one book-to-film adaptation without major cuts. I could go on and on for hours about the endless list of book adaptations with major cuts, and the very, very short list of faithful adaptations. I thought the first film kept in spirit with the original book well enough and while it was different in some places, was still plenty good for me. And I say this as someone who read the book.
The decision to focus on Atreju was a wise one, I think. Unlike books, which have the freedom to have their focus anywhere and everything, films require a much stronger anchoring point.
And while we're discussing painful cuts and changes, let's talk about Peter Jackson's adaptation of "The Two Towers" and some parts of "The Return of the King". I'd say that Peter Jackson butchered the middle volume of "The Lord of the Rings" far worse than Wolfgang Peterson harmed the first part of "The Neverending Story". The film version of "The Neverending Story" was mostly just guilty of cuts and the fact that it remained unfinished for a long time, but the mega popular LotR films that you and I both admit to liking quite a lot are actually guilty of figurative character raping.
The movies were not only cut down too much from the story of the book, but some scenes where also altered just to put more "action" in. The neverending story shouldn't be an action movie.
I beg to differ on that last remark. I find the first movie to be wonderful, and
I do think it should have been made.
I will admit its not a great adaptation of the book, of course, neither was Don Bluth's film adaptation of "Mrs. Frisby and the Rats of NIMH", in fact, it bordered on book butchery, itself. In any case I still think its a great movie in and of itself.