If the Deadline report is true, it's kind of bizarre on a number of levels. First, Legendary was said to have basically severed their ties with Warner Bros. last year before moving onto Universal as their distribution arm.
Second, does Universal not have Kong movie rights of some kind? I know the history of King Kong's copyright is convoluted, but I've been told that - outside of Universal - not just any studio can go ahead with a new live action film featuring Kong.
Third, the size difference between the new Godzilla and the new Kong would (presumably) make any conflict patently ridiculous.
Fourth, why would Universal allow Legendary to take the picture elsewhere? Surely there were already contracts and deals in place. Why would Universal let the project go (assuming they did) when they're building a gigantic attraction that will end up promoting a competitor's movie. I mean, yes, Universal licenses the I.P.s of its competitors all the time, but they've always claimed that Kong was an important character to the studio (even on the filmmaking side), so to see Legendary take the movie over to Warner Bros. must sting.
If it's true.