Some people are speculating that being a startup number. Once all the sets, props, costumes, etc are done, it'll be cheaper. Alternately, that's the cost of the first two seasons which will be shot back to back. Since reports say that it'll be eight eps a season, my calculator says that's $290,625 an episode.
If I had a time machine, the first thing I'd do is jump ahead maybe three years, catch up on LOTR, then go back and do the expected activities.