I know 4 locations of Hobbit machines, 3 have this issue (after a few months of intense play). At least one machine with this problem is early production.
(This does NOT say that 75% of the machines have this problem obviously since I only know 4 machines.)
I diagnosed one of these, it seems the Smaug jaw servo motor has overheated and is damaged. I opened one of the Smaugs, with the motor running free during test mode it tries to move in one direction but gets stuck immediately.
I don't know much about servo motors but I guess that either the servo is being driven incorrectly or that the mouth open/closed positions are wrong, causing too much stress on the mechanism. The servo motor eventually overheats and melts. It has the typical burning plastic smell so that's obviously not good.
If your Smaug does not work (test it!), disconnect your Smaug and order a new one under warranty. The game plays fine with Smaug disconnected. I hope JJP investigates this issue and comes up with an explanation and solution.
The most recent manual has instructions on how to calibrate this motor. I assume the motor is calibrated in the factory so the settings are preserved during incremental software updates. It is a good idea to follow these calibration instructions after performing a clean install of your machine.