Quoted from PanzerFreak:

In order to get the update to install properly follow the steps below.
1. Format your thumb drive
2. After downloading the update right click on the zip file and click "Extract All" (assuming you are on a PC)
3. Change your file destination to the root of your thumb drive and select "Extract"
Myself and others have ran into issues with updates failing to install if the file is first extracted / unzipped locally and then copied over to the thumb drive.

Quoted from LTG:

Did it say updating and then go blank ? If so yes. Let it run until it reboots. If you turned it off, you'll need to reload a full install of 1.01 and then the update.
Here is for a delta update :
I use a PNY USB stick 8GB. Some brands don't work.
The update is a delta, not a full install.
I'm using a pc. Download the update, place on my desktop. It is a zipped folder. I left click it once, then right click and a list comes up, I click on extract all and send to a formatted fat 32 memory stick with nothing else on it.
When done I go to the machine with the machine turned on. Open coin door, plug in memory stick. Go to utilities and then to USB update and do what the screen says.
The screen will say update in progress. then go black. Just wait, eventually after 5 to 10 minutes the game will turn back on. Then remove memory stick and you are done.
Instructions for a full install are in the rear of the manual available here if you don't have it :
http://www.jerseyjackpinball.com/game-specific-downloads/the-hobbit-downloads/
LTG : )

Quoted from LTG:

It never says done - it should just reboot to attract mode. Heck, leave it sit for 30 0r 40 minutes, won't hurt anything.
I'd start all over. Install 1.01. Then start with a fresh download of 1.31. ( Unless your game works fine, then try a new download of 1.31 )
Back of the manual has instructions for a full install - http://www.jerseyjackpinball.com/game-specific-downloads/the-hobbit-downloads/
Maybe your copy of 1.31 was corrupted ?
LTG : )