Could be either one really. Or a mix of both where people control their empires and some characters. But I think I'd like this more if it was from the perspective of individuals. The Lord of the Rings and indeed The Hobbit were about some tightly knit groups on high stakes quests. If you want it to have the feel of LOTR, an individual based RP would fit that vibe best.

Then again there's the mix, like I said. People would control empires in the background, but the main group would take center stage.