`Hobbit' to Be Filmed in New Zealand As Warner, Key Strike Deal

New Zealand has reached agreement with Warner Bros. Productions Ltd. to keep the filming of two movies based on “The Hobbit” in the country, Prime Minister John Key said today.

The filming of the movies, based on the book by J.R.R. Tolkien and to be directed by Peter Jackson, will promote New Zealand on the world stage, Key said.

The announcement brings to an end two days of negotiations between New Zealand’s government and Warner Bros executives after the studio threatened to move the production elsewhere in the wake of an actors’ union dispute. Key, who holds the dual post of prime minister and tourism minister, took personal control of the talks on behalf of the New Zealand government.

“I am delighted we have achieved this result,” Key told reporters in Wellington. “Making the two Hobbit movies here will not only safeguard work for thousands of New Zealanders, but it will also follow the success of the Lord Of The Rings trilogy in once again promoting New Zealand on the world stage.”

New Zealand’s government wants the two-film prequel to the “Lord of the Rings” trilogy made in the country to help boost a sluggish economic recovery. Hiring crew and equipment for the original series added about NZ$350 million ($261 million) to the economy in a three-year period to March 2002, and boosted tourism as fans flocked to locations where Frodo battled Orcs in a recreation of Tolkien’s Middle Earth.

Bright Spot

The government agreed to pay Warner extra rebates of as much as $7.5 million per picture, subject to their success, to improve New Zealand’s competitiveness as a film location, Key said. The government will also contribute $10 million toward marketing costs of the films, Key said.

New Zealand and Warner plan to form a “long-term strategic partnership” to promote the country as a film and tourist destination, Key said.

The government will also introduce new employment laws on Oct. 28 to clarify the difference between contractors and employees in the film industry following the actors’ proposed industrial action, he said.

New Zealand’s film industry was worth NZ$2.8 billion in 2009, according to a Statistics New Zealand report. That doesn’t count the boost to tourism, which overtook the dairy industry as New Zealand’s biggest export in the year to March 31, according to a report today.

Tourism Spending

“The prospect of ‘The Hobbit’ being filmed in New Zealand has been a bright spot in the outlook for the tourism industry through the economic downturn,” said Anne-Marie Johnson, communications manager at the Tourism Industry Association in an e-mailed statement on Oct. 21. “Unless travelers are aware of New Zealand, we are never likely to get onto their shopping list of potential destinations.”

Tourism spending, investment and employment makes up 8.7 percent of New Zealand’s economy. Growth unexpectedly weakened in the second quarter as consumer spending and housing demand slowed, according to government figures last month.

The deal brings to an end the latest in a series of troubles for the production after Guillermo del Toro quit as director in May and a Wellington studio where parts of the film were to be shot caught fire earlier this month. The fallout from the actors’ dispute sent thousands of New Zealanders’ to the streets to protest about the film’s potential re-location.

Locations Reviewed

Warner Bros reviewed the location after a workers’ boycott of the movie was proposed by New Zealand Actors’ Equity, backed by Australia-based Media, Entertainment and Arts Alliance. The union actions caused “substantial damage and disruption,” the company said in a statement on Oct. 22.

Actors’ Equity recommended people delay accepting work on the films until producers offer union contracts. That prompted Wellington-based Jackson, who directed the three “Lord of the Rings” films, to blame the unions’ actions for putting the New Zealand film industry at risk.

“Seemingly overnight, NZ Actors Equity shredded the reputation of a burgeoning industry, which has been over forty years in the making”, Jackson said in a statement on Oct. 21.

The industrial unrest “has been damaging for New Zealand’s reputation as a shooting location and created a lot of uncertainty,” the Screen Production and Development Association said in a statement on Oct. 21.

The association has reached an interim agreement with Actors’ Equity that films beginning pre-production before March would use existing employment arrangements, and that the union would lift the boycott, it said.

Middle Earth Tours

The Rings trilogy, based on Tolkien’s fantasy epic, generated $2.9 billion in worldwide box-office receipts and another $3 billion from DVDs, merchandise and other sources.

The award-winning films inspired New Zealand businesses to provide tours to locations where Frodo battled Orcs in a recreation of Tolkien’s Middle Earth. Tours are still operating in more than thirty locations in New Zealand, according to www.tourism.net.nz, where fans pay to see Jackson’s vision of the Road to Mordor, Misty Mountains and Ford of Bruinen.

To contact the reporter on this story: Tracy Withers in Wellington at twithers@bloomberg.net

To contact the editor responsible for this story: Iain Wilson at iwilson2@bloomberg.net

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