New Zealand Reaches Deal to Keep 'Hobbit' Production at Home

AUCKLAND — Warner Brothers agreed to keep Peter Jackson’s production of “The Hobbit” in New Zealand after the government promised to change local labor laws and offered extra financial incentives, Prime Minister John Key said Wednesday.

The deal came after two days of talks between Mr. Key and other government officials and executives from Warner and its New Line Cinema unit.

Filming of the two “Hobbit” movies, which is expected to start in February, had been threatened by a dispute over whether a New Zealand branch of an Australian union could engage in collective bargaining on the Hollywood films, which they have not been able to do in the past.

A New Zealand actors union, backed by a larger union, the Media, Entertainment & Arts Alliance of Australia, had demanded collective bargaining for work on the films, but both Warner and government officials contended that collective bargaining with actors was barred by New Zealand law.

The unions withdrew their demand and lifted their call that international unions boycott the films, but Warner executives remained concerned about the possibility of labor disruptions.

As part of the deal to keep production of the “The Hobbit” in New Zealand, the government will introduce new legislation on Thursday to clarify the difference between an employee and a contractor, Mr. Key said during a news conference in Wellington, adding that the change would affect only the film industry.

In addition, Mr. Key said the country would offset $10 million of Warner’s marketing costs as the government agreed to a joint venture with the studio to promote New Zealand “on the world stage.”

He also announced an additional tax rebate for big budget films made in the country, saying production companies would be eligible for up to $7.5 million extra per picture, depending on its success. New Zealand already offers a 15 percent rebate on money spent on the production of major movies.

Mr. Jackson’s office in New Zealand declined to immediately comment.

The “Hobbit” films, which are being financed in a partnership with Metro-Goldwyn-Mayer, have a production budget of about $500 million, and many in New Zealand believe they are crucial to the future of that country’s film industry.

“I’m delighted we have achieved this result. Making the two movies here will not only safeguard work for thousands of New Zealanders, but will also allow us to follow the success of the Lord of the Rings trilogy in once again promoting New Zealand on the world stage,” Mr. Key said.

“The industrial issues that have arisen in the past several weeks have highlighted a significant set of concerns for the way in which the international film industry operates here in New Zealand. We will be moving to ensure that New Zealand law in this area is settled to give film producers like Warner Brothers the confidence they need to produce their movies in New Zealand.”