Thursday, October 28, 2010

New Zealand Bends and ‘Hobbit’ Stays

The New York Times
October 27, 2010

In this photo taken June 28, 2010, a sculpture of Gollum, the villainous "Lord of the Rings" hobbit, stands in front of a welcome sign, in Hobbiton Town, Matamata, New Zealand.
(AP Photo/New Zealand Herald, Christine Cornege)

LOS ANGELES — New Zealand will remain the middle of Middle-earth, at a price.

After meeting in Wellington with visiting Hollywood studio executives, New Zealand officials, led by the prime minister, agreed to an extraordinary deal on Wednesday under which they will contribute special financing and introduce new labor legislation to keep the filming of Warner Brothers’ two movies based on J. R. R. Tolkien’s “The Hobbit” on their shores.

It may seem that New Zealand has grown sentimental over its Hobbits — or rather the filmmaker Peter Jackson’s Hobbits. It has built a tourism industry and no small amount of national pride around the creatures, dating to when Mr. Jackson’s “Lord of the Rings” franchise established a growing movie industry sometimes called Wellywood there.

But behind the agreement is a hard economic reality. Hollywood has the upper hand in deciding where to film its big-budget extravaganzas, and there are many places willing to pay to attract filmmakers. And so the negotiations found executives of a giant American studio sitting across the table from the chief executive of a sovereign nation, population 4.4 million, wrangling over the fate of a pair of films and, with it, a not insignificant part of that nation’s economy and public image.

Prime Minister John Key announced the agreement at a news conference late Wednesday in Wellington, after a week in which thousands of film workers had taken to the streets in support of efforts to save the movies after a labor dispute had stalled production.

“This will guarantee the movies are made in New Zealand,” Mr. Key said.

Reaction was predictably ecstatic at, a fan Web site that has closely followed the Middle-earth movies over the years. “Well, John Key has probably just won next year’s election,” said one post.

“We’re all feeling much happier today,” said Graeme Mason, the chief executive of the New Zealand film commission. Mr. Mason said government incentives and the expertise of local workers would probably have held the country’s film industry together even if the Hobbit films had left.

“But where it was apocalyptic, potentially,” Mr. Mason said, “is that New Zealanders are so invested” in the work done by Mr. Jackson and his colleagues on those films.

In a statement, Mr. Jackson said he was grateful to the government for introducing legislation and added, “I feel enormous gratitude to the film technicians, actors and fans who came out in support of making these films in New Zealand. To the thousands of people who took the time to write and let us know they were with us — thank you.”

Some in New Zealand and elsewhere questioned whether the politicians had gone too far in kowtowing to Hollywood. Trevor Mallard, a spokesman for the opposition Labour Party, told Parliament that Mr. Key, who leads the National Party, had been taken in by Warner, “and as a result of that, they will be laughing all the way to the Bank of America.”

Keith Locke, a spokesman for the smaller Green Party, said overseas investors should have no say in changing New Zealand laws.

“Yes, New Zealanders are proud of ‘Lord of the Rings,’ the achievements of Peter Jackson and the prospect that ‘The Hobbit’ will be filmed here, but pride should also stop us selling our soul,” Mr. Locke said.

A pro-'Hobbit' supporter is seen during the protest at Civic Square Monday in Wellington, New Zealand. (Melville/Getty Images)

The legislation is expected to require workers to designate their status as an employee or a freelance worker when beginning a project, then stick with it, according to one person who was briefed on the talks but spoke anonymously because the agreement was not complete. Thus, anyone who contracted individually with producers of “The Hobbit” as a freelance worker at the beginning of the film could not change status later and claim the rights of a permanent employee.

The future of the back-to-back productions, with a combined budget of about $500 million, came into question when a small actors’ union, New Zealand Actors Equity, demanded that producers bargain collectively with actors on the films. Mr. Jackson, who is a producer and the director, had joined Warner executives and New Zealand officials in insisting that such bargaining was prohibited by New Zealand law.

Perhaps just as important, Wednesday’s agreement also calls for New Zealand to increase its contribution to each film by $7.5 million, in addition to a standing government incentive that reimburses up to 15 percent of the spending in New Zealand by a high-budget production like “The Hobbit.” In a further twist, Mr. Key told reporters, in a commitment to Time Warner and its global media group, New Zealand would contribute $10 million to a marketing campaign that would tie the films to tourism in the country.

So when Wellywood meets Hollywood, does Wellywood come out on the losing end?

Warner won the agreement after an unusual bit of cinematic gunboat diplomacy. On Sunday evening, a contingent of high-level studio executives flew to New Zealand with a mandate to move the films if the cloud of labor trouble did not lift.

Already, the production, which was to begin in January, had been delayed for at least a month by the dispute — a factor that apparently contributed to the bargaining for extra incentives.

“The lesson is that everybody is pandering to the film industry,” said Schuyler M. Moore, a Los Angeles entertainment lawyer. Mr. Moore cautions that state subsidies for film production often amount to picking money from one pocket of an economy to fill another — and that producers are quick to side with a higher bidder.

“It takes a minute for an executive to say, ‘Let’s wrap and go somewhere else,’ ” Mr. Moore said. He pointed out that a weak dollar, and aggressive subsidy programs in states like Michigan and Louisiana, had made production in countries like New Zealand less attractive.

Even as New Zealand was scrambling to keep the “Hobbit” films, Warner was exploring ways the movies could be made elsewhere, again with government support.

Mr. Jackson was not present in the meetings with New Zealand officials, though his manager, Ken Kamins, who is also an executive producer of the film, was, along with Toby Emmerich, New Line’s president, and John A. Rogovin, Warner’s general counsel. The discussions were generally smooth, according to the person who spoke anonymously. That person said both Warner executives and government officials agreed from the outset that New Zealand was the preferred location, if the union question could be resolved, and if Warner could recoup some of the money it had lost in the delay, partly from a strengthening of the New Zealand currency. Canada, Germany and Britain had all surfaced as viable alternative locations.

The films are scheduled for release in December 2012 and December 2013, and provide a pair of much-needed, large-scale films for Warner and MGM.

New Zealand’s film industry received an enormous boost from the production of Mr. Jackson’s “Lord of the Rings” and “King Kong” films, and has continued to be a center for special-effects work on other movies, including James Cameron’s “Avatar.” The industry had revenue of 2.8 billion New Zealand dollars in 2009, or $2.1 billion — roughly 2 percent of the gross domestic product, according to Statistics New Zealand, an agency that monitors the country’s economy.

In announcing the proposed settlement on Wednesday, the prime minister expressed relief that the cinematic crisis appeared to have passed.

“It’s good to have the uncertainty over and to have everyone now full steam ahead on this project,” Mr. Key said.

Colin Peacock contributed reporting from Wellington, New Zealand.

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