NZ keeps The Hobbit

NZ keeps The Hobbit

By Pattrick Smellie

Oct. 27 (BusinessDesk) – Warner Bros has agreed to keep the US$500 million movie project, The Hobbit, in New Zealand in return for a taxpayer sweetener of up to US$15 million and rewrites to a crucial element of employment law.

The new legislation will be rushed through Parliament under Urgency tomorrow, and already has the support of the ACT and Maori parties, Prime Minister John Key said at the end of 48 hours of on-the-hoof negotiations with a senior executive team from the Los Angeles-based global film studio.

The law change will only apply to contract employees working in the film production industry and make clear that they cannot also have employee status – the issue at the heart of the dispute that saw Warners threaten to take the world’s largest current feature film project elsewhere.

However, the industrial dispute also created the opportunity for Warners to argue for further subsidies than those already on offer because of the dramatic impact of the rising kiwi dollar on the economics of the project.

Translating to NZ$20 million, the additional subsidy for the two films appears roughly to correlate with the exchange rate impact on the value of subsidies available through the New Zealand Film Commission’s Large Budget Screen Production Grant Scheme.

However, the additional support is being dressed as an extension to the range of expenses that can be claimed under the New Zealand subsidy scheme, to match conditions applying in other countries, details of which Key declined to discuss owing to “commercial confidentiality.”

“They may still have come and asked for more money because of the exchange rate,” said Key, although the project was “green-lit” in Hollywood in recent weeks at around current exchange rates and without reference to requiring further monetary assistance in New Zealand.

The green-lighting was announced just as the film’s producer, Sir Peter Jackson, began attacking as an Australian union-inspired plan the attempt by actors unions to dictate employment terms through an international ban on signing for the film.

The row has seriously damaged trans-Tasman trade union relations, with the New Zealand Council of Trade Unions livid at the unilateral conduct of the Australian Media, Entertainment and Arts Alliance union, of which the New Zealand actors’ union is a branch.

Key effectively conceded Warners had been able to wring additional taxpayer support for The Hobbit because of the industrial relations disruption, which would have seen the film moved to another country.

“If it hadn’t been for that, they would have pulled the trigger on these movies” (to be shot in New Zealand), said Key.

While the 15% subsidy was never available on the whole US$500 million total budget, it is understood to have been worth between $50 million and $60 million to the project’s bottom line, which Key said was initially budgeted when the kiwi dollar was much weaker, at around NZ$1 = US 50 cents.

Subsequent weakness in the American currency has moved that to around $NZ1 = US75 cents.

Key stressed that other countries had made much larger value offers to lure the films away, and the government had not been willing to write any cheque to keep The Hobbit in New Zealand.

“The government and Warner Bros have agreed to work together in a long term strategic partnership to promote New Zealand as both a film production and tourism destination.

“There is only a guarantee for these two films, but we have delivered an environment that is conducive.”

Key justified both the law change and the additional funding by saying the films would have moved elsewhere without those concessions, nutted out in private sessions between the Warner executives and a four-strong team of senior Ministers: Key, Gerry Brownlee, Steven Joyce, and Arts and Culture Minister Chris Finlayson.

(BusinessDesk)

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