LOS ANGELES — When “The Lord of the Rings” debuted in theaters in 2001, it not only introduced to the big screen the fantastical world of wizards, hobbits and orcs, but it also put New Zealand on the world stage.
The Academy Award-winning trilogy ushered in a hit franchise for New Line Cinema, employed thousands of crew members, spurred a tourism industry called the “Frodo economy” and, thanks to breathtaking landscapes along with low-cost labor, established New Zealand as Hollywood’s go-to destination Down Under for filming.
“It’s a source of pride that we’ve built an international industry here and we have long-standing relationships with the Hollywood studios,” said Gisella Carr, chief executive of Film New Zealand, a group that helps filmmakers find locations. “We’re talking about an industry which is growing faster than any other sector of the economy.”
But that growth could be severely stunted, ironically because of a brawl between the man most credited with building up the industry — New Zealand filmmaker Peter Jackson — and the New Zealand actors set to work on his next project, “The Hobbit,” the predecessor story to “The Lord of the Rings.”
Warner Bros., its New Line Cinema unit and co-financing partner Metro-Goldwyn-Mayer recently greenlighted production of “The Hobbit,” which has had a history of setbacks that delayed shooting for years. But the studios have threatened to move the two-picture project, which is scheduled to begin filming in February, after a dispute with New Zealand Actors Equity.
With the support of an Australian actors union, the group mounted an international campaign to press for union wages and work rules for New Zealand performers, who work as independent contractors. Even after the unions called off their boycott, producers of “The Hobbit” said they were still considering filming elsewhere.
“The damage has been done,” Jackson warned ominously in a statement.
The prospect of losing the $500-million project has sent a temblor through the small South Pacific island nation of 4 million people, where the film industry is one of the largest private employers.
New Zealand’s so-called screen industry employs 7,000 people and supported 2,673 companies in 2009, up 30 percent from 2005. Most of the growth has been in the digital graphics, animation and effects business, where revenue swelled to $196 million in 2009, up from $26 million in 2007, according to a report from Statistics New Zealand. The largest of the players is Jackson’s Weta Digital, which did most of the effects work on James Cameron’s hit film “Avatar.”
Economic Development Minister Gerry Brownlee has estimated that “The Hobbit” would amount to nothing less than an economic stimulus for New Zealand by creating 1,000 jobs and $1 billion in spending. He has warned that the dispute could discourage others from filming there.
“It’s a dreadful situation, and it’s going to take a bit of work to even get future productions into good shape,” Brownlee told a New Zealand TV station.
For a country that enjoys a reputation as one of the most peaceful and bucolic on the planet, the fracas over “The Hobbit” triggered the kind of protests seen more on the streets of Paris than of Wellington.
This week, more than 2,000 actors, crew members and technicians marched in the capital in support of keeping the films in New Zealand. Even Prime Minister John Key has gotten into the act. On Tuesday he met with New Line President Toby Emmerich and other executives to urge them to keep “The Hobbit” from emigrating out of the country.
Executives at Warner and New Line are said to be seeking additional financial incentives to film in New Zealand, beyond the $60-million to $75-million subsidy already offered.
There would be no shortage of potential suitors. In a global marketplace where countries try to outdo one another with tax breaks and other incentives aimed at luring filmmakers, New Zealand faces stiff competition from such countries as Britain, Australia and Canada.
“Other countries have everything to gain from a dispute in New Zealand,” Carr said recently. “International productions can take their pick of where they film in the world, and everyone wants a picture like ‘The Hobbit.’ It’s a buyer’s market.”
New Zealand offers a 15 percent rebate toward qualified production costs on major films. Other selling points include stunning vistas, a top-notch visual-effects industry and low production and labor costs. The California Milk Advisory board shot a series of “Happy Cows” TV commercials in Auckland last year, citing low production costs there.
The hand-wringing over the fate of “The Hobbit” is understandable, especially given how much the country profited from the “Lord of the Rings” films. The three “Rings” movies pumped $350 million into the economy and employed 50 principal actors, hundreds of crew members and more than 15,000 extras, or about 0.4 percent of the country’s population.
The trilogy spawned a burgeoning tourism trade and paved the way for a number of other high-profile productions to shoot in New Zealand, including “The Last Samurai,” “King Kong,” “10,000 B.C.” and the TV series “Spartacus.”
Carmi Zlotnik, managing director or Starz Media, which is producing “Spartacus,” said he was “keeping an eye” on the labor dispute but said his company had had good experiences in the country.
“There are a lot of great professionals there, and we’ve been building a base of talent there for a number of years,” he said.
Carr said she was hopeful the labor dispute wouldn’t hurt the country’s standing among filmmakers. “In the short term, there may be some concern about whether New Zealand’s reputation as a filmmaker’s paradise and an easy place to do business is going to change, but I’m confident that our reputation won’t be affected in the long term.”
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