New Zealand divided over government deal to keep Hobbit

WELLINGTON – The New Zealand government began making changes to labor laws on Thursday as it moved quickly to seal its bargain with Warner Bros. on the big budget "Hobbit" movies, drawing both praise and outrage.

Fearing the loss of the estimated $500 million two-film project and damage to the reputation of New Zealand's fledgling film industry, Prime Minister John Key stepped in, negotiating a deal to keep the project that was announced late on Wednesday.

A short-lived union boycott had prompted Warner Bros. representatives to travel to New Zealand this week to review the studio's decision to shoot Peter Jackson's two-part adaptation of J.R.R. Tolkien's fantasy in New Zealand.

Included in the agreement was an offer of $25 million, some $15 million of that in tax breaks, and the law changes, which are being pushed through without the normal process of referral to a parliamentary committee and public submissions.

"(It is) a solution that will enable Warner Bros and the international film community to restore their confidence in the New Zealand screen production environment," said Penelope Borland, chief executive of the Screen Production and Development Association of NZ.

Jackson, whose adaptation of Tolkien's "Lord of the Rings" trilogy was shot in his native country and garnered major international publicity for New Zealand, as well as winning him and his team 11 Oscars, said he was thrilled and grateful.

But union officials, who had given assurances that the films would not be hit by industrial action, were outraged.

"That a foreign corporation can come into this country and demand that workers' rights in this industry be removed...that's effectively what's going to happen today," said Helen Kelly, the head of the Council of Trade Unions.

The dispute erupted over moves by actors' unions to negotiate a minimum wage and working conditions for their members.

"Not only are we now handing over wads of extra cash, the government is now ramming through unnecessary industrial legislation at the direction of Warners," said Trevor Mallard, a lawmaker from the Labor Party, in a statement.

"It's a move that sets a dangerous precedent."

PUBLIC OPINION DIVIDED

The threatened loss of the movies, which economists said could cost New Zealand $1.5 billion, drew thousands to the streets in protest.

As part of the overall package New Zealand is giving extra tax rebates for each "Hobbit" movie on top of the usual 15 percent, and will partly offset the costs of a joint marketing deal with Warner Bros., a Time Warner Inc unit, to promote the country as a film production and tourism destination.

Opinion in Wellington, which is home to Jackson's production company and styles itself "Wellywood," was divided.

"It was important that something was done to keep the films here so we get all the benefits like the jobs and tourist profile," said office worker Warren Anderson.

But the sense that Key buckled to Warner Bros. angered others.

"We shouldn't be doing what any multinational corporation dictates to us and changing laws just to suit their narrow profit motives," said company secretary Leanne Jones.

"The Hobbit" is based on the adventures of Bilbo Baggins, a hobbit who lives in the land of Middle-earth that is filled with wizards, elves and other fantasy creatures. Bilbo goes on a quest to find treasure guarded by a dragon.

The book, first published in 1937, is the precursor to the "Lord of the Rings" trilogy that is also based in Middle-earth.