'Hobbit' debate rages in NZ parliament

SYDNEY  - Furious debate is underway in New Zealand's parliament on legislation sought by Warner Bros. to amend the country's labor laws and make unionization of the local film industry more difficult, a condition of the studio's recent decision to shoot "The Hobbit" there.

The government has the necessary votes for the law revision and passage is expected later Friday (New Zealand time). A member of the center-left Labour Party opposition said it was a "day of shame." Both Labour and members of the Green party have hammered the government on the loss of sovereignty implied by negotiating legislation with a foreign corporation, and then ramming it through under an urgency procedure.

The ruling center-right National Party has emphasized the financial benefit of retaining the "Hobbit" production in country.

As the law changes got under way, "Hobbit" director-producer Peter Jackson thanked the film technicians, actors and fans, the New Zealand government and Warner Bros and its New Line Cinema unit for their support in their monthlong fight to keep "The Hobbit" films in New Zealand.

"We are grateful to the government for introducing legislation which shall give everyone in the film industry certainty as to their employment status. This clarification will provide much needed stability and reassurance for film workers as well as investors from within New Zealand and overseas," Jackson and partner Fran Walsh said in a statement.

He added that the support from the film technicians, actors and fans and the thousands who had written to them in their month long battle to keep the films in NZ, "made all the difference."

Essentially what the new law does is create a default position, categorizing all film production workers as independent contractors, Jim Roberts, partner at law firm Hesketh Henry told the New Zealand Herald.

"Most workers engaged by screen production companies in the New Zealand film industry had indicated they were reasonably happy with being engaged as contractors, with the advantages that brings in terms of expenses and taxation in New Zealand and it certainly makes sense for production companies who largely work on a project to project basis," said Penelope Borland, CEO of producers guild SPADA.

While the labor law changes were under way, there was less clarity about the effect of proposed changes to the Large Budget Screen Production Grant. That provides a 15% tax rebate to qualifying films with budgets of over $15 million.

New Zealand Prime Minister John Key said Wednesday the government would "widen" the qualifying criteria for the Large Budget Screen Production Fund to "improve New Zealand's competitiveness as a film destination for large budget films like 'The Hobbit.'"

That allowed the government to guarantee the studio an extra $7.5 million per film above the 15% rebate, bringing the incentive to 17.5% -- still less than other territories who were reportedly offering Warner Bros packages of incentives of between 20% and 30% of the films' budget.

But some observers have argued that the additional $10 million provided to Warner Bros. for the Hobbit's marketing costs brings the incentive level up to close to 20%.

Australia loosened its 15% location incentive in July by removing the requirement for productions spending between $14.5 million and $48.5 million to spend at least 70% of the total production budget in Australia. That was aimed at "boosting Australia as an attractive destination for the international film industry" and brought Australian incentives into line with the NZ incentives introduced in 2007.

Another international bidding war on incentives may have begun again.

Meanwhile the New Zealand Film Commission and tourism officials said the $10 million marketing deal with Warner Bros, which includes promotional videos about New Zealand as a film and tourism destination on all Hobbit DVDs was "invaluable."