October 22, 2010 / 5:06 AM / 9 years ago

New Zealand could face $1.5 billion fallout if loses "Hobbit"

WELLINGTON (Reuters) - New Zealand’s economy could lose as much as $1.5 billion if Warner Bros. relocates its production of “The Hobbit” with the country’s burgeoning film suffering long-term damage, economists said on Friday.

Elijah Wood as Hobbit Frodo in a scene from "The Lord of The Rings: The Fellowship of The Ring". REUTERS/Handout

New Zealand filmmaker Peter Jackson shot his blockbuster “Lord of the Rings” trilogy in his home country, which bolstered the local film industry, and he planned to shoot a two-part adaption of J.R.R. Tolkien’s “The Hobbit” locally as well.

But the project’s future in New Zealand is now in doubt after actors’ unions boycotted working on “The Hobbit” and Time Warner Inc.’s Warner Bros started looking for alternative locations for the estimated $500 million production.

Economists at New Zealand’s largest bank ANZ-National said the flow-on economic effects from the film could be as much as $1.5 billion, or three times the original investment, with such major project highlighting the country’s film industry.

“There’s pretty big spin-offs. There’s a lot of employees, sub-contractors, domestic suppliers of good and services, it flows through the economy,” said ANZ economist Mark Smith.

“The image of New Zealand is important; it was showcased by “The Lord of the Rings” and there won’t be the same brand exposure if the movie doesn’t go ahead,” Smith said.

A dispute between actors’ unions and the film’s producers over the ability to negotiate work agreements has been resolved this week but Jackson said the damage is already done.

Up to 1,500 protesters, including film technicians and other workers, took to the streets in a protest on Wednesday waving signs that read “Ireland is not Middle-earth,” a reference to the story’s fantasy setting, and shouting “Don’t kill Bilbo,” the name of the film’s protagonist.

Representatives from Warner Bros are due to arrive in the country next week to make a final decision on where to make the films which are due to start production next February for release in December 2012 and December 2013.

Efforts to keep “The Hobbit” in New Zealand now also involve Prime Minister John Key.

The “Lord of the Rings” trilogy, which grossed nearly $3 billion worldwide at box office, provided a massive boost to the local economy in terms of “Tolkien tourism” and also ongoing work for local film and special effects studios, which have since worked on box office hits such as “King Kong” and “Avatar.”

A study by Statistics New Zealand put revenue for the entire screen industry at NZ$2.8 billion in 2009, a rise of six percent from 2005, while New Zealand’s gross domestic product on an expenditure basis was NZ$187.3 billion in the year to June 2010.

Reporting by Adrian Bathgate, Editing by Belinda Goldsmith

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