Key comes through: $34m deal sees Hobbit stay in NZ

Key trade-offs to keep the $670 million Hobbit in NZ

  • Film-industry specific contract legislation
  • $US15m ($NZ20.4m) on top of existing 15% tax rebate
  • $US10m ($NZ13.6m) to off-set Warners' marketing

The Hobbit will be made in New Zealand, prime minister John Key said last night.

A memorandum of understanding was signed with Warner Brothers and the New Zealand government around 7pm, the prime minister said.

Mr Key, fresh from a meeting with the visiting Warner Brothers executives, told media that special, film industry-specific legislation would be introduced to Parliament tomorrow that will "clarify the distinction between independent contractors and employees as it relates to the film industry only."

The government has also thrown more money into the pot.

The $670 million production, to be shot in 3D, would involve two movies. Warner Bros would get up to $US7.5 million for each film on top of the 15% tax break already available to all-comers.

The full $US15 million ($NZ20.4 million) will only be paid if both movies are successful at the box office.

Further, the government will help defray the giant US studio's marketing costs to the tune of $US10 million ($NZ13.6 million).

The marketing boost marked the start of a "long-term strategic partnership" between the government and Warner Brothers, Mr Key said. The two had agreed to work together to promote New Zealand as a film production and tourism destination.

The prime minister said the deal would safeguard thousands of jobs, and "put New Zealand on the world stage". It would have been "unacceptable" for the production to go overseas.

READ ALSO: Warner execs score the poshest of digs

Earlier, Mr Key said the Hollywood delegation was asking for "a lot", while his government was offering "not a lot".

The PM first met with the visiting Warner Brothers executives yesterday, then again last night and this afternoon, accompanied by a clutch of senior cabinet ministers.

Sir Peter Jackson would be "a very happy camper", Mr Key said.

Earlier in the day, the prime minister said that the government was "likely" to make changes to employment law to reassure Warner the The Hobbit here without facing the threat of industrial action.

 Warner could have got better deal elsewhere
Mr Key said that in financial terms there was no doubt Warner Brothers could have got a better deal from other countries, but the studio wanted to make the movies in New Zealand and so did director Sir Peter Jackson.

"They wanted a lot more, they argued for a lot more," he said.

"I made it clear we were at our limit. ..this is a better deal than we have had with other big movies made here in the past."

And the government has scored through an agreement that New Zealand will be promoted through all the marketing DVDs and other material that will be used to publicise the two Hobbit movies, as well as hosting one of the world premieres.

To get that it will offset $US10 million of Warner Brothers marketing costs.

"The strategic marketing opportunities for New Zealand from the movies will be worth tens of millions of dollars," Mr Key said.

"In the financial sense, this is a good deal."

MORE:
The New York Times New Zealand Reaches Deal to Keep ‘Hobbit’ at Home
NBR: 'I was never asked for a meeting. Not without a gun to my head' - Sir Peter


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39 Comments & Questions

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Well done John Key!

This is terrific news.

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I assume you own Warner Bros

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I think this is fantastic news. For the sake of a small tax allowance, and lets face it compared to what it will bring in for NZ...it is very small, it will be worth it. I think the union had good intentions unfortunately it picked a fight it could not win. Better luck next time, I imagine most of the actors in that union ill be applying for a job in this movie. They would be cutting off their nose to spite their face if they didn't. GREAT NEWS FOR NEW ZEALAND!! It is a shame that politics had to be involved though.

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Well done John Key! We are now officially a banana republic! A bloated millionaire has a hissy fit and we change the law and increase the kickback to his American masters! Lets hope the $20 million fee he is getting for directing each film, the $5 million fee he's getting for 'writing' each film and the $10 million fee he's getting for producing each film goes some small way to helping Peter Jackson put the 'beating heart' back into our third world film industry. NZ Taxpayers - you're now a principal investor in this franchise. Your ROI: anti-worker legislation and another Lear jet for the most over-rated hack this country has ever produced.

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mate you are a moron, I work in the tourism industry and the amount of people who travel to New Zealand, just because of the Lord of the Rings films is huge and probably has brought in over a billion tourism dollars. also the legislation only applies to the film industry and is a minor change anyway, just clarifying that when a contract says 'contractor' in means contractor and not based on other criteria. The law was already critised as ambigious before this fracas. How can you label the NZ film industry 3rd world when we produce movies like Avatar, Xmen origins and the Lord of the Rings. You should get a clue.

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This is a flash in the pan and will fade soon. But then as a member of the 'tourist industry' you don't care and will pillage those that come until they no longer do so.

FYI, we didn't 'produce' the film Avatar, the producers did. NZ was just a location do work. There are many, many more that will compete with deeper pockets. All we get is bragging rights.

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These concessions will provide a far greater return than the cost, wakeup! Thats right I forgot the unions here are anti business at the mo - they should be ashamed of themselves .
Why don't the unions and their supporters fess up and admit it was their actions that caused the new costs.
Remember too the majority of actors did not support the unions actions - that says a lot too.

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John key= the best PM in NZ history!!!

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Great news for Warner brothers and an additional $35M cost to the tax payers of NZ.

Great to have big movies in NZ but surely there is a limit as to what is a feasible deal and what is stupidity. The country can't afford this movie at what is now a $100M cost.
If the movie costs $670M and half is wages and half is fixed costs - the taxman will collect $144M and give back $100M to Warners leaving a net tax of $44M to the Govt. That relates to a tax rate of 6.5% - hardly exciting.

I think John Key needs to create better deals for NZ than deals like this one if the country is going to lift it's game and improve our lifestyles.

This is just another tarde for John - unfortunately running a country is far more complicated than trading foreign exchange.

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Rounded to $145mil tax take minus 15% rebate = $21Mil + 33Mil extra rebates and promo = NZ $54Mil

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Hobbit Kickbacks:

$US15 million = NZ$20 million
on top of 15% tax rebates = ~NZ$100 million
$US10 million marketing campaign = NZ$13 million
already received: NZ$12.5 million tax rebates
FRST TechNZ grants: NZ$2 million

Total bribe committed to so far: $147.5 million of NZ Taxpayers money.

Money Out:

PJ Directors Fees for two films: at least $40 million

PJ Writers Fees for two films: at least $10 million
Fran Walsh Writers Fees: at least 10 million
Phillipa Boyens Writers Fees: at least 10 million

PJ Producers Fees for two films: at least $20 million
Fran Walsh Producers Fees: at least $20 million
Phillipa Boyens Producers Fees: at least $20 million

Straight into their back pockets: $130 million of NZ Taxpayers money.

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Didn't John Key tell us earlier today he couldn't afford to pay these guys anymore.money as NZ could not afford it.

Maybe John is paying these additional costs out of his looty he earned in the USA?

This had nothing to do with Unions John and now we know that from your response

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Do we have any idea what the TOTAL payback could be? Not only jobs but Tourism etc? Anyone done that calc? Without that we're guessing whether this good or bad from a dollar perspective.

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On balance I think this is a win for NZ.

The government isn't going to be losing money on this. A 15% rebate on the local expenditure is alot more than 100% of nothing.

The value to NZ tourism and the future of the NZ film industry is also huge. And the fact that the films will employ hundreds if not thousands of local film industry workers, with all the economic benefits of that.

The concessions aren't huge either - an additional $15m is easily offset by income, the $10 marketing is probably pretty at least partly from our existing internation tourism marketing budget... And the point of law with relation to the employment of contractors probably needs clarification (although I'd assume the same is true outside of the film industry too)

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you guys are seriously retarded! 7.5 per movie to save the whole industry is nothing, especially considering the money well get back from it from tourism, other films made here, more employed work force for years to come. You pretend to know so much about figures, calculate what well get back from this, also calculate how many man hours all those people youve listed have worked on this project, calculate how much money well get back just from the coffee the tourists will be drinking in this country and calculate how much those contractors will actually get paid overall as well as residuals then come back here with figures you naive bunch of pessimists. Key did well today

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Fantastic! I am delighted to hear Hobbit will be made in New Zealand!!

Go John Key!

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There are a few short-sighted posts here.

There is no cost to the NZ tax payer what-so-ever. And won't be.
This deal simply means the govt won't make as much money as they would have before the Actors tiff.
Now - we actually make some money AND our film industry workers get paid for three years worth of work.

GREAT deal - thankyou Mr Key- and thankyou Warner Bros. Let's make some more movies!

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Shame on you, John Key. Did they offer you a bit part on 'the world stage'?

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This announcement by John Key & not forgetting the hard work that Sir Peter Jackson has also done with this negotiation is nothing short of absolutely fabulous news for New Zealand, it's Film Industry & it's Tourism Industry as well.

Here is what happened in Matamata when LOTR came onto the scene, as an example of what The Hobbit can do for New Zealand Tourism:

"Before 2002 we had an average of 50,000 per year through our doors at the i-Site," she says. "In 2004 we had 364,000 in our info centre - all looking to visit Hobbiton or asking about the site or wanting to get their photo taken.

"Even now we are at an average of 200,000 per year."

I'm certain that The Hobbit will continue to generate MEGA $$ into the New Zealand economy for well into the next decade.

I'm so proud to have been part of the Rally to support The Hobbit that occurred around New Zealand on Monday, to coincide with the arrival of the Warner Bros Execs.

Now, for all those people focusing on $$ signs, DON'T get detracted from the this very IMPORTANT FACT, that also announced today by John Key & sadly not mentioned in this article *at all*

"The Government and Warner Bros agreed to work together in a "long-term strategic partnership" to promote New Zealand as both a film production and tourism destination," said Mr Key."

Now THAT ^^^ is a MASSIVE advantage for New Zealand, way over & above what any Tax Breaks or Added Incentives have been offered to Warner Bros & people should really focus on that.

This is a MEGA deal for New Zealand, as a whole & we should all be incredibly proud of what has happened today.

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7.5mill extra peanuts per movie + 10mill free peanuts already allocated for within the tourism budget...nice wool over the Warner Bros eyes on that last bread crumb you threw them John.
So let me see...that's an extra $15million(7.5mill x2) investment for a nett return to NZ far in in excess of $500 million(direct and spinoffs)...I'd say that's a sweet deal.
Why the bleeting comments on this page?..but then again I guess the same people would be whingeing if Warner had taken their business to England...no pleasing some I guess.
FACT: New Zealand's screen production industry boasted foreign nett earnings of $542m in 2009 alone...and that was a year without a LOTR or Hobbit mega production.

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If the Australian lead actors union had not put its foot in its mouth, none of this would have happened. John Key has done a great job to protect our film industry, including the thousands of people who earn a living from it. It may have escaped the disillusioned luddites who believe "stars" are the future of the industry, when in fact they are the past. Just take your grand chilren to the movies to see Toy Story if you think Robyn Malcolm, Jennifer Ward-Lealand, Keisha Castle-Hughes or Lucy Lawless are the future of the industry. They are kidding themselves and they over played their hand, as did Helen Kelly, who couldn't see where the future is in digital movie productions. Sorry girls, but you are all out of date!!!

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this is uplifting to see john bring his commercial acumen to political issue and and get a strategic outcome for nz, its film industry, tourism and all the intellectual property that NZ'ers are building off the back of these industries when they flourish (good on you Weta, Jucy etc). lets hope the aussies dont run out of things to pull out of the ground because that is what underpins the lucky country not the noble deeds of their unionists.

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Great news - we should not have had to bend at all!

Maybe PM Key can now give some support to the locally owned and operated Inbound Tour Operators who cannot compete in International Markets as they have to pay GST on thier margins and Foreign companies don't!

Please Mr PM lend some support for local companies - I know we don't generate PR for you but we do need some urgent help.

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Jonny Key you are a true legend (a) booted that Aussie union inteloper for touch (b) sorted out mislead NZ Unionists (c) continued to support NZ icon Sir Peter Jackson - a man who has built an industry in NZ out of nothing. (d) negotiated a hard but fair deal with seasoned US deal makers - that in itself is a legendary effort (e) cut a marketing deal for NZ with one of the worlds leading media companies.

Its hard out there (I know better than anyone) and we need positive assertive leadership to get things going. This is exactly what you are doing! Good job.

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The Govt has been very pragmatic here, and the unions have been just been true to their colours. Warner Bros have got a good deal, but so has the NZ taxpayer.
This is no different to the Chinese Govt providing major incentives to the studio that filmed the Karate Kid - except that there are no union idiots in China !The question is will Robyn Malcom get a role in the new movie ? Tui Billboard here we come !

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"Ignatius J. Reilly must be (Penny) Not So Bright"

WRONG - I publish under my own name.

Penny Bright

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Great idea to get NZ tourism marketign material included in every DVD ! This has been well handled by the PM. Shame on the actors union ! Shame on Helen Kelly !

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has indicated he is also keen to look at making his next movie in New Zealand. He wishes to meet with John Key to discuss the possibility of a law change - lowering the age of consent to thirteen.

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You have cleaned up the mess created by these greedy actors. Perhaps all these years of taxpayer subsidies for their "art" has given them a false sense of entitlement. May I sugest we look at removing all taxpayer fuding to the local TV and movie industry as a way or recouping these extra payouts to Warners?
Regards

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Lets give some credit for a change, well done to all involved as for Peter J making 20 million well done good on him being able to command such a fee. Don't you get sick and tired of the jealous knockers in this country, lets just celebrate the sucess.

Wonder what sort of deal a Helen and Michael would have cobbled together in the same circumstances I guess they would have been on the unions side?????

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Lets give some credit for a change, well done to all involved as for Peter J making 20 million well done good on him being able to command such a fee. Don't you get sick and tired of the jealous knockers in this country, lets just celebrate the sucess.

Wonder what sort of deal a Helen and Michael would have cobbled together in the same circumstances I guess they would have been on the unions side?????

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Well done John Key. The best performance since the the lovely Helen departed. I have to say that Robyn Malcom and Jennifer Ward-Lealand should be billed for the $20million they have cost NZ. Think of how many hip operations or extra teachers we could have bought if it wasn't for those two friends of NZ. They should be expelled to Waiheke and be forced to live with Chris Carter as punishment.

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to keep this movie within NZ! I am sure I don't need to reiterate the income this will eventually bring through tourism and future blockbusters to be made here.... I bet if this movie has been declared elsewhere then everyone was to blame Mr Key to his lack of credibility. There's just never satisfying people nowadays and NO We are NOT a banana republic. Well Done Mr Key.

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...and would we think Goff or Little could have negotiated this outcome of keeping the film...let along the hugely valuable strategic partnership...

Great to have a pragmatic leader..

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Any monkey in government could look economically responsible as we experienced the last 20 years of debt driven global growth. The man in street didn't notice that NZ's competitiveness was going down hill throughout this period. We are in a new reality going forward where governments are going to have to be a lot smarter and work with business in a more strategic manner to compete. The so called "currency wars" are the thin end of the wedge as we fight for a smaller demand pie with the added burden of an ageing population. In this environment I would rather have someone with the life experience and skills of a John Key leading the ship than the leadership of the Australian Labour Party who had a good go at blowing up they core mining industry before the last election. They should focus on exporting iron ore rather than their skills in industrial relations. Great stuff John

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What a joke that a nation's political leader gets involved in negotiating a movie deal. I'm sure this happens everywhere. NZ is soooo provincial.

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I've just paid $8 to make a movie I didn't want to see. Presumably NBR agrees that its better for me to decide how I spend my income that for John Key ... or does that only apply to welfare benefits?

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It's not hard to see from their lack of comprehension, and lack of vision and foresight, why the average Kiwi is so damn average

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Congratulations are in order, others may have been part of it, but the deal is so commercially orientated that you know John Key is the key ingredient (pun intended).

These guys (Warner Brothers, Jackson) want some thing I have got, so what do they have that I want. Brilliant.

Access to picture theaters, credits on CDs, marketing savy, eyeballs in the 100s of millions, a revolver aimed directly at stupid unions, the lsit goes on and John got them all.

Did anyone hear from Phil recently, he doesn't know how to respond, this whole episode is just not in labours frame of reference, they are not even in the game. Can't even be clasiffied as a knowledgable member of the audience.

Years in the FX market dealing with merchant banks has given John an edge of huge proportions, and his humility and down to earth Kiwi persona mean we could have him as PM for 15 years, I certainly hope so.

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