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Will the NZ Government's investment in The Hobbit be worth it?

Wednesday 28 Nov 2012 10:04 a.m.

By Janika ter Ellen

The Hobbit trilogy is being hailed as a huge asset for New Zealand’s film and tourism industries.

The Government certainly thinks the films will bring big benefits - it changed our labour laws to get it here and handed Warner Brothers a cash incentive to sweeten the deal.

So just how much are we getting back?

Tourism New Zealand chief executive Kevin Bowler says the Hobbit trilogy will be the biggest thing ever to happen to its industry, driven by the presence of more than 100 international media in Wellington for today's premiere.

“Not just will they come to Wellington, but they'll also see other parts of New Zealand, so when they start reporting on the first of the three films, they'll also talk about what it's like to visit New Zealand, what you can do, and some of the locations where the films have been made,” Mr Bowler says.

How that may translate to visitor numbers - and dollars in the bank - is based on a survey conducted by the Ministry of Economic Development the year after the final Lord of the Rings film was released. It found 1 percent of visitors in 2004 came here because of the movies.

That's 11,000 people, each spending about $3000, meaning Lord of the Rings tourists brought in $33 million that year alone.

Tourism New Zealand says it's the kind of boost the country needs again as visitor numbers decline because of the global financial crisis.

But there could be fewer visitors this time around. The exchange rate has almost doubled since the early 2000s when the Lord of the Rings movies were released. Back then, the kiwi dollar was worth between 40 and 60 US cents. Now, it's 82 cents - meaning tourists from the US get much less bang for their buck today.

“That is a really big challenge for the industry,” Mr Bowler says.

The growing, $3 billion a year film industry is also desperate to leverage off The Hobbit. Film New Zealand chief executive Gisella Carr says the aim is to increase expertise, and act as a free advertisement.

“When The Hobbit looked as if it might move off shore I was being phoned by my colleagues around the world saying, ‘My minister's ringing me and saying we've got mountains, phone Warners.’"

But securing The Hobbit came at a price. The New Zealand Government changed our labour laws so actors and crew cannot collectively bargain; promised Warners a $20.4 million payment depending on the success of the films and gave them $13.6 million towards marketing.

And that's on top of the existing 15 percent tax rebate on their spending in the country.

With a production budget in the region of half a billion dollars, that 15 percent is likely to be worth a very hefty sum. But Ms Carr calls those Government moves "clever".

“That's how this production operates all across the world. If you don't want to do that, that's fine, but don't imagine you can bring in production if you don't - because other countries will take it.”

But is it fair on other industries? Business New Zealand chief executive Phil O’Reilly is not sure.

“Really what Government's doing is treading a very fine line.”

He says better long-term studies are needed into the benefit of large Government investment in the film and tourism industries.

“The Government should be able to justify every single cent of that on the basis that the economy more broadly did better - significantly better - on the basis of that Government spend.”

While it's widely expected the Hobbit movies will lead to significant economic benefits for New Zealand, as yet, there's no hard proof.

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