Peter Jackson has warned that New Zealand may lose the filming of The Hobbit movies, with financial backers Warner Brothers making arrangements to shift the production offshore.
Filmmaker Jackson's production company, Wingnut Films, and the union Actors' Equity have been at loggerheads over pay deals for actors in the 500 million US dollar two-film prequel to the highly successful Lord Of The Rings trilogy.
Shooting of the two 3-D films is due to begin in February.
Wingnut Films said in a statement that the actors' move in threatening to boycott the production had undermined Warner Brothers confidence in the industry "and they are now, quite rightly, very concerned about the security of their 500m US dollars investment".
"Next week Warners are coming down to New Zealand to make arrangements to move the production offshore," Jackson's production company said.
"It appears we cannot make films in our own country even when substantial financing is available."
Jackson said while they would fight to keep the films in New Zealand, the decision ultimately rests with Warner Brothers.
The statement gave no indication of where the films' production might be moved, but co-producer Fran Walsh, Jackson's partner, said Warners already had an executive in England scoping filming locations and assessing the studio used for shooting the Harry Potter series for relocating The Hobbit movies. US studio Warners owns the studio complex.
Production of The Hobbit was given the green light from Warners and New Line Cinema at the weekend, with Jackson as director.
More than a thousand film technicians have marched through the capital, Wellington, demanding actors end their dispute over contracts. They chanted "Save The Hobbit" and waved banners that said, "Keep it Made in New Zealand" and "SOS Hobbits".