The producers of the popular Lord of the Rings film series say production of the next two installments will be moved from New Zealand due to a dispute with the actors' union.
Director Peter Jackson issued a statement Thursday saying representatives of U.S.-based Warner Brothers film studio would arrive in New Zealand next week to make plans to move the $500 million production of The Hobbit overseas. Warner Brothers is one of the financial backers of the project.
The decision caps a weeks-long standoff between Jackson and the New Zealand Actors Equity, after he refused to negotiate with the union on a collective wage contract for its members. The union banned its members from working on the project, but reversed course when it appeared The Hobbit would be moved overseas.
Jackson said Warner Brothers was "quite rightly" very concerned about its investment.
He puts the blame squarely on New Zealand Actors Equity, saying it "shredded the reputation" the country's film industry "seemingly overnight."
Prime Minister John Key has offered to mediate a compromise to keep the project in New Zealand.
The two-part The Hobbit is a precursor to the three-part Lord of the Rings series based on the classic fantasy novels of J.R.R. Tolkien. The series, filmed entirely in New Zealand, became a global phenomenon and boosted the country's tourism sector.
Production of The Hobbit has been plagued by numerous delays due to a lack of financing, which led director Guillermo del Toro to quit the project earlier this year.
Some information for this report was provided by AP, AFP and Reuters.