Analysis: How the Guilds Lost the 'Hobbit' War

Will entertainment workers of the world unite? Probably not any time soon.

They just tried, and it blew up in their faces.

The two-month "Hobbit" affair in New Zealand began with local actors attempting to organize the film and ended with a smackdown from U.S.-based Warner Bros., which extracted an additional $25 million in incentives from the island nation and secured passage of antiunion legislation, apparently negotiated directly between the government and key Warners executives including New Line president Toby Emmerich and Warners Home Entertainment president Kevin Tsujihara.

As labor leaders (including SAG, which boycotted in solidarity) withdrew under a barrage of negative publicity and even death threats, they were left to wonder: what went wrong?

Just about everything:

– The local union, New Zealand Actors Equity (NZAE), never made clear to the public why it was trying to organize the production. Were working conditions the issue? Pay rates? Residuals? There was never a detailed or consistent answer.

– Early on, a key legal issue arose: Could actors be engaged as employees rather than independent contractors? The union never developed a clear response to this question, instead focusing on odd stopgaps for protecting actors engaged as independent contractors.

– NZAE failed to develop significant support from local actors. A planned meeting -- canceled due to a counter-demonstration -- was expected to draw only about 90 attendees. Meanwhile, meetings and rallies of industry workers, including actors, who opposed the union¹s actions attracted thousands.

– In what seems an unusual arrangement, NZAE is a unit of an Australian union, the Media, Entertainment and Arts Alliance (MEAA). The initial spokesperson for labor in the dispute was an Australian, Simon Whipp. Those facts alone incited charges in New Zealand that union activists from its larger neighbor were endangering a $500 million two-film production vital to the New Zealand economy.

– The unions took little account of the public reverence for director-producer Peter Jackson, who was knighted less than a year ago for services to the arts. Jackson's role in the affair was complex: at times he reiterated the studio message that the project might move to another country, while at other times he vowed to "fight like hell" to retain the project in-country.

– In any case, MEAA/NZAE seemed unprepared for the media firestorm that its organizing attempt generated. And the unions had little political support within New Zealand. When the center-right government weighed in against the unions, the Labour party was silent.

In the end, the entire fracas redounded to the benefit of the government and Warner Bros. Under an "urgency" procedure, parliament passed in a single day laws that put all Kiwi film (and videogame) workers effectively beyond the reach of the unions. That conforms to the ruling National party¹s political agenda. Government ministers at various times acknowledged that the legislation was being introduced and fast-tracked at the behest of the studio, and at other times denied this, but without explaining in that case why urgency was required.

Meanwhile, Warners secured an extra $25 million in production incentives on top of tens of millions of dollars the project already qualified for. That seemed like a power grab by the studio. However, New Zealand did receive a valuable benefit: an agreement by the studio to include on Hobbit DVDs and electronic copies a video promoting the country as a tourist destination.

That's no small move, considering how much New Zealand tourism benefited from the Lord of the Rings trilogy.

Kiwi actors on the films will now receive residuals. That seems like a win for the union, but a studio-side source claims that a residuals proposal was made before the NZAE organizing campaign kicked in. The facts are unclear.

Ultimately, the country retained the production it could ill-afford to lose. New Zealand has become a popular filming location because of its scenery, and skilled (and obviously English-speaking) crews -- but also because of its lower wage rates and lack of unions. Keeping the project in-country was do or die for the local industry: as Prime Minister John Key put it, "If you can't make The Hobbit here, frankly, what movies are you going to make here?"

Whether Warners would ever actually have pulled the project is impossible to know. But one thing is clear: As more and more U.S. movies and television programs are made in other countries, studios are determined to limit guild influence as much as possible. Hollywood may be a union town, but New Zealand is not.

The Hollywood Reporter