New Zealand, Hobbit execs find middle ground

Two Hobbit movies will be made in New Zealand after all, thanks to two days of crisis talks between government officials and Hollywood studio executives.

Prime Minister John Key made the announcement Wednesday after the talks with Warner Bros. and New Line Cinema, whowon an agreement for a change in labour law and bigger tax breaks to keep the project in New Zealand.

A dispute over pay and conditions for actors threw the production into turmoil last week. The studios had warned that unless the threat of labour action was removed, production of the two movies would be moved to another country.

The dispute was a major issue in New Zealand, which received a huge boost to its tourism and film industries after The Lord of the Rings trilogy was made here.

Hundreds of people marched in several cities Monday to show their support for keeping production in New Zealand.

Key said the deal includes an extra tax break of$15.4 millionfor the studios, on top of $46.3 million already pledged by the government.

New Zealand will also contribute $7.6 million to help with marketing costs of the two films.