Amazon's Lord of the Rings New Zealand exit a tourism nightmare

Lord of the Rings will now be filmed in the UK. Photo / Supplied, publicity image first released for Lord of the Rings Trilogy by New Line Cinema, Warner Brothers

Amazon's decision to move production of future seasons of the Lord of the Rings to the United Kingdom represents something of a nightmare scenario for New Zealand's tourism industry, which sounded the alarm two years ago that a country like the UK could forever sever our reputation as the "home of Middle-Earth".

Before the deal was inked with Amazon, tourism officials singled out the UK as a potential threat to the strong link New Zealand has to the film franchise.

"Should another destination 'closer to home' (for example the UK) deliver the same value proposition, then NZ should expect [the Lord of the Rings] legacy to quickly taper off – particularly in the current climate of slowing global travel and economic uncertainty," warns one tourism document, released under the Official Information Act.

Tourism officials warned that the decades of investment New Zealand tourism has put into the Lord of the Rings could evaporate if another country were to become associated with the franchise.

That fear is now reality, after news the production will now be based out of the UK.

Tourism NZ has confirmed that it had not prepared a marketing campaign for the film.

However, the New Zealand taxpayer will walk away hundreds of millions of dollars better off, after Amazon decided to move production of future seasons of the Lord of the Rings to the United Kingdom.

The internet giant negotiated a deal with the Government giving it a 25 per cent rebate on almost every dollar spent in New Zealand.

This was estimated to cost the taxpayer $160 million for the first season alone - although that estimate has since been cut.

Subsequent series were estimated to leave the taxpayer with a bill running into the hundreds of millions of dollars.

Forecasting by Treasury in 2019 found the enormous amounts of money being lavished on the film industry qualified as a "significant fiscal risk" to the Government's books, and were likely to cost the taxpayer $1 billion over the five years from 2019 to 2024.

The two productions singled out by Treasury as contributing to that cost blowout were Amazon's The Lord of the Rings TV series, and James Cameron's Avatar sequels.

With Amazon now withdrawing from New Zealand with about $130 million worth of the subsidy, Avatar is the last one of those productions standing.

To date, the Avatar sequels have received $119 million in subsidies.

Act deputy leader Brooke van Velden said the failed deal showed the futility of film subsidy deals.

"These multinational companies know that governments are willing to spend taxpayer money to keep them in their countries," she said.

"The Government tried to give them more rebates and ultimately it wasn't enough to keep them. How much would the Government have been willing to present to keep them there?"

She said while she felt for the people who had lost work on the project, it was "better for New Zealand in the long run that they've left".

National's economic development spokesman Todd McClay blamed Minister Stuart Nash for bungling negotiations with Amazon.

"Stuart Nash has shown a lack of interest in negotiating with Amazon, despite the huge impact the production could have on our economy.

"Stuart Nash needs to be transparent with Kiwis about why he didn't even ask for future seasons of the show to be filmed in New Zealand.

Nash said the Government only discovered on Thursday Amazon was pulling the plug.

"The international film sector is incredibly competitive and highly mobile. We have no regrets about giving this production our best shot with Government support.

"However, we are disappointed for the local screen industry. Work will continue across Government on ways to keep supporting the sector," Nash said.

The Green Party's Chlöe Swarbrick said the party was "thinking of the around 2000 people who had been relying on this income.

"Screen subsidies are not black and white, but there's a huge lesson here in the opportunity to create a self-sustaining industry in Aotearoa," she said.

Film subsidies are an economic headache for the Government.

Documents released with the 2021 Budget show the cost of the subsidies is running at three times that originally forecast.

Nash and Arts, Culture and Heritage Minister Carmel Sepuloni have been doing some work on ways of keeping the cost of the scheme under control.

But Nash has said that this work won't involve putting a cap on the cost of the scheme.

All productions that film in New Zealand get a 20 per cent subsidy on every dollar spent in the country.

Productions that bring "significant economic benefits" get an additional 5 per cent rebate, if certain conditions are met.

Amazon applied for and received that additional 5 per cent rebate.

In return, Amazon promised to forge a lasting relationship with New Zealand, possibly partnering with and mentoring companies here.

Negotiating the deal, the Ministry for Business Innovation and Employment hoped that cozying up to Amazon would bring "opportunities to showcase New Zealand in a serious and meaningful way to senior Amazon business leaders, through targeted visits to New Zealand".

They also hoped Amazon would show "a willingness to explore innovative opportunities which can support inclusive economic development across different parts of New Zealand".

With Amazon now walking away from New Zealand, it has also turned its back on the additional 5 per cent rebate - costing it about $30 million. It has also turned its back on its obligations under that agreement.

One of those obligations was to allow New Zealand to leverage assets from the films for "marketing campaigns and tourism promotions" - the promotion was tentatively titled 100% Home of [Lord of the Rings].

However, it is understood Amazon made good on its promise to provide film internships on the project.