Lord of the Rings director Peter Jackson will start filming the two-part prequel The Hobbit in February. (Chris Park/Associated Press)New Zealand may lose the filming of The Hobbit movies, with financial backers Warner Bros. making arrangements to shift the production offshore, director Peter Jackson has warned.

Jackson's production company, Wingnut Films, and the Actors' Equity union have been at loggerheads over pay deals for actors in the $500-million US two-film prequel to the highly successful Lord of the Rings trilogy.

Shooting of the two 3D films is due to begin in February.

Wingnut Films said in a statement issued Thursday in New Zealand that the actors' move in threatening to boycott the production had undermined Warner Bros.' confidence in the industry "and they are now, quite rightly, very concerned about the security of their $500 million 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."

The statement gave no indication of where the films' production might be moved.

Warner Brothers decision

Jackson said while they would fight to keep the films in New Zealand, the decision ultimately rests with Warner Bros.

Production of The Hobbit was given the green light from U.S. studios Warners and New Line Cinema on the weekend, with Jackson as director.

Late Wednesday, more than 1,000 film technicians 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."

The group had planned to attend an actors' meeting and "verbalize their concern" outside, said the head of Wellington's Weta Workshop film production house, Richard Taylor, but when the actors cancelled their meeting the technicians marched through the streets to show their concerns.

Taylor said Thursday that he "can only hope that [Warner's] ongoing intention is to see [the films] made [in New Zealand]. I have to cling on to hope. The alternate is too dire to think about. But I'm always positive that good can come out of such things," he told New Zealand's National Radio.

His production unit Weta Workshop "has been hired on the film for a number of months ... and were confident ... that the film will continue on. But we respectfully understand that the studio is in a very difficult place around the negotiations of the actors and therefore are tentative about how they could move forward."

3 years in production

After the huge success of the Lord of the Rings trilogy that was shot in New Zealand, Jackson has spent the past three years working on adapting the J.R.R. Tolkien fantasy novel set before the trilogy.

The films' co-producer, Jackson's partner Fran Walsh, said the ban placed on the film by the actors union remains in place, despite New Zealand actors saying it was lifted on Sunday and that Warner Bros. had been advised.

"The boycott has not been lifted. If anyone goes to the Screen Actors' Guild [of America] website now they will see we are blacklisted," Walsh told National Radio. Warner Bros. "are saying they need stability and certainty and that's no longer here ... [and] they can protect their investment better elsewhere."

Why would Warner "go to a place where they're almost guaranteed industrial action during the shoot?" she added.

Co-writer Phillipa Boyens said the company "is fighting to retrieve" the movies, but "we can literally feel [them] slipping from our fingers."

As well as union issues, the ongoing restructuring of flailing Hollywood studio Metro-Goldwyn-Mayer Inc., which owns half the project, has contributed to delays.

In May, Hollywood director Guillermo del Toro quit after working on the project for nearly two years. Jackson, who directed the Rings series, has taken his place.