Movie maker Sir Peter Jackson says New Zealand needs to keep up with international competition if it wants to continue making big budget movies here.
His latest film, The Hobbit: An Unexpected Journey, has its world premiere in Wellington tomorrow.
The movie was made here, but Sir Peter told Radio New Zealand Warner Bros was close to taking production overseas.
He said the industry needed tax incentives that other countries offered.
In 2010 the Hobbit trilogy was guaranteed a New Zealand home when a deal between Warner Bros and the Government saw $34 million in tax breaks for the industry, help with marketing costs and an urgent change to labour laws.
The legislative changes ensured that film workers hired as contractors would not be able to later argue in court that they were employees.
The deal was vigorously opposed by the Council of Trade Unions and the Actors Equity union.
Sir Peter told RNZ the Australian actors union was pushing for collective bargaining by the actors, despite the fact that they were hired as independent contractors.
"It was using the Hobbit to get what they were trying to get but it wasn't within the law here and no-one seemed to get that."
He said The Hobbit came "very close" to not being filmed here.
"The worst time for me was when a huge box arrived in the office...they had sent a location scout around England and Scotland to take photos.
"They literally had the Hobbit script broken down into each scene and in each scene there were pictures of the Scottish highlands and forests in England and that was to convince us that we could easily go over there and shoot the film.
"Because the Hobbit was going to happen and they wanted me to do it and I would have gone over there to do it and yet I was trying to fight for it to stay here."
Sir Peter said tax incentives were part of the film industry worldwide and there was no sentimentality with the film studios when it came to movie budgets.
"There's no way they're going to spend an extra cent for the sentimental reason of doing it because that's where Peter lives. It's just not going to happen."
He said if New Zealand wanted to make films it had to be aware of what competition there was internationally.
"If you want to be in the game, you've got to be in the game."
Go to nzherald.co.nz tomorrow for full coverage of The Hobbit red carpet and premiere. Live updates will begin at 12pm and a live stream of all the action will start at 3:50pm.