Fran O'Sullivan writes that New Zealand has lost major winners before by keeping the national wallet tightly closed.

When John Key invited the Hollywood moguls into Premier House he knew they would seize the opportunity to up the ante in the hardball negotiations over The Hobbit.

The Prime Minister had choices.

He could have done a David Lange. He could have stood on principle and told Warner Bros to take its bully-boy tactics elsewhere.

This response appeals to the element in the Kiwi psyche where we like it when our leaders show a bit of the old "up you" spirit.

But that would just have played into the hands of the union leaders whose decision to organise the international actors' boycott caused the row in the first place. Union boss Helen Kelly - who seems obsessed by her drive to "get John Key out" - would have been even more convinced her strategy of involving foreign unions to try to change New Zealand's labour laws is correct.

But giving the two-fingers salute to Warner Bros would have marred New Zealand's reputation as a destination for large-scale movie productions and resulted in major harm to the talented domestic film industry. Rather like the salute that then Labour Prime Minister Lange gave the United States a quarter of a century ago, which ultimately resulted in this country being sidelined by America and Australia when they forged a stronger economic relationship.

Key could also have listened to the Treasury wallahs who are dead against "picking winners", abolished the large-screen production grants scheme and told Sir Peter Jackson to make his blockbusters elsewhere.

Many Kiwis, particularly those who envy Jackson's brilliant successes, would have rejoiced in seeing another tall poppy scythed down.

Instead, the Prime Minister cut a commercial deal which will increase the price tab for The Hobbit's film subsidies to about $90 million to $100 million. The Government will also inject US$10 million towards the marketing budget with the proviso that Sir Peter whizzes up a bit of magic and ensures that New Zealand is strongly promoted within the DVDs of the two blockbuster movies.

This is no more - and arguably considerably less - than Warner Bros could have got from other countries, including Australia, if the movie had been relocated.

In return, New Zealand secures two blockbusters that will generate the thick end of a billion dollars of economic activity, ensure the jobs of a thousand or so highly talented Kiwis and put this increasingly marginal country back on the world stage. And a small price to pay for enhancing New Zealand's tourism image beyond bungy jumping and binge-drinking.

Don't believe me? Well, look at what the Los Angeles Times published in an article 'Hobbit casts cloud over film-makers' paradise'.

The newspaper noted that when The Lord of the Rings debuted in theatres in 2001, it "not only introduced to the big screen the fantastical world of wizards, hobbits and orcs, it also put New Zealand on the world stage".

"The Academy Award-winning film ushered in a hit franchise for New Line Cinema, employed thousands of crew members, spurred a tourism industry called the "Frodo economy" and, thanks to breathtaking landscapes along with low-cost labour, established New Zealand as Hollywood's go-to destination Down Under for filming."

It went on to report the trilogy spawned a burgeoning tourism trade and paved the way for a number of other high-profile productions to shoot in New Zealand, including The Last Samurai, King Kong, 10,000 B.C. and the television series Spartacus.

So, it is hardly surprising that Key wanted to secure the future of the New Zealand film industry and the opportunities The Hobbit offers this country to distinguish its brand as more than a giant dairy farm, a nation which prides itself on being clean and green. But frankly, it's getting bland and a bit too boring, and that's why nearly a quarter of New Zealanders live overseas.

We've lost major winners before, like America's Cup hero Sir Russell Coutts, because we wouldn't pony up enough cash to keep him and his winning Team New Zealand in Auckland.

Coutts did not initially want to take part in a bidding war after he nailed his second America's Cup win. But he was entitled to more say - much more say - in the future of New Zealand's Cup crusades than the businessmen who ran the local show were prepared to give him.

Let's get a bit real here. His successor, Dean Barker, does an okay job. But he is nowhere near the winner that Coutts is.

New Zealand could also have co-hosted the 2003 Rugby World Cup with Australia. But the previous Government stuffed that opportunity.

We can get all prissy about the fact that the Hollywood studios found Key's inflexion point. Get over it. No one will remember any prime ministerial egg-on-face when the Hobbit omelette is finally cooked.