The co-producer of The Hobbit says the films are "on the edge" of being moved from New Zealand and the producers need to fight to get them back.
Film studio New Line Cinema, its parent Warner Bros. and MGM this month approved the finance for two movies to be produced and directed by Sir Peter Jackson, with an expected budget of about $US500 million.
Sir Peter's company, Wingnut Films Productions, and the New Zealand Actors' Equity union have been at loggerheads over a collective pay agreement, leading to warnings the film might be made in another country.
Early on Thursday morning, Wingnut Films released a statement saying Warner Bros. representatives are coming to New Zealand next week to make arrangements to move the production offshore.
However, Warner Bros. has refused to confirm whether the movies will be filmed in another country.
Wingnut Films said New Zealand Actors' Equity industrial action has undermined Warner's confidence in New Zealand as a stable employment environment and it is very concerned about the security of its investment.
"We've been driven to this precipice by an Australian union," co-producer Philippa Boyens told Radio New Zealand's Nine to Noon programme, referring to the urging of Australian-based Media, Entertainment and Arts Alliance (MEAA) for a boycott.
"We don't know how far we have to go to retrieve this situation. We need to fight to get this film back. That's basically where we're at."
Neither she nor co-producer Fran Walsh specified exactly how far Warner Bros.' decision-making had gone.
But Ms Walsh said Warner Bros. had people in the United Kingdom taking location photos and owns a studio used in the Harry Potter movies "that they say would be perfect for us."
Prime Minister John Key says he wants to meet the Warner Bros. representative who is arriving in New Zealand next week. He says the issue is not about money, but of the potential for industrial strife.
Boycott lifted, says union
Council of Trade Unions president Helen Kelly said the industrial issues were well on the way to being resolved by the time hundreds of industry workers marched in Wellington on Wednesday night in protest at the actors' union action.
She said the unions were prevented from making an announcement by an agreement with Warners on managing the process, and told Nine to Noon she understands Sir Peter Jackson had a say in the content of the studio's media release.
Ms Kelly said financial incentives offered by the Government will be the crucial factor in whether the film is produced in this country or overseas.
The Hobbit co-producer Fran Walsh told Nine to Noon the deciding factor is not tax breaks but certainty and stability in the workforce.
She disputed that the boycott had been lifted, because she said there was still a blacklist notice on the Screen Actors' Guild website.
Later on Thursday, the guild's website had posted a statement advising members they were free to work on the film.
New Zealand Actors Equity's spokesperson Robyn Malcolm said she strongly doubts that union action has scared away the film's big-budget backers.
"I mean how powerful, really, are we to derail a production like this?"
On Morning Report on Thursday, Sir Richard Taylor of Weta Workshop said he had no information on whether the film will end up being made outside New Zealand, but is clinging to the hope it will remain in the country.