Cinema operators have told a select committee that if the Government strips them of current protections, some theatres may be forced out of business.
At the moment, retailers are banned from importing and selling films on DVD until nine months after the movie is first screened internationally.
That gives cinemas a window of time to exclusively screen movies without competition.
That law expires at the end of October and the Government is considering whether to extend it for another three years - but for a period of five months, rather than nine.
The Ministry of Business, Innovation and Employment has advised the Government not to renew the ban at all when it expires.
But the Motion Picture Exhibitors' Association says that could mean a significant drop in box-office revenue and the loss of more than 100 jobs.
Though many films are released in New Zealand at the same time as overseas, some are delayed for weeks or months - for example, to time them with the school holidays.
Spokesperson for the association Mark Christensen says the ban protects those delayed films from having to compete with imported DVDs.
He told the select committee if the ban was lifted they'd be forced to screen movies at inconvenient times or not at all.
Mr Christensen says cinemas would make considerably less profit, and some in provincial or rural areas might be forced to close altogether.
"In 2002 we surveyed cinemas throughout the country on the effects of two years of unrestricted parallel importing. We found that provincial cinemas out side the main centres experienced a box office decline of up to 35%"
But the Creative Freedom Foundation says the ban is anti-competitive and effectively a government-granted advantage for cinemas.
Foundation director Bronwyn Holloway-Smith told the select committee the ban will encourage piracy and illegal downloads.
"While watching a film in a movie theatre is a wonderful experience it is a limited one audiences today expect a much broader choice of where they watched their legally purchased film."
She says artists could miss out on earnings because of a lack of legally available options to access films.
Ms Holloway-Smith also provided the select committee with the findings of a recent Parliamentary Inquiry in Australia which expressly warns against such bans.
The select committee is due to report back to Parliament next month.