Deal Reached to Shoot Avatar Sequels - Wall Street Journal

Dec. 16, 2013 1:09 a.m. ET

WELLINGTON—New Zealand struck a deal with director James Cameron ^[1] for the next three Avatar films to be filmed in the country, boosting the local economy by 500 million New Zealand dollars (US$414 million).

It follows months of speculation that Mr. Cameron would make the remaining Avatar films elsewhere, with other countries offering sweeteners to attract the sequels to a 2009 hit film that grossed around US$2.8 billion at the box office.

Peter Jackson's "Lord of the Rings" film trilogy kick-started a multibillion-dollar film and television industry in the Pacific nation now valued at around US$3.3 billion a year, according to government figures. But a high New Zealand dollar exchange rate has pushed up wage and production costs in recent times, making the country a less attractive destination for filmmakers, despite its picturesque alpine peaks, rain forests and wilderness.

Under the terms of Monday's deal between Lightstorm Entertainment Inc., Twentieth Century Fox and the government, the Avatar sequels are eligible to at least a 25% tax rebate, up from 15% previously. In return, the filmmakers have agreed to invest a minimum NZ$500 million during their production.

Mr. Cameron said that without the tax incentives, the films would likely have been produced elsewhere.

"Despite my personal advocacy for shooting here we would have had to look very cold and hard at the numbers," Mr. Cameron said. "Business sense would have had to prevail and I am glad it never came to that."

Time Warner ^[2] TWX -0.41% ^[3] Time Warner Inc.^[4] U.S.: NYSE ^$65.55 -0.27 -0.41% Dec. 13, 2013 4:00 pm Volume (Delayed 15m) : 3.52M AFTER HOURS ^$65.77 +0.22 +0.33% Dec. 13, 2013 4:45 pm Volume (Delayed 15m): 93,092 P/E Ratio 15.87 Market Cap $59.30 Billion Dividend Yield 1.75% Rev. per Employee $864,529 12/15/13 'The Hobbit: The Desolation of...^[5] 12/11/13 Weinsteins Sue Warner Bros. Ov...^[6] 11/27/13 One Benefit of a Time Warner C...^[7] More quote details and news »^[8] in 2010 warned it would shift the US$500 million production of Mr. Jackson's "The Hobbit" series offshore amid a labor dispute with unions ^[9] . Prime Minister John Key secured a commitment to keep that film in the country by offering a 15% tax break and changes to local labor laws. That deal was criticized by labor union leaders and opposition lawmakers. The prime minister moved to head off any criticism of the latest agreement, saying the Avatar movies would give a "big boost" to the local industry.

"We need a strong flow of international productions to retain critical mass," said Economic Development Minister Steven Joyce.

"The Hobbit" series created 5,500 jobs, with around 8% of tourists to New Zealand citing the movies as one of the main reasons for their visit, according to the government.

Work on the Avatar sequels, which are due to be released annually from Christmas 2016, is already under way.

Mr. Cameron declined to give a total budget figure, but said he hoped it would "undershoot" US$1 billion given all three films will be produced at the same time, with a single production schedule.

Write to Rebecca Howard at rebecca.howard@wsj.com ^[10]