New Zealand's prime minister held a crisis meeting with studio bosses in a bid to keep filming of The Hobbit movies, but warned his country would not be drawn into a bidding war.
Plans to make the £316 million, two-film project in New Zealand fell into disarray last week when the film-makers made it known they were considering moving production because of a pay dispute with the local actors' union.
The union says it called off its boycott of the production last week, but director Peter Jackson said the studios were not confident there would not be more trouble during the production.
Executives from Warner Bros and New Line Cinema flew to New Zealand this week for meetings before making a final decision.
The dispute has become a national issue in New Zealand. Hundreds of people marched in several centres on Monday to support the movies being made in the country.
The Lord Of The Rings films based on JRR Tolkien's novels relied heavily on the rugged landscape of New Zealand, which in turn received a tourism boost after becoming associated with Tolkien's Middle Earth fantasy world inhabited by hairy-footed little people and host of other colourful beings.
The three-film production also kick-started an international film industry in New Zealand.
The Hobbit is Tolkien's prequel to the story of The Lord Of The Rings.
Prime minister John Key said before Tuesday's meeting that he thought there was an even chance the project would stay in New Zealand. But he said he would not be offering more tax breaks to ensure that was the case.
"I've made it quite clear that if it comes to a bidding war New Zealand is out. I don't think that's the right way to run this," Mr Key told the TV One programme.