New Zealand's government has warned that it will not get into a bidding war to prevent Warner Bros from moving its big Hobbit production to another country.
Reports have suggested that Warner Bros is considering locations in Ireland, England, Scotland, Canada, Australia and eastern Europe.
In the wake of a short-lived union boycott that rattled the Hollywood studio, executives said last week they would consider shooting filmmaker Peter Jackson's $500m adaptation of the JRR Tolkien fantasy elsewhere.
Economists said the move could cost New Zealand up to $1.5bn.
Thousands of protestors - some dressed as hobbits - took to the streets to convince the studio that New Zealand was the only valid location for the two-part series.
Mr Jackson's adaptation of Tolkien's Lord of the Rings proved beneficial to everyone: New Zealand received international publicity, it sold nearly $3bn worth of tickets at the box office, and the filmmaker and his team won several Oscars.
Studio executives will decide on the location for The Hobbit after meeting this week with government officials, led by Prime Minister John Key.
But the centre-right politician ruled out increasing the country's subsidy programme to sway studio executives.
'In the conversations I've had with Warner Bros so far I've made it quite clear if it comes to a bidding war, then New Zealand's out, because I don't think that's the right way to run this,' Mr Key says.
'We don't want to be re-negotiating with every single production company that comes to New Zealand.'
Film subsidies are expected to run to about $50m, and some union members had argued that Warner Bros was using the industrial dispute - which centred on working conditions - to wrangle a better deal from the government.
The rising value of the New Zealand dollar has also been cited as a factor, with the currency trading about $0.75, around a third higher than when New Zealand was first investigated as a potential site for filming.
Though Mr Key has pledged not to throw money at Warner Bros, he has also said he will not rule out further tax breaks or changes in industrial laws.
The project has already suffered a series of delays including the resignation of director Guillermo de Toro, who quit in May as the uncertain financial future of movie studio partner MGM put a question mark over the project.
The Hobbit is based on the adventures of Bilbo Baggins, a hobbit who lives in the land of Middle-earth that is filled with wizards, elves and other fantasy creatures.
