There's trouble down in Middle Earth. In an act of what has been seen as startling corporate bullying, Warner Bros has pressurised the government of New Zealand to change its employment law and provide a package of $25m (£16m) tax breaks to keep filming its upcoming $500m Hobbit movies in the country.

Changes enacted by the Kiwi government mean actors will be treated as contractors, rather than employees, which affects their right to unionisation, strike action, holidays and sick pay. Sir Peter Jackson, director of the two Hobbit films, which are planned as "prequels" to the Lord of the Rings series, had threatened to shift production elsewhere, with Ireland mooted as an alternative locale.

Opposition Labour MPs are not happy – during an angry debate, one brandished an NZ flag emblazoned with a Warner Bros logo, while another suggested the country was in danger of looking like a "Mickey Mouse state". But it's tough for a small country to stand up to a multinational – the $36bn market capitalisation of Warner's parent company, Time Warner, amounts to almost a third of New Zealand's GDP. And the likely $1.5bn economic benefit of the Hobbit movies could be worth about $350 for each of the country's 4.3m people. It's just like crumbling before Tolkien's treasure-hungry dragon, Smaug.