The best analysis of the Hobbit debacle. New Zealand's comparative advantages in film do not include our scenery. It's our relatively well-educated cheap to hire workforce that's our primary advantage.
We've also now got good IT and technical skills. However neither of those things are enough to keep production in the country, especially when a Hollywood studio (MGM) wants to see a return on its investment. Jackson seems to be caught in the middle between his backers and a union determined to win more members and increase its muscle in the New Zealand industry.