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Interesting article! I've heard stories about this -- how the success of LotR has altered the New Zealand film industry. Probably the only reason that the LotR even exists is because they were able to do it on the (relative) cheap in New Zealand. But all that money flowing for all those years created bigger and bigger expectations from local labor and talent. They want more, and so consequently one of the principal attractions of filming in New Zealand -- low cost -- is going away.
I'm a union guy, but reality is reality. The L.A. economy has taken significant hits over the past fifteen or twenty years because of "runaway production". It's cheaper to go to Canada, or eastern Europe, or even just out of state to get attractive tax rebates and non-union crews. Films can go to the Czech Republic and get a crew to work six days a week for pennies on the dollar -- and they do.
By the way, this won't affect the main cast, who are probably all working under SAG contracts anyway. It's more to do with day players, background actors, and stuntmen.
This is just gamesmanship. I don't think it will affect whether The Hobbit gets made one way or the other. It may affect where it gets made.
Last I heard, MGM was very close to some kind of deal that will resolve their financial trouble. In fact I recall reading something only a week or two ago about how Bond is ready to move forward. Things seem to be happening. I wouldn't be surprised to see some kind of formal announcement about The Hobbit in the near future.
EDIT: Whoops -- a little googling reveals that SAG has alerted members not to accept work on the picture. So maybe more serious than I thought. Still, gamesmanship. No doubt some deal will be struck after both sides stop posturing.
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