A billion-dollar global game tech company has cut ties with Wētā Digital, causing 265 redundancies.
Wētā Digital's content creation tools have been used in films and television shows such as Avatar, Game of Thrones and Lord of the Rings.
In 2021, San Francisco-based Unity Software purchased Wētā Digital - including its engineers, pipeline, tools and technology - for US$1.625 billion (NZ$2.64bn) in a combination of cash and stock.
Its VFX teams meanwhile continued under Wētā FX, of which Sir Peter Jackson holds majority ownership.
Wētā FX said it and Unity "mutually agreed" to terminate Unity's service agreement with Wētā FX.
Wētā FX said they were aiming to hire as many of the staff back as possible.
"However, there may be a few roles that we may not be able to accommodate within our new structure," said Wētā FX.
The redundancies will come into effect on 10 December.
Both Unity Software and Wētā FX have indicated they will offer support to those affected, whose jobs will be cut just 15 days before Christmas.
"It makes more sense for Wētā FX to own full end-to-end production activities directly… a shorter path which makes sense for both companies."
Unity would keep ownership of the technologies it purchased from Wētā in December 2021 but will also remain fully available to Wētā FX.
A Unity spokesperson said the company had done a "comprehensive assessment of our product portfolio to focus on those products that are most valuable to our customers".
It also planned to close offices in 14 locations such as Berlin and Singapore, and reduce the footprint of its remaining offices, including in San Francisco and Bellevue, Washington.
An employee from Wētā FX said she was feeling uncertain about her job security after being notified on Wednesday in an email about the wave of redundancies.
"Everything is quite sudden, so people are quite shocked. But, I think generally people have been pulling together and supporting one another, which has been really good."
She said it could be a positive step for Wētā to regain ownership of the effects process from start to finish and be back under one name.
"Splitting things out does overcomplicate and you don't feel like you're part of one full team."
Wētā Digital had not disclosed the exact number of New Zealanders who would lose their jobs.
But the employee confirmed many in the team were from Aotearoa.
She said many of those being made redundant were experts in their field, with in-demand skills, who would easily find other work.
It had been a turbulent year for the film industry with the Hollywood strikes, which were now over.
The Wellington Chamber of Commerce was concerned the redundancies, many for roles with significant salaries, would see people go offshore.
"That is a loss to the city when you see that kind of modern, contemporary, quality job walking out the door," chief executive Simon Arcus said.
Wellington had done well in the tech field and it was something the chamber wanted to see continue.
"We want to keep that talent in the city," Arcus said.