Financing woes are all too reel for Hollywood studios

The pullback could set the studios scrambling to find alternative sources of capital to help mitigate risk on their movie slates as filmmaking and marketing costs continue to climb.

With the debt markets depressed and money drying up, studios like Paramount Pictures and MGM -- which for months have been looking to raise new "slate" financing -- could find themselves living on leaner movie budgets, making fewer pictures or turning to offshore sources such as India.

"It's not a great time for the debt markets, especially for the volatile film business," said media analyst Richard Greenfield of Pali Research. Investors, he said, are learning the hard way that Hollywood is "still not a great-return-on-investment business."

Deutsche Bank, which had been working on the Paramount deal, is one of several banking institutions, along with Merrill Lynch & Co. and Morgan Stanley, that have parted ways with their high-profile film financing teams since the end of last year.

Banks and hedge funds have accounted for more than $10 billion in film financing packages since 2004 for major Hollywood studios such as Sony Pictures, 20th Century Fox, Universal Pictures and Warner Bros.

Roger Smith, an analyst at investment research service Global Media Intelligence, agrees. "As an investor these days you don't want anything exotic like films," he said.

Earlier this month, Deutsche Bank abandoned efforts to raise $450 million on behalf of Paramount for 30 films after failing to attract investors for all of the senior debt. As part of the deal, Deutsche was prepared to shoulder $150 million of the senior debt and had arranged for Qualia Capital and other investors to assume $150 million in junior capital. But the deal fell apart when the bank couldn't find takers for the remaining senior debt.

Around the same time, Deutsche parted ways with its film financing team headed by its onetime star banker Laura Fazio, who only a year earlier had been recruited amid great fanfare from Dresdner Kleinwort. A spokeswoman for Dresdner declined to comment on whether the firm was still pursuing film financing deals.