Indie woes: Too little credit, too many films

Even before the credit crisis, the independent film business was retrenching. Paramount Pictures this summer folded its specialty film label, Paramount Vantage, into the studio. That followed a move by Warner Bros. to close its specialty arm, Warner Independent Pictures, as well as Picturehouse. And entrepreneur Sidney Kimmel has significantly curtailed his film production company, which financed "United 93" and "The Kite Runner."

Money from private equity firms and hedge funds has also grown scarce at the same time that several banks have cooled on lending to Hollywood. In July, Germany's Deutsche Bank abandoned efforts to raise $450 million for Paramount Pictures. It was followed by Societe Generale, the Paris-based bank and well-known movie financier, which exited the business, citing market conditions.

Many independent filmmakers depend heavily on "preselling" the rights of movies to distributors in foreign territories. Those sales usually require an upfront payment before the movie is delivered, and are used as guarantees to secure bank loans to finance production.

But foreign presales, already sluggish the last two years, slowed further when credit markets froze, creating new pressures on foreign theater exhibitors, pay-TV channels, broadcast stations and home video distributors, according to industry executives. The consequence was felt last month when buyers largely stayed on the sidelines at the annual Mipcom market in Cannes, where TV program producers gather to sell their shows to networks and distributors from around the world.

Some foreign distributors have had their credit lines restricted and are struggling to make payments to producers.

"My Iceland buyer said, 'I don't know when I'm going to pay you because our bank suspended operation,' " Damon said. Iceland's economy was hit so hard by the global financial meltdown that it is now seeking a bailout from the International Monetary Fund.

Avi Lerner, co-chairman of Nu Image Films and Millennium Films, a producer of "Rambo" and "Righteous Kill," said buyers in Turkey, Russia, Brazil and elsewhere were struggling to raise cash to honor existing agreements.

"People owe me millions of dollars," Lerner said. "They don't have the confidence that they will get the money from the banks, so they are limiting purchases."