LOS ANGELES (Reuters) - Looking for a rebound in the risky independent film business, several newly formed U.S. companies aim to fill a void created in the past 18 months when major players failed due to a glut of movies in the market.
But the recession and foreign competition have forced veteran companies, along with new players including distributor Apparition and Beastie Boy Adam Yauch's Oscilloscope Pictures, to change business plans and cut production costs, market players said.
One thing is certain as the indie film industry gears up for a big showcase at September's Toronto International Film Festival: audiences still crave low-budget fare made outside Hollywood's major studios.
Several of the U.S. summer movie season's art house flicks have enjoyed solid ticket sales at box offices including "(500) Days of Summer" ($19 million), "Away We Go" ($9 million) and "The Hurt Locker" ($11 million).
"The opportunity of the pullback gave us the motivation to go ahead and jump in," said Apparition co-founder Bob Berney.
Last year, Picturehouse, Warner Independent Pictures, Paramount Vantage and THINKFilm were among the major indie companies that closed or drastically revised business plans.
Fueled by Wall Street investors looking to strike box office gold with the next "Brokeback Mountain," -- a 2005 movie about gay cowboys made for around $14 million that reached mainstream success and a $178 million global box office -- indie movie budgets sometimes reached lofty heights of $30-$40 million or more -- near the cost of a Hollywood studio film.
But Berney said many production companies have drastically cut back costs and are making movies in the $15 million range.
Wade Bradley, chief executive of financing group IndieVest, welcomes that change. "Independent film will again be what it should have always been. It's essentially $12 million or less production budgets and outside the studio system," he said.
Jonathan Wolf, executive vice president of the Independent Film & Television Alliance, said the sector has suffered from a glut of movies. His organization's website listed more than 1,000 films picked up by distributors last year, even though many failed to reach theaters.
"What happened throughout this past decade, you had irrational exuberance of production, by producers who ignored the competition to their peril," Wolf said.
"(The) pendulum's heading toward equilibrium, where the supply is matching market demand," he said.
Mark Gill, chief executive of The Film Department, said he expects the number of indie releases to be cut by two-thirds in coming months. Banks his company has tapped in the past report that, as a result of the global credit crisis, their single-picture lending is down 80 percent.
Also creating problems for indie filmmakers has been local competition in foreign markets, particularly in Korea and Brazil where demand for movies is high but production costs for homemade films is very low. That makes it difficult to sell U.S.-made flicks in those countries without a big-name star.
"The film with nobody in it, directed by someone you've never heard of is dead on arrival overseas," Gill said.
For Apparition, dealing with market uncertainty means focusing on buying movies made by others and distributing them, more than funding their own productions, said Berney.
Reporting by Alex Dobuzinskis: editing by Bob Tourtellotte and Todd Eastham