It is no secret that investing in the film industry is a highly speculative and inherently risky business. Apart from the threat of piracy and recent sagas such as the Hollywood writers’ strike, there is no assurance of success – particularly as revenue is dependent primarily on acceptance by the public.

These uncertainties, coupled with the collapse of credit markets and general economic gloom, have made film-industry players from Los Angeles to London nervous about from where future funding will come.

Finance for several big US studios is relatively secure. Summit and Marvel, both of which have credit facilities with Merrill Lynch, are thought to have their rates already set. However, it is unclear whether once-active film investors such as Merrill, now being acquired by Bank of America, and Goldman Sachs will be willing to put their money into films now that their financial positions have changed somewhat.

Other studios have ventured to Asia, seeing limited chance of success in the West in the current market. Dreamworks and India’s Reliance ADA have done a deal that will see the creation of a new $1.2 billion (£680 million) film company.

Expect further investment from Asia. MGM, which recently retained Goldman Sachs to look at options to deal with its $3.7 billion debt load, is understood to have had talks in August for Reliance ADA to come in as an investor. Also, according to The Hollywood Reporter, the Weinstein Company is thought to be seeking further financing, turning to Asian sources after its Goldman Sachs fund closes.

In Britain, film investment has tended to be less reliant on banks. The UK Film Council insists that there has not been a significant effect on film financing in the UK from the banking industry turmoil, saying that hedge funds provide much of the funding. Hedge funds have put $13 billion into the global film industry and UK independents have benefited from this.

However, some are sceptical about the role of hedge funds. Stephen Margolis, chief executive of Future Film Group, said: “We don’t know how much toxic debt is sitting in hedge funds that have been providing funding to independent film makers.”

Paul Webster, head of film at Kudos and the producer of films such as Pride & Prejudice, starring Keira Knightley, said that the economic downturn has hit both UK independent filmmakers and studios. “Studios with a large bank behind them are going to be worried. However, we are unlikely to see an impact on studios in the next few years, as a lot of deals have already been signed for the long term,” he said.

Duncan Reid, of Ingenious Media, said that a number of fundraisings have failed recently because bank debt could not be raised, mentioning the reported collapse of a Paramount Pictures $450 million film-financing deal this year. He said: “Independent films in particular have traditionally relied on banks for a part of their financing.

This finance appears to have been curtailed due to the credit crunch.” However, he added that studios still have enough from previously raised funds to cover themselves for up to a couple more years.

Ian Hutchinson, the director of film finance for Bank of Ireland, focuses on non-studio films, lending to the likes of Ecosse Films and Recorded Picture Company through special purpose vehicles. “Banks will be more selective to reflect the economic situation,” he said.

In Britain, others are concerned about a possible decrease in investment from television broadcasters in film. As Channel 4 feels the pressure, it is cutting £50 million from its programming budget in the next two years.

Amid the gloom, some are remaining positive, especially as UK cinema’s box-office has just enjoyed its best summer in 40 years. Mr Webster said: “People are not walking away from filmed entertainment. They will keep renting DVDs and going to the cinema, as these are relatively low-cost forms of entertainment.”

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