'The film market needs to change. I have been told it will never change but two years ago the same thing would have been said about the financial markets.'
So says Gennaro Buonocore, managing director of media markets at electronic interdealer broker Icap. The company has put its money where its mouth is and is turning its attention to independent film.
The notion there are upsides to the downturn is intriguing. For all the wishful thinking that cinema can ride the recession by cashing in on its role as an escape from day-to-day misery, cutbacks are already biting across the industry.
Job losses have been announced at Viacom's NBC Universal, retail closures in the UK have hit vital distribution of Christmas DVDs and all at the end of a year in which markets have been limping along.
At the very least, the brief, if unrealistic, period of hope that saw hedge funds pump $12bn into Hollywood looks a long time ago. Restructuring and cost-cutting are taking precedence over the innovation in which so much hope had been invested. But are there ways in which the industry can actually gain from a recession'
The argument goes beyond the important but facile point that when people are miserable they have historically enjoyed the escapism of the movie house. Even if that is true, box-office queues do not make for a healthy industry in general - except in the important respect that it reminds the industry that demand for entertainment is increasing even if our capacity to service it is being tested.
Talking about green shoots before the main recession kicks in seems counter-intuitive. Yet many of the critical issues affecting film were in place before the newspapers began churning out news of bank crashes and mortgage crises.
An industry examining itself
It is easy to forget in the tidal wave of financial headlines, that the industry was already in a period of self-examination. As one finance expert put it bluntly when asked about the effect of the recession this week: 'You don't need a recession to have a crisis in film.'
Maybe a downturn concentrates minds, although that will not be much of a short-term consolation. But at least part of the reason why issues are not resolved comes from a perpetual postponement of the discussion.
The transformation to digital technologies in the home and theatrical markets in much of the world has been ponderous. There is no question that from a market perspective, there has been a serious over-supply issue, exacerbated in many international markets by a subsidy-driven production growth that has little link to commerce and is not even predicated on reaching audiences.
Any new finance for film now stalls on the same factors as usual - even if the problems are greater. Potential investors do not have confidence in the business model.
Speaking at Screen's European Film Finance conference in Berlin earlier this year, financier Ben Waisbren, president and CEO of Continental Entertainment Capital, warned: 'The fundamental problem with film, from an investor's point of view, is the lack of visibility of both past and present performance.'
That is an issue during a boom when the banks are lending freely but the lack of liquidity in a recession makes that fatal. The lack of transparency is historically part of film culture. Potential financiers are given little clarity about how the pie is sliced. Yet the banks have become highly risk-averse - not least at a time when some are being bailed out by taxpayers.
Ian Hutchinson, associate director, film finance group, at the Bank of Ireland, for example, has warned this is a time when track records are critical. 'Track record has always been important and it's getting increasingly important as banks get more selective. It's quite difficult for first-time or inexperienced directors and producers to get financing.'
So the crucial question is whether film has the ability to make steps forward by addressing these underlying issues. To an extent, that may well happen anyway. A serious lack of finance is likely to address over-supply over the next couple of years. What's more, less money and access to new digital equipment could force budget reductions in production. That leaves two fundamental issues, the failures of effective and cost-efficient distribution and transparency.
The first of these was already in the process of being addressed. New players had entered the distribution market with hopes of creating a new multi-territory distribution model. The ability to distribute across borders in key international markets has been something of a holy grail since the collapse of PolyGram.
What the attention on distribution demonstrates is a recognition that the failure to connect to audiences has been extremely damaging. For Icap, which makes its money in business-to-business investment opportunities, efficient distribution and transparency go hand in hand. 'Historically, when it comes to investment in film, people have leveraged on the fact that making movies is an art, and have hidden behind all the different human, unquantifiable elements,' says Buonocore. 'In today's market, that does not work. By simplifying the model, we believe we can get money coming back into the market. The market is ready for transparency.'
A lack of agreement
It is a familiar refrain but not one that has often translated into action. Optimistic efforts to introduce some kind of slate finance system that would bring together European indies to create a clear investment opportunity faltered because no transparent model could be agreed.
But Bernhard Stampfer, senior vice-president and head of expert team media at Deutsche Bank, says: 'People are looking for smarter solutions. Look at Icon and at what Stewart Till is trying to do - other players are setting up new distribution investment opportunities. Banks definitely want to be on the very safe side these days. They are looking at real asset-based lending, at companies with a proper rating, with a solid base.'
Martin Churchill, editor of the UK-based Tax Efficient Review, puts it even more succinctly: 'You need an investment opportunity that you can explain comfortably at a dinner party.'
In other words, you need to understand that investors want clarity. Churchill suggests there are opportunities for a working investment regime, particularly in the UK where the producer equity could be leveraged as an attractive means to bring in investment.
The danger with transparency, however, is that you reveal the emperor has no clothes. That, of course, is the challenge - a means to connect product with audiences that allows profit along the value chain
Paul Brett, of UK film fund Prescience, is among those who believes the key is to concentrate on what the market has: 'There is less money around for investment but demand is no less. There's been a correction in the market place and that's just fine. There's still a demand for strong product.'
Demand at least offers a basis for growth, even if the economy makes it tough.
Additional reporting by Eleanor Kenny and Audrey Ward