On the eve of the Toronto International Film Festival, Canadian distributors Alliance Films and Entertainment One (E1) are circling each other like prize fighters - but they do so on top of a shifting canvas.

The unpredictable nature of the international film market and the US marketplace's tendency to lob spanners around - for example, last February's decision by Time Warner to take control of New Line Cinema's product flow - means any sudden shifts can send shockwaves through a company's bottom line. And this is particularly true in English Canada where local production is less than a blip on the local box-office tally.

Canadian distributors live and die by their US output deals, so when Alliance Films' chairman Victor Loewy learned his output deal with New Line, a long-standing and consistent cash generator for his business, was slipping away, he was shocked. As with all matters of business, when the US sneezes, Canada catches a cold.

But Time Warner's move exposes the predicament of independent distributors and the pressure to expand operations and even band together against the might of the studios.

Alliance and E1 are now two of the largest non-studio multi-territory operations in the world. Alliance owns Momentum Pictures in the UK and Aurum in Spain, while E1 has theatrical distribution operations in Canada (Seville Pictures and Maximum Films Distribution), the UK (Contender Entertainment) and Benelux (through RCV) as well as video distribution in the US (Koch Entertainment).

'It's not complicated,' says Alliance Films president Charles Layton, explaining the rationale for multi-territory distribution plays.

'The idea is to participate in hopefully bigger and more successful movies and, with traditional independent movies, to shift the terms of trade from what you were able to command as a single-territory distributor into something more advantageous as a multi-territory. The benefits are economies of scale in releasing costs.'

Those economies are extensive, according to Patrice Theroux, president, filmed entertainment for E1. While E1 does not put equity into a film, it does try to buy into a film at the earliest opportunity, a move that can be symbiotic for both producer and distributor.

Jumping in early

'When a public company likes ours comes in to buy, the banks are going to be more comfortable offering finance,' says Theroux. 'If the producer is borrowing against sales projections, it's more expensive than borrowing against contracted sales.'

For their part, E1 or Alliance benefit much as a studio does: from market visibility - 'People tend to think of us first,' says Theroux - to better terms on prints. E1 has bulk print deals with Deluxe and Technicolor. So even if it buys for only one territory, the print costs will be less than a lone distributor would pay. 'If we do 10 million feet (of print stock), they don't care if its nine million feet from the UK and one million in Benelux,' Theroux explains. 'They just want to keep their shop busy.'

In its 2008 annual report, E1 has stated plans to spend more than $74m (£40m) on content acquisitions in 2009 - up from $47m in 2008. With more than $700m in revenue in 2007, it has the means to keep up the pace. The report makes it clear: 'Entertainment One's strategy is to become the world's leading independent content ownership and distribution business.'

If it seems E1 has the momentum, Alliance remains the leading distributor in Canada, with a market share of 14.5% for the first six months of 2008. And Alliance chairman Victor Loewy has not been idle. While takeover talks with Joni Sighvatsson's Scanbox have been shelved for now, Alliance is engaging in joint acquisitions with the Scandinavian distributor alongside Italy's Eagle Pictures - Eagle is owned by Tarak Ben Ammar's Quinta Communications. Ben Ammar, of course, is planning a pan-European distribution network called Alliance Europe. However, Alliance Films' Layton would not confirm Alliance Films' formal participation in Alliance Europe.

Most recently, the union purchased distribution rights to Grosvenor Park's spoof Disaster Movie and Ealing International's Dorian Gray for each player's respective territories: Scandinavia, Canada, the UK, Spain and Italy. Alliance and Goldman Sachs are also kicking the tyres of TFM International, the theatrical distribution arm of the French broadcaster.

Moreover, there are rumours Time Warner may be rethinking New Line Cinema's output deal with Alliance, and indeed may extend it beyond this year. According to Layton, a series of upcoming 'transactions' (probably output deals) will replace any volume represented by the loss of its Miramax output deal in April.

On the acquisitions trail

Meanwhile, E1 has made a series of acquisitions akin to an Alliance Atlantis reunion. In July, it bought Maximum Film Distribution, two television production companies, Toronto-based Barna-Alper and Los Angeles-based Blueprint Entertainment, as well as Oasis Entertainment, an international television sales agency. Robert Lantos, Theroux's former boss at Alliance, held an equity stake in all four businesses; he now has a stake in E1 and holds a position as an executive director.

E1's TV acquisitions signal a return of sorts to Alliance's roots under Lantos, who built the company's fortunes around television programming. Alliance, which is now privately held and so not compelled to issue financial results, seems to be sticking with a pure film-distribution strategy. The question is whether the non-studio market will play along. Are there enough star-driven English-language pictures on the market' The answer is one both parties can agree on.

'I've heard that question every year for 20 years,' says E1's Theroux. 'There's always constant demand for non-studio films. And there's enough out there to feed independent distribution companies. If six more distributors opened in Canada there might be a problem, but also keep in mind if there was a fluctuation we have structures that are adaptable.'

Alliance's Layton says: 'The audience is there for these movies, there's no question about that; it's always been there and always will be.

'The real question is how many movies can the market absorb of a specialised and limited nature - especially when it takes more money to get people's attention''