It does not take long for the film world to turn on its head. A couple of years ago, discussion of the US industry tended to be couched in terms of crisis: runaway production, job losses, an over-ripe domestic market falling into the shadow of international.

But suddenly it seems the US is the place to be. Where in recent years locations from Canada to Romania have been standing in for expensive US landscapes and cities, now states are seriously talking about winning overseas shoots. The firm stand against tax schemes, most recently in the UK, is likely to make that interest grow still further.

The interest may, of course, be cyclical - it was only very recently that tax breaks, or loopholes, in the UK and Germany were funding 20%-30% of Hollywood studio budgets. That disappeared virtually overnight and, as the UK has shown, the former soft-money havens can quickly lose their shine.

Much of the international interest in the US is certainly enhanced in the short term by problems elsewhere. The question is whether the US is merely benefiting from other people's misfortunes or whether there are more significant and sustainable factors at play.

The lure of the US
Speaking at Screen International's Financing Films In America conference in London this week, veteran producer Edward R Pressman, whose credits include Wall Street, identified a range of those factors exciting interest right now. A few stand out:

-a very attractive dollar exchange rate
- state tax incentives
- an explosion of private equity.

Though it may be one of the main drivers for US financing, the soft dollar clearly has the least long-term reliability and remains at the whim of markets and political priorities. It is not surprising that businesses are making hay while that particular sun is shining, but there is no control over the matter.

The tax breaks are a more interesting prospect. Of course, the three dozen or so states that offer some kind of break are competing in a crowded market. Many were set up specifically to stop productions being tempted overseas by similar incentives. To an extent they are now just a chip in the international game.

What makes them a little more interesting is that there is real commitment from states themselves, which have been won over by the economic case that film incentives are an investment not a cost. They are also competing with each other very strongly which means deals can be struck.

'Each state has embraced the desire to bring films into their region and there are a lot of additional breaks available that are not advertised,' said Ted Hope, partner in This is That Productions and the co-founder of Good Machine. Any production can strike improved deals if they know the rules of the game, and what is more, said Hope, the hunger in states for film dollars is coupled with the ambitions and flexibility of the workforce.

'One of the most important things to keep in mind is that the entrepreneurial attitude is pretty much the national characteristic of the US. Everyone really thinks that they are going to get rich, from the production assistant up,' he said.

What that means in practical terms is a willingness to do a deal, to swap a tasty salary for a promising 'back equity' - that percentage of the action that every now and then turns into the big break. 'Everything is standardised and everything is negotiable,' Hope suggested.

As Europe has shown, tax incentives have an element of variability too. They are most obviously subject to political control, which may not seem an issue today but may be so in the future.

Another factor is that the bodies now arising to cash-flow US incentives are not yet tested in a growing market. More significant still may be that state subsidies can be victims of their own success. There is a danger of overheating that will force up costs, Hope warned.

Most state tax incentives have a cap on how much can be spent, limiting the number of films that can take advantage of their incentives. 'There's a glut of films in the states working to maximum capacity. In places like New York at the moment, there's not much incentive for people to do it for less,' said Hope.

Inevitably, growing demand will lead to a tightening of the currently generous offers. Where a number of productions are fighting for space, the unions, for example, may be less accommodating.

For international productions considering shooting in the US, Hope warned, there may be issues with bringing over talent and accessing some benefits but he believes working with a good local producer and partner can see off many fears.

Capital looking for a home
But it is the boom in private finance that is really attracting the attention of the world. That is not surprising given the billions of dollars that have flowed into the film market from hedge funds.

Banks and financiers have channelled that finance into film, with the studios and the bigger independents gratefully adapting to soak up the opportunities. There seems little prospect of that changing any time soon.

'There is so much capital in the marketplace that unless there is some radical political crisis, the situation looks like it will remain strong,' said Pressman.

What has happened is an alignment between film and finance in the US on a scale no one had expected, said Ryan Kavanaugh, whose Relativity Media has played a key role in the private equity boom, most recently teaming up with Citigroup Corporate and Investment Banking to co-finance approximately 45 films from Sony.

In total, Kavanaugh has played an instrumental part in financing $7bn worth of production these past two years, including backing the world's current top-grossing film, 300, through Virtual Studios. 'It has been a perfect convergence of a trend in Wall Street and two trends in Hollywood that caused it to happen,' he said.

'Within Hollywood there were two major shifts. There was incredible consolidation amongst the studios over the last 10 years. The new corporate owners wanted to know effectively, how do you reduce what the studios are burning, not increase it'

'Secondly, during the consolidation, the studios were relying extremely heavily on a number of what we might call the free equity markets - that's the German tax funds, the UK sale and leaseback programmes and others.'

In the latter case, the key was that the money did not rely on the performance of films, in which the investor had little interest. When it disappeared, there was a gaping hole. 'So suddenly you had studio owners looking for billions of dollars and nowhere to get it. Particularly not from a corporate parent,' Kavanaugh explained.

'The only place you could find billions of dollars overnight is Wall Street. And at the same time Wall Street was more flushed with cash than it had ever been in its history.

'The hedge funds were looking for a place they could invest significant amounts of capital. And there was a lack of places to put capital.'

Private equity wanted conventional business arguments
The deals struck have changed the nature of the business in a way that will have an impact on the international business directly or indirectly.

That is mainly because to access the capital, the studios had to be transparent about their business. Private equity wanted conventional business arguments, not a rehash of the 'no one knows anything' line.

Kavanaugh said that what everyone has discovered is that with proper slate financing structures and a genuine alignment of interests, it is possible to see film as a genuine investment case.

The benefits may be reaped by the independent sector. 'With the huge influx of capital into the studio world and only so much studio product available, the capital is looking for what they might think of as the next best thing. But what we consider the lower risk and more lucrative market is the independent finance world,' said Kavanaugh.

'While film was a very bad word in the investment world five years ago, it's not something that people consider an asset in many cases.'

For independents, that may mean adopting the slate approach. 'The funds have recognised that the issue with independent films is the lack of ability to get a slate. What the banks are realising is that there are ways of offering the independent world and still employ the slate mentality.'

Private capital coupled with state incentives looks like an alluring combination for international producers. A less tangible but still important point is that the US is at present more amenable to overseas production. That fact tends to be more obvious in the use of overseas talent in US films than at the box office, particularly for foreign-language film.

International production
But experienced producers see signs of change. Pressman was executive producer of Wolfgang Petersen's global hit Das Boot in 1981. Things have changed a lot since then, he suggested. 'What I was doing back in the days of Das Boot is much more prevalent today. Other cultures are having a bigger impact,' he said.

It also makes economic sense to look beyond borders given the vital need for films to perform in international markets. 'What's happened is that America represents a much smaller fraction of the film economy, From an American perspective, the domestic market represented two-thirds of the market but now it represents one third. That changes things enormously,' said Pressman.

The US has opened a gateway to international production that is open to traffic in both directions. The long-term interest in the US as far as international production is concerned may be short-lived.

'This is a cyclical business,' said Paul Brett, of UK-based financier Prescience Film Finance. 'In five years' time we will probably be asking who would even consider financing films in America.'

But the influence of that engagement with the US may be more profound. Peter Samuelson, executive producer of Samuelson Productions, said that too much emphasis is often placed on the search for finance as an end in itself. He was talking about the UK but it is true of many international markets.

'While fully accepting that without jumping financing hurdles successfully, you don't make your film, you also have to say, 'Is there a market for this film' Is the script any good' And where should we make it that would actually work for this film''' he said.

'There is now incentive money everywhere in the world and, within limits, they are of a similar nature in the impact they will have on making your film. As Ryan Kavanaugh has said, you are a bit daft if you don't work out which of the 300 places that have incentive schemes can creatively successfully make your film.'

His point is a simple one for any film-maker: work out what you want to do with your film and its potential audience before getting bogged down in finance, wherever that may come from.

No doubt some producers will shift production to the US in the coming years but the influence may be longer lasting.

The lesson of the US may just be that it has found a model whereby public incentives are a secondary support to commercially viable slates that hold credibility for private investors. The replication of that model may be the biggest contribution of the current international interest in the US.

In the meantime, expect that hedge fund money to back the next big fad: the creation of new distribution operations in North America, including Rob Friedman's budding new studio in tandem with Studio Entertainment. European producers may not benefit directly from Wall Street's largesse, but they can look forward to more buying outlets for their work.