Consolidation in the independent sector has been an absolute inevitability, particularly in Europe, for some time. The position of the traditional sales agent has been quietly changing during the past couple of years, and the state of today's market makes the acceleration of that process virtually certain.

So the news of the merger between Celluloid Dreams and HanWay comes as no surprise. Neither is the nervous reaction from some quarters.

The new entity - Dreamachine - has been very upfront about the fact it is not going to support the same volume of small films for theatrical release that its two parent companies did. There is natural concern that specialist and arthouse film-makers have lost at least one major player. Some have suggested the merger is a vote of no confidence in the small indie film.

Nearer to the mark is that it is a vote of no confidence in the current economics of the independent film business (see page 6). The numbers just do not add up any more for a great many companies.

The market for arthouse and speciality is changing for a whole series of reasons beyond the control of individual players. Pooling ideas and growing bigger is one logical way of facing up to that future.

What Celluloid and HanWay have done is take a punt on a digital future, in which traditional theatrical distribution is not the be all and end all and in which today's sales companies will have a much broader role taking in digital distribution.

We should not get the discussions mixed up. Recognising that the sale of small films country by country to distributors for tiny theatrical release is not working is not the same as saying that cinema is dead.

The cinema business looks pretty rosy this year and online distribution may in reality support it still further. It will give film-makers a chance to reach bigger audiences online, allowing them to establish a following that they may take into cinemas for future releases. Digital may feed the roots in a way theatrical exhibition never could.

The current market is not only tough but is likely to get tougher still with competition from the US independents and studios. Hollywood has not followed the script set out by many international observers some years ago. It was meant to be the great cultural imperialist bullying the world into accepting a diet of bland blockbusters, the cinematic equivalent of fast food and cola.

Instead, the studios are taking a much more internationalist position. The driving force may be the same - a desire to make money in global markets given the saturation of the domestic market. But the strategy has not been one size fits all. Indeed, most studios are actively seeking partners in local markets.

There are, of course, exceptions to the rule that should be celebrated. But the truth is that in Europe, in particular, the response to a tighter market has been perversely to make more films that have little hope of being seen.

The production graph has consistently grown across Europe, even when admissions have dropped.

Some of that production was driven by tax incentives that are becoming ever thinner on the ground.

The cynic might see an equivalent of other areas of European over-production, such as wine lakes and butter mountains. Yet Dreamachine is actually a rather optimistic take on the situation. Yes, the theatrically driven market as it stands will not accommodate today's levels of production.

But new media platforms do not face the same restrictions. And, encouragingly, HanWay and Celluloid Dreams do not seem to be in a hurry to ditch their arthouse passions for the supposed certainties of genre production.

Dreamachine should not be seen as a defensive creation to deal with today's problems, but as a driver of tomorrow's opportunities.