The announcement yesterday of the merger between HanWay Films and Celluloid Dreams to create a new combined company, dreamachine, has provoked a mixed response from the European film industry.

Some have welcomed the consolidation of the two companies. For example, Tartan Films founder Hamish McAlpine applauded the move. 'Hanway and Celluloid have had very different cultures,' McAlpine said.

'Until very recently, Celluloid was a company that along with Fortissimo tended to dominate the foreign-language section of festivals whereas HanWay was very much English-language. This was a logical conclusion for both companies. If anything, it is likely to broaden their customer base. I think it is a very smart move.'

At rival sales company Films Distribution, Francois Yon said: 'I think it is an opportunity for us. We are very happy to see them merge. And I think it's wonderful for them. Celluloid was reaching the maximum of what it could do in that market segment and it was natural they should move on to another one.'

'It's a brilliant-looking merger,' agreed one British sales agent. 'Celluloid are definitely a magnet for talent. Hengameh Panahi is an incredible ambassador for that kind of independent film. And HanWay are a very slick machine. Not only do they have Tim Haslam, who is a very good manager, they also have Stephan Mallmann who is a level-headed, cool operations guy and Peter Watson, who is a financial whiz. It is a great team.'

Another UK-based observer added: 'It looks as if the HanWay team will continue to sell the first run films and that Celluloid will sell the catalogue titles. That makes sense and mirrors what Stuart Ford did with First Look.'

Some, however, were striking a wary note about the possible implications for art-house filmmakers, especially those working outside the English language. As Hengameh Panahi herself acknowledged this week: 'What I call the smaller movies that I've been putting energy into aren't working any more. They are festival movies but no matter how great they are they can't find distributors.'

'It (the merger) shows something that is not optimistic about our business,' said Vincent Maraval of another France-based sales company, Wild Bunch. 'She (Hengameh Panahi) was one of the best. She is still one of the best, but she could not make it (sales) profitable.'

However, other sales agents insist that smaller, director-driven films can still work in the marketplace if handled correctly. 'There is no business for auteur movies if you pay them too much money. If you pay the right and amount and stick to what the market tells you, there will be no bad surprise,' Yon said.

'There will be always be smaller independent distributors looking for quality movies that get high exposure in festivals.'

Robert Beeson of Artificial Eye, one of the UK's leading independent distributors, said that he didn't expect the increasing consolidation in the sales market would affect art-house buyers in search of festival titles. 'If the films are still being made, producers will find another sales agent. Someone will step up to fill the breach.'

Maraval predicted that Wild Bunch will now come under increasing pressure to handle films that would once have gone to Celluloid Dreams.

'The main problem that we are going to have now is that we have too many films already. We are afraid of the pressure from producers, especially French producers, on us,' Maraval said. 'The main problem we have today as a sales agent is the lack of competitors.

'There are plenty of small sales companies, especially in France, but we need two or three major key players to take care of the films...today there is a lot of money available for equity financing. The movies are being done but there are no sales agents to take care of them.'

What was clear, Maraval said, was 'that being a pure sales agent was not profitable. What is left now is a kind of vertical integration - companies that are at the same time distributors, producers and sales agents.'

Panahi herself echoed that sentiment, saying that Dreamachine's strength was that it could be more than just a sales company. She said: 'This way we become a sales company more in the heart of financing and production, involved in that chain all the way through helping with marketing and distribution.'

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