Is a sucker born every minute? Hollywood might be a good place to find the answer. Speculators ranging from insurers to German investors with tax incentives have put cash into films in previous cycles. In the past three years, hedge funds and private equity firms have ploughed $4bn of equity into big US studio projects. That translates into $12bn of financing including debt, says Global Media Intelligence. In search of diversification (and, perhaps, tickets to the Oscars), financiers have ignored Hollywood's reputation as a money pit. Amid the flight to safety, many are now desperate to get out.

Since 2004, the film industry's revenue growth has stalled, DVD sales are shrinking and costs are up. The top six US studios' entire 2006 movie slate will generate a $1.9bn operating loss over the next five years, GMI estimates. Yet Hollywood has won so much funding that the number of completed films has jumped. Those films still compete for a limited number of eyeballs. Backing winners has become ever more of a lottery, and even more costly.

Studios largely used to finance their own films. Their media-conglomerate parents could distribute the content, which justified producers' single-digit returns. That strategic rationale, however, is missing for financial investors, and many have signed loose deals that favour studios. Aside from Dune Capital's alliance with costconscious Fox, most equity investors are under water, and junior and some senior lending looks unsteady. Banks and investors are anxious to shed their risk but have found it tough, even at 60 cents on the dollar.

Next in line for the limelight? Dubai and Abu Dhabi are jockeying for Hollywood's attention. Saudi and Indonesian investors have also shown interest. Certain foreign investors may merely be looking to build cultural awareness or relationships with studios. Those hoping to make money, however, would be smart to negotiate tougher deals than their predecessors.