Just Call It Eurowood.(European production companies making American movies)

When Hollywood movie producers Mario Kassar and Andy Vajna decided to revive the "Terminator" series for a third megabudget installment, they chose to look outside the seven major Hollywood studios for backing. "Independent financing allows us the creative control we need for these movies," explains Vajna. The only independent Hollywood player that could afford the $170 million-plus budget was Intermedia, a Los Angeles-based production company fueled by a German investment fund. "They were looking for a tent-pole movie," says Vajna. "And we had it."

Once the deal was struck, with Arnold Schwarzenegger back as the muscle-bound cyborg, Intermedia auctioned the film's distribution rights to the studios. When "Terminator 3: Rise of the Machines" hits movie screens this summer--beginning with a promo-reel screening this week at Cannes--it will be under the auspices of Warner Bros. in the United States and Sony's Columbia TriStar overseas. Intermedia will remain discreetly in the background, quietly cashing in on its percentage of the profits.

After years of blaming Hollywood for the demise of European cinema, EU film financiers and producers have taken a new tack: developing and packaging "international" movies, then selling them, ready-made, to American studios. Hollywood, under increasing pressure to cut costs, particularly in film production, is welcoming them with open arms. To feed their international-distribution pipelines, the studios must release 25 to 30 films a year under their own banner. But they now produce only five or six of those in-house--usually monster-budget extravaganzas that play big around the globe. To fill in the gap, the studios are increasingly turning to the independent production companies, which are flush with cash from European tax funds and tax incentives.

Intermedia is the biggest of the Eurowood contingent. Launched a decade ago as a film-sales company based in Hollywood and Britain, it moved into production when it merged with German-born film executive Moritz Borman's Pacifica Film Development in 2000. Quickly, Intermedia ramped up an impressive slate of important independent movies--films like "The Quiet American" and "Adaptation," both nominated for Oscars this year. Later, it acquired ...