TORONTO - The Toronto International Film Festival is in full swing with cinephiles set to view the latest offerings from such industry heavyweights as the Coen brothers, Steven Soderbergh, Jane Campion and Jason Reitman, but after last year's breakout success of "Slumdog Millionaire" the hunt is on for that hidden indie gem that could mean a box office bonanza amid a leaner fall film slate.

Distributors on the prowl over the 10-day movie marathon say the economic downturn means there's less money to go around and suggest fewer films will be picked up during the festival.

Still, they say those movie masterpieces that catch their eye will elicit the same excitement of more robust times, but any bidding wars that emerge will be more focused on finding that sure-fire hit.

"Every distributor is a little more cautious," says Noah Segal, executive vice president of Alliance Films.

"There's a sense that it's harder to get a film up and get into that Top 20, Top 30 box office scenario. You want to be in there, once you get into that winners' circle, it's great, so that's what everyone's hungry to make sure those things work. But they're also being more exacting about what doesn't make it, ourselves included."

Like most industries, the film business was hit hard by the economic downturn. Many movie studios and distributors have reduced the number of their theatrical releases this year, with one estimate suggesting 40 per cent fewer movies this fall than last.

Segal points to reduced outputs from Picture House, New Line and Miramax and the disappearance of Paramount Vantage for contributing to the reduced count, and suggests the resulting leaner slate may not necessarily be a bad thing.

"It negatively impacts the consumer in a way because they lose choices, but I think that the market was kind of flooded and it's more naturalized now," he says, adding that Alliance is looking at a "modest" trim to its roster next year.

"It's shaving around the edges - films that weren't quite making it, people don't have the patience for that anymore. The challenge is, when you have a film that is sort of borderline, that's really really good, you have to fight that much harder to get people to say, 'no, no, for real, it's going to happen.' "

Films already causing waves among insiders include the Sundance smash "Precious: Based on the Novel 'Push' by Sapphire," about a teen incest victim; the '60s coming-of-age tale, "An Education," based on a script by Nick Hornby and starring British ingenue Carey Mulligan; Reitman's George Clooney vehicle, "Up In the Air," and a campy Ethan Hawke vampire film called "Daybreakers."

Meanwhile, Campion returns with a luscious, romantic period piece in "Bright Star," France's Bruno Dumont has tongues wagging about his religious treatise, "Hadewijch," and Soderbergh brings his quirky feature "The Informant!," starring Matt Damon as an agri-industry executive who exposes a price-fixing conspiracy.

Festival opener "Creation" - billed as part ghost story, part psychological thriller and part love story about the life of Charles Darwin - launched the festival on a high note Thursday after finding a Canadian distributor earlier this week in Toronto-based upstart D Films.

Despite the lean times, D Film's vice-president of acquisitions says now is a great time to start a distribution company.

"There's a market out there, all the probabilities are there, so why not exploit them?""says Tony Cianciotta, a veteran distributor who teamed up with Jim Sherry, former co-president of Maple Pictures, to create the boutique label."

"When companies close and downsize, there's opportunities," Cianciotta adds. "That's the time to go in. It's an old cliche, but it works."

Canadian director Ruba Nadda, who brings her romance "Cairo Time," to the festival, says she's hoping to find a U.S. distributor at the festival after already striking a domestic deal with Mongrel Media.

"I think it's always hard, it's always a challenge," says Nadda, noting that her prospects are buoyed by the fact that the box office receipts have nevertheless weathered the economic downturn. "I think cinema is striving, even in a bad economy."

Amid all the wheeling-and-dealing, early Oscar predictions are also in full swing.

With the academy's recent decision to double the nominees for best picture to 10 films, speculation runs rampant on how that will shape the final short list.

Last year, many complained that "The Dark Knight," did not make the cut, despite being one of the year's most acclaimed films. The Mumbai-set sleeper "Slumdog Millionaire" swept major categories despite its no-name cast and big-studio competition from star-packed vehicles featuring Brad Pitt, Sean Penn and Kate Winslet.

Festival co-director Cameron Bailey notes that the expanded field could allow for more commercial fare like "Star Trek" or "District 9" to sneak into the race, while co-director Piers Handling said it would be interesting to see an animated film like "Up," move into the category.

"The Oscars have kind of moved in an indie direction over the last few years," Handling notes.

" 'Juno' was up for a nomination a couple of years ago, Jason Reitman's film, so I think it'll actually expand both ways."

Segal questioned whether the tactic would draw more substantive interest to the year's hottest films or just contribute further to the noise.

"We need focus. In a world with overwhelming Tweeting and online blogging and Facebooking, do we need another 10 more choices in our life?" he asked.

Among those vying for early academy consideration are the Coen brothers with their comedy 'A Serious Man," and Viggo Mortensen who stars in a stark film adaptation of Cormac McCarthy's Pulitzer-prize winning book, "The Road.""

Canadian films hoping to make a splash with audiences include "Chloe," a sexual thriller from director Atom Egoyan; "Cooking With Stella," a comedy from Dilip Mehta from a script he co-wrote with his sister, Deepa; "The Trotsky," a high school revolutionary tale starring Jay Baruchel and "Suck," a rock 'n' roll vampire film from newcomer Rob Stefaniuk.

There's certainly no science to predicting the next blockbuster, but picking a winner is often easier than some might think, suggests Segal.

"It's a funny thing you can see 18 movies in a day and then see one really good one and you'll be re-energized, it's like a crazy thing," he says.

"When you see something magical, you see it, you know?"