Low budget meant high spirits at last week’s Mifed market, where business was as frantic as Milan street traffic despite the scarcity of star-powered A titles.

The stars of the 59th Mifed market were art movies and genre pictures in the $ 2 million to $ 5 million range, which sold like hot cakes.

Thebrisk action for B pix defied doomsayers, who several years ago predicted the low-budget sector would disappear with the demise of independent homevideo.

True, video is not the driving force it once was at Mifed. And pay TV in the U.S. has ceased to be a top-dollar customer for indie product. But TV programmers in Europe and the Far East are becoming competitive buyers, and the increase in the volume and value of TV deals is now a major feature of the marketplace.

Insiders agreed there were fewer big pictures than six or seven years ago, when such companies as PSO, Embassy, CBS Theatrical Films, Goldcrest and Thorn EMI ScreenEntertainment arrived with an array of studio-quality movies.

The latest casualty to join that once-stellar list is Carolco, whose absence from Mifed’s halls has left a gigantic hole.

Indeed, Carolco’s regular customers, who for 10 years thrived on a diet of megahits–including “First Blood,””Total Recall,””Terminator 2″ and “Basic Instinct”–are now scrambling to fill a yawning gap. They were among the most aggressive bidders in Milan for what top product was available.

Meanwhile, audiences in Asia, Central and South America continue to demand low-cost drama, especially action, while Euro TV webs find a place for such fare on their late night skeds.

The low-budget sector is divided between genre pictures–action, erotic, sci-fi and horror–and what might be broadly defined as art movies. Between them , they provided the bulk of the approximately 400 films offered for sale in Milan.

A few years ago, art movies were a rarity at Mifed, which was dominated by chopsocky and soft porn destined to go straight to video. But now, high-quality low-budget films, often backed principally by TV money (and in Europe by state subsidies), constitute one of the major elements in the market. Indeed, the Mifed screening schedule reads like the program of a giant film fest.

Some outstanding art titles created considerable excitement this year, among them “Orlando,””Damage,””Flight of the Innocent,””Enchanted April,””Brothers and Sisters” and “IP5.”

But not all are new.

“We call Mifed the used-film market,” said Penta exec Claudio Tinari. “They come to see us when deals get canceled.” Penta, Italy’s leading distrib, bought only one major title, Wim Wenders’ “Faraway So Close.”

Metropolis Film’s Francine Brucher admitted most art pix had either been on the market for months or were presold. “Distributors are coming here to see on the screen what they bought last year,” she said.

As for genre pictures, they are reportedly better made than before, with more rigidly controlled budgets, and they sell for realistic prices. Golden’s veep Albert Lee reported his company’s “best year ever,” with Jackie Chan’s latest being a hot seller.

Lloyd Simandl’s North American Group is a typical low-budget company. He and his partner, John Curtis, sell, produce and direct the films. Budgets rarely stray above $ 2 million, and the company aims to achieve sales to the value of 150% of the cost to cover finance charges.

“We’re not getting rich, but we are paying the bills and giving investors a return,” Simandl says. “What we make goes back into the films. Our budgets are higher than they used to be.”

Low-budget movies tend to have modest theatrical prospects and a limited life in video. Profits if any, come from TV.

Sales agents at the bottom end of the market no longer worry if a film will play theatrically. A few years ago, there was a stigma attached to going direct to video or TV. But now, as one agent said, “one sale is as good as another.”

In fact, with so many participants at Mifed also attending the TV markets, there is increasing doubt about the validity of splitting one area of rights from another. As Dieter Giessler, prexy of Cinevox, said, “Mifed is Mipcom and vice versa.”

Follow @Variety on Twitter for breaking news, reviews and more