Box office gross in Western Europe is predicted to surge by 17% over the next five years - a rate of around 3% a year - largely due to expanding local film industries and advances in digital cinema, new research predicts.

The report from Dodona Research sees box office in Austria, Belgium, Cyprus, France, Germany, Greece, Italy, Luxembourg, Malta, the Netherlands, Portugal, Spain and Switzerland reaching $6.4bn (EUR4.7bn) by 2011. Greece, the Netherlands and Spain will see the fastest growth. Germany, Belgium and Malta will advance more slowly.

Karsten Grummitt, author of the report, says the growth can be attributed to the fact that European film industries are becoming better at making successful films with commercial potential, rather than simply harvesting subsidies as in the past.

"European film is doing much better and a large part of that is because people are making better movies than they were 10 years ago," he says. "For example, a decade ago the Dutch film industry was virtually non-existent - rarely did a local film make the top 10. But now, there are about two or three (per week), which is a significant trend."

This year in the Netherlands, Black Book has already grossed $9.8m, while Crusade In Jeans (Kruistocht In Spijkerbroek) made $3.8m up to February.

Local screen tests

But an increase in the number of local films on offer in Western Europe is not just down to the fact that they can be made at a lower cost - the appetite for local-language films has risen due to increased exposure.

Grummitt says an influx of screens in the region, which has led to a virtually saturated exhibition market, has helped local films gain more opportunities to be seen. "It's a new kind of market professionalism," says Grummitt. "Local films are cheaper to make because they probably won't have Tom Cruise in them, but they're successful because there are more cinema screens now and more people are going to see films."

He adds: "That is not to say that there is no call for some new screens in selected locations and ongoing upgrading is always necessarily. There will be new drivers of growth, including conversion to digital cinema and the expansion of domestic film industries, which will take the industry into the next phase of its evolution."

Belgian company Kinepolis Group and Luxembourg-based Utopia Group are among the key companies spearheading European digital cinema. Kinepolis operates 27% of all cinema screens in Belgium and also has cinemas in France, Spain and Switzerland. Utopia Group operates in Belgium, Luxembourg, the Netherlands and France.

"Once you don't have to have everybody who wants to see the same film in the same room, things will get more interesting," says Grummitt. "Theatres are now too big and once cinemas are free from the shackles of $2,000 worth of 35mm prints, people will look at this business differently."

The proof is in admissions

Currently, France is one of the healthiest markets in Western Europe, and is helped by a state sector that heavily funds and supports local film-making. The country boasts three admissions per head a year.

However, Germany - the second largest market in Western Europe - is less inclined to visit the cinema compared to the French, with only 1.7 admissions per head a year. The country has fewer screens, more expensive ticket prices and a declining market. The lack of profitability in the market means that consolidation in the exhibition sector is less widespread compared to other markets.

In the past year, Italy, Spain, Austria and Switzerland have seen considerable consolidation. After acquisitions in Italy, UCI is now the largest exhibitor in Western Europe with almost 900 screens. EuroPalaces has 800 screens in France, Italy, the Netherlands and Switzerland, while Greater Union and UGC both have over 500 screens. Cinebox's acquisition of Cines Abaco now brings it to 478 screens. A further 13 companies in the region collectively have more than 100 screens.