It may boast an abundance of talent, but European animation has always been little more than a cottage industry. And in a global market dominated by the likes of Disney and DreamWorks Animation, Europe's lack of marketing clout, branding and distribution is painfully obvious.

But there are signs that European feature animation is in a robust state. Luc Besson's $80m Arthur And The Invisibles - an attempt to make a full-length animated CGI feature that could go toe to toe with Disney and DreamWorks - has passed six million admissions in France alone, and two sequels are in the works.

At the European Film Market in Berlin last month, animated titles were among the hottest sellers. German sales company Sola Media/Atrix Film's $3m Estonian-Latvian co-production Lotte From Gadgetville sold to 15 territories for theatrical release, while French sales outfit MK2 announced it was partnering with Herold & Family on an irreverent version of Puss In Boots budgeted at $24m.

And in the UK, Aardman Animations is striking a bullish note after the severance of its ties with DreamWorks (see right).

The company has five features on its slate and has not discounted the possibility of financing them out of Europe. "We started to find the US model so inflexible. There are buttons you have to press, targets you have to hit and people you can't offend," says Peter Lord, a founder of Aardman. "That's why everyone is perceiving American CG cartoons as so samey. They've become formula-led and a bit dreary."

As Lord's remarks imply, there is an implicit relief that Aardman no longer has to march to the studio beat. However, competing with the likes of Pixar and DreamWorks on their own terms is, for most European companies, an impossibility.

But they can use different tactics. Increasingly, producers are targeting niches - the pre-school market, for instance - or looking to meet the growing demand for adult-oriented animation. Edgy titles such as Christopher Nielsen's UK-Norway co-production Free Jimmy, about a stoned circus elephant, Denmark's Princess from director Anders Morgenthaler about a former priest with a porn-star sister, and Anders Ronnow Klarlund's Strings, an adult puppet movie, have all broken out in recent years.

Belgium-based Oscar winner Linda Van Tulden, whose company DeFamilie Janssen was recently a co-producer on Picha's Snow White The Sequel, points out that the upturn in European animation has coincided with a drop in costs. "As animation becomes cheaper, the opportunities are increasing," she says.

Aardman's Lord suggests that merchandising - at which the US studios excel - "is not as big a deal any more", given the number of animated films released each year. "There was a time when people thought, 'Ho ho, this is how we'll all get rich.' But it's not," he says. However, Lord acknowledges the US studios have the advantage on distribution. "The Americans can make really quite a crappy old film but they have the advantage of throwing $50m at it."

He also notes that many European animated features are "extremely unattractive and dispiriting", without a "real creative voice. You have a sense of films that are manufactured."

But Lord cannot hide his optimism about the talent at work in Europe.

European animation films since 1997
Chicken RunUK-US2000$225m
Wallace & Gromit: The Curse Of The Were-RabbitUK-US2005$193m
Flushed AwayUK-US2006$175m*
The Corpse BrideUK-US2005$117m
Arthur And The InvisiblesFr2006$93m*
The Little Polar BearGer2001$35m
The Magic RoundaboutUK2005$26m
Laura's StarGer2004$22m
Happily N'Ever AfterGer-US2007$16m**
*Still on release **US figure only (to be released worldwide next month)

$10.5m-$13m - Average budget for a European animated feature
81 - Animated movies produced and released theatrically in Europe between 1997-2003.
$80m - Budget for EuropaCorp's Arthur And The Invisibles, the biggest-budget European animated feature in history
4 - Number of Oscars won by Aardman's Nick Park