Iran's film industry is unusual internationally and unique in the Middle East. Production levels - 80 features plus 36 feature documentaries and children's films in 2006 - are the highest in the region. Around 60% of films are released theatrically, and homegrown product makes up 94% of local box office.
The state-run Farabi Cinema Foundation heads a network of agencies that invest in production, provide loans, equipment and facilities for film-makers, and even pre-buy rights from favoured producers.
Internationally-renowned directors such as Abbas Kiarostami, the Makhmalbaf family, Bahman Ghobadi and Jafar Panahi are guaranteed festival exposure, and new talents are emerging - for example, Mohsen Amiryoussefi (Bitter Dream), Mohammad Rasoulof (Iron Island), Saman Salour (A Few Kilos Of Dates For A Funeral) and Mani Haghighi (Abadan, Men At Work).
'Both pre-buyers and festival buyers follow Iranian film - there are so many talented film-makers,' says Jean Labadie, president of France's Bac Films.
Behrooz Hashemian of Paris-based Silkroad Production co-produced Ghobadi's Half Moon, which won the Golden Shell at San Sebastian in 2006. 'I have a good feeling about the new generation,' he says, pointing out that more than 2,200 shorts were produced in Iran last year.
Festival hits are often low budget, which, say some producers, helps offset the risk inherent in Iran's complex censorship process. Haghighi's Berlin 2006 title Men At Work, made at a single location with cast and crew working for free, is an extreme example - it cost just $30,000.
Budgets for 35mm films usually range from $200,000-$2m, with the average at $350,000-$500,000. Many auteurs are self-financing or aided by private investors. An Iranian bank, for example, funded 80% of veteran director Bahman Farmanara's Little Kiss (2006).
Meanwhile, there are a number of upcoming directors trying to bridge the gap between international festival fare and the commercial dramas popular locally. Asghar Farhadi's domestic drama Fireworks Wednesday (2006) won Chicago's Gold Hugo Award for best film and has been a hit at home.
'Something is happening,' says film critic Kamyar Mohsenin. 'The new generation is tackling contemporary, urban subjects, and their style is changing... Iranians can identify with their films.'
Festival consultant Sheila Whitaker, a former director of the London Film Festival, agrees: 'There are so many young directors waiting in the wings, many of them very good. They're breaking away from old cinematic styles and beginning to confront somewhat taboo subjects such as drugs and the position of women.'
When conservative Mahmoud Ahmadinejad replaced arts enthusiast Mohammad Khatami as president in 2005, it was widely assumed the film industry would suffer. But according to producers, the Ministry of Culture is looking to double its audiovisual budget in 2007, albeit mainly to build new theatres.
For the first time, Farabi funded independent sales agents to attend the Berlinale in 2006, accompanying a bumper year for Iranian films at the festival.
Alireza Rezadad, managing director of Farabi, says that as the industry becomes more diverse, he expects production to become more independent, although 'this independence is not something to import from somewhere else - it must find its roots in Iranian culture'.
This rosy picture, of course, excludes independent films and those falling foul of the system - from 'underground' directors who touch on, for example, politics or the liberal Tehran party scene to the likes of Jafar Panahi, whose 2006 Silver Bear winner Offside was banned. These censored pictures, coined 'black films' by some distributors, circulate among cinephiles on pirate DVDs.
Well-funded comedies and melodramas rule the local box office and, according to Farabi, are increasingly sold to the US, United Arab Emirates and Central Asia. 'In Iran, just as abroad, cinema is increasingly commercial, and it's difficult to finance a film without a well-known cast, let alone real people,' says Rafi Pitts, director of critics' favourite It's Winter, sold in 2006 by Celluloid Dreams to Artificial Eye in the UK, among other territories.
Government funding tends to be channelled towards favoured directors and themes. Producers say the perennial subject of the Iran-Iraq war is becoming dominant once more, while religious films and historical epics are a growing business at home and in neighbouring TV markets such as Turkey. 'There are few independent producers - it's risky, and the only way is to finance and sell your films abroad,' says Katayoon Shahabi of Sheherazad Media International.
Distribution and marketing remain underdeveloped, say Shahabi and Mohammed Attebai, director of Iranian Independents. 'For [the past] decade, we've needed a centralised support system but the budget also needed to be injected into private companies, which never happened,' says Attebai. And international sales, say some agents, are getting tougher.
Meanwhile, obtaining shooting permits, say directors, is an unpredictable and convoluted process. Having proved themselves through making shorts and joining the directors' union, film-makers ideally need to bring on board a member of the producers' union, who gains approval for the script and a permit to shoot from the Ministry of Culture & Islamic Guidance. The finished film is then screened for a committee that decides whether or not to grant a screening licence.
'If something is happening in Iranian film, it's in independent, low-budget films,' says director Niki Karimi, whose A Few Days Later played in competition in the Rome Film Fest last year. 'This cinema comes from the creativity and courage of all of us, coping with the restrictions that we have.'
Producers and directors describe a 'more restrictive atmosphere' since the change in government, although the results of current policies will only begin to surface at this year's Fajr Film Festival. And, as ever in Iran, the political situation is complex. Ahmadinejad's rival in the presidential race, Muhammad Ghalibaf - now mayor of Tehran - has an alternative vision. He is building non-commercial cinemas and has started a fund to support documentaries and features based on city themes.
'The independents know the loopholes and are a tight, supportive community,' says festival consultant and film curator Rose Issa. 'They've always made their films, shown them inside, and got them out, and they'll continue to do so.'
IRAN AT A GLANCE:
- Iranian production in 2006: 80 features, plus 36 feature documentaries and children's films
- Budgets range from $200,000-$2m, with the average for 35mm features at $350,000-$500,000
- Some 60% of Iranian films are released at home - making up 94% of the local box office
- Iran has just 250 theatres for a population of 70 million; increasing the number of screens is a key government priority.