RAICinema, the recently-formed film unit of Italian state broadcaster RAI, is set to officially launch at this year's Cannes film festival, complete with an annual budget of $250m (L500bn), some of which will be channelled into studio acquisitions.

The new outfit will be involved in production, distribution and international sales, with the distribution division up and running by the end of the year. While the company isn't saying how much of its budget is earmarked for buying foreign product, RAICinema managing director Giancarlo Leone confirmed that $60-65m (L120-130bn) will be invested in producing and acquiring Italian and European films.

'This is our priority but we know that we can't ignore US product if our distribution arm is going to be able to compete in Italy,' Leone said. 'How much we spend on non-European acquisitions will depend on the market and what's available and at the moment we have no definite budget for US deals.'

He added that the company is still looking into how the theatrical and video distribution arm, a first for RAI, will shape up. One possibility is to link up with either one of the US majors or another Italian independent in some kind of service deal. 'We are looking into the various ways the division could be run,' he said.