Summing up the frustrations of many of his peers, Edward Fletcher of Soda Pictures says simply: "It's difficult to be an independent in the current climate."

Fletcher and co-managing director Eve Gabereau started the indie UK distributor in 2002 when foreign-language and arthouse films seemed to be connecting with audiences. But the market has become tougher by all accounts.

"The market we were born into was more optimistic," Fletcher recalls. "Things like Amelie and Amores Perros and Asian extreme films were playing quite widely in cinemas. It seemed like an attractive moment for world cinema that had greater audience potential - that wasn't just an arthouse film. "

The independent distribution sector has been hurt by the closing of some key cinemas (such as Odeon Wardour Street in London) as well as exhibition consolidation. Fewer UK screens are letting smaller films grow through word of mouth. "Audiences don't have a month [to discover a film], they don't have a week," Fletcher says. Gabereau also notes that subtitles can be a harder sell than dubbed foreign-language fare elsewhere in Europe.

The company is managing to fight through the downturn. Soda had its biggest theatrical release in 2006, with Laurent Cantet's Heading South taking $380,000 (£195,000), beating Head-On's $210,000 (£107,000) in 2005. In 2007, Soda will release films including Susanne Bier's Oscar nominee After The Wedding, Raul Ruiz's Klimt, Israeli drama Close To Home, Chad feature Darratt, Bruno Dumont's Flanders, family film The Italian, and UK feature Someone Else.

Soda also relies increasingly heavily on DVD sales (DVD work is done in-house and sold through World Cinema). "DVD figures are encouraging. People in the UK are buying and renting interesting films," Gabereau says. The company has also seen success with non-theatrical DVD titles, such as Tour de France documentary Overcoming or music DVDs such as The White Stripes: Under Blackpool Lights.

The company is also exploring the download market, and not just through third-party partners such as LoveFilm. Fletcher says the company plans to launch its own online platform Soda Cinema by the end of 2007; the model will not be a library of downloads but more of a virtual cinema that is programmed, with films from Soda and other content providers. They know that the consumer shift to downloading could take a few years. "We don't want to invest too early nor too late," Gabereau says.

Soda has a full-time staff of seven and recently moved to expanded offices in Covent Garden. Fletcher and Gabereau met while he was at the ICA, in charge of distribution arm ICA Projects, and she was working as a film festival programmer for various events including Vancouver, Edinburgh and London (Canadian-born Gabereau also worked in international relations before moving into the festival world).

A passion for film keeps them going even when theatrical cashflow looks dismal. "The DVD market is important for our own personal investment in the films," Fletcher says, "because it can be soul destroying releasing films and seeing them gone in a week when you know there are good films and there's an audience for them."