ROME — The Italian box office is down 5% so far in 2008, a year that is seeing Yank pics command a hefty 62% marketshare despite some Hollywood underperformers. Meanwhile local movies are consolidating their upswing.

One indie title that in Italy proved a surprise high-flier is “The Kite Runner,” which pulled $11 million via Filmauro –the highest European take for “Kite” –thanks to clever marketing of its Afghan location and bestselling source novel.

The Coen brothers proved their cachet with Italo auds. “No Country for Old Men” made $7.8 million and Venice opener “Burn After Reading” took $7.5 million, both via Medusa, the top Italo distributor.

“Into the Wild” is another standout title at the Italian B.O., where the Sean Penn-helmed adaptation of Jon Krakauer’s bestseller pulled north of $7 million via distrib BIM.

But the box office also has seen its share of indie flops this year. They included “Juno,” “There Will Be Blood,” “The Darjeeling Limited,” and Spike Lee’s Tuscany-set RAI Cinema coprod “Miracle at St. Anna.”

Italian auds do have an appetite for specialized titles, but they require an obvious hook — stars, a timely topic or a hot book as source material.

“Times are tough, so we have to be very selective,” says Lucky Red buyer Stefano Massenzi. “P&A costs are up, our revenues from pay and free TV are down, and the intake from new digital platforms is still close to zero,” he laments. Therefore, “theatrical is absolutely crucial.”

But while Italy lags behind in terms of Internet VOD, digital rights are slowly starting to perk up. In January, Mediaset launched its Premium DTT pay TV service. Mediaset more recently teamed up with RAI on a multichannel free digital TV platform called Tivu, modeled on Blighty’s Freeview.

Meanwhile, local product has been increasingly connecting with auds, be it lowbrow comedies or pics with more gravitas, often drawing on social themes. Top local titles contributing to Italy’s current 27% share of the domestic box office are comic Carlo Verdone’s smash hit “Grande, grosso e … Verdone,” with a $17.5 million haul via Filmauro, Matteo Garrone’s naturalistic Neapolitan mob crimer “Gomorra” ($13.5 million, 01 Distribuzione) and Nanni Moretti starrer “Quiet Chaos” ($7.2 million, also from 01 Distribuzione).

The country’s most prominent local distributors — Medusa, RAI Cinema, and Filmauro — are basically peppering their lineups with high-profile Yank indie fare alongside their gradually growing domestic crops.

2008 B.O.

$570 million (through Oct. 10)

Top title

“Kung Fu Panda” $23 million

Recent Pickups

“A Serious Man” (Medusa)

“Cheri” (Rai Cinema/01 Distribuzione)

“Slumdog Millionaire” (Lucky Red)

“Milk” (BIM)

“The Imaginarium of Doctor Parnassus” (Moviemax)