As word of Disney and Fox’s new world cinema ancillary labels spread on the Croisette, reaction from the U.S. foreign-language film distribution community was understandably mixed. On the one hand, it shows the vitality of a market that’s launched surprise hits like the “Girl With the Dragon Tattoo” films. On the other, it introduces two corporate-backed competitors to a crowded niche arena with declining ancillary revenues and many challenges.

“The films that get traction seem to go farther and tend to gross even higher than they would normally gross, as evidenced by something like ‘The Secret in Their Eyes,’ ” says Sony Pictures Classics co-president Michael Barker, who nabbed North American and Latin American rights to Joseph Cedar’s Israeli father-son drama “Footnote” just before its Saturday competition bow. “But the smaller films, the ones that have a tough time, have it tougher than ever before to (find) a profile and get to a satisfying gross.”

Foreign-language behemoths Sony Classics and IFC (which have many spaces to fill in their annual release calendars) are also facing some revived competition: after years of big indies cutting back their foreign-language slate, signs point to many re-entering the arena. The Weinstein Co. nabbed all rights outside Asia and French-speaking Europe to the Chinese martial-arts epic “Dragon” on the fest’s first day, and with Fox Searchlight handling at least some of the new Fox World Cinema’s ancillary fare, their subtitled output is likely to increase.

Music Box Films arrives with an increased appetite from its “Tattoo” success. New players Indomina Releasing, Pantelion Films, Cohen Media Group and China Lion are now in the mix. And a host of vet niche distribs from Strand to Palisades Tartan hope to unearth a hidden gem.

Given all the competition, at least the newcomers’ timing is fortuitous: with English-language films tackling subject matter that’s tough, many see foreign pics in the official Cannes mix as better bets. Foreign-language competition entries attracting eyes include the Japanese 3D actioner “Hara-Kiri: Death of a Samurai” and Jean-Pierre and Luc Dardenne’s “The Kid With a Bike.” Other hot titles include Mexico-set World Cup kidnapping thriller “Days of Grace,” the Nicolas Sarkozy biopic “The Conquest” and Christophe Honore’s closing-night musical drama “The Beloved.”

The increased activity and competition will only make it more difficult for smaller indies to get first crack at Cannes foreign titles.

Just how tough is it already? Ask Music Box founder William Schopf.

Two years ago on the Croisette, riding high on the $6.2 million U.S. gross for his French thriller “Tell No One,” he had his eye on the acclaimed prison drama “A Prophet.”

“In trying to just get an appointment to talk about the film, we researched the best gross the director had in the U.S. and made one of the top offers we’ve ever made, and we didn’t get an appointment!,” he says incredulously.

Sony Classics ended up nabbing multiple territories on the Grand Prix-winning “Prophet,” and its ability to make global buys is one of several advantages it has over most other foreign film distribs. It offers subtitled films rare access to pay TV through parent company Sony’s deal with cabler Starz and builds on Sony’s strong relationship with exhibitors.

Though he’s hinted that a day-and-date release might be a possibility for the right title in the future, SPC’s Barker says he has no plans to participate in the 60-day window VOD experiment Sony has with DirecTV.

Day-and-date has fueled IFC, which offers both traditional and simultaneous format releases and has nabbed around seven films at any given Cannes thanks to its own advantages.

“No other company has output deals with two of its sister companies (Sundance Channel and the Independent Film Channel) that show foreign-language films, and there are no linear television outlets that show them,” says Sundance Selects/IFC Entertainment president Jonathan Sehring.

“Netflix is great, but where’s the window after Netflix or the window concurrent with Netflix? With pay television, I think most of the pay networks will say — and this is really specifically for the new companies — that foreign-language films are excluded from probably all the deals that currently exist.”

In an unusual move, IFC snapped up North American rights to Olivier Assayas’ French coming-of-age drama “Something in the Air” in the script stage Friday. The sale is part of a surprise explosion of pre-buys among US distribs, who traditionally focus on finished Cannes films and rarely pre-buy subtitled fare.

While continuing to compete for prestige films with SPC, IFC has moved toward more marketable fare to fill its IFC Midnight slate in recent years.

IFC’s top day-and-date competitor is Magnolia, which had its biggest 2010 hit with the Italian drama “I Am Love.”

Last month, the Wagner/Cuban Cos.’ Mark Cuban told Bloomberg he’s taking offers to sell the distributor (and its frequent theatrical outlet, Landmark Theaters).

Shortly after the news broke, Magnolia announced three acquisitions in a row from the otherwise quiet Tribeca Film Festival’s lineup. Whether this was an attempt to show its viability in the face of sale talk, fatten its slate for suitors or business as usual, the distrib’s future remains a question mark.

Music Box’s Schopf is planning to experiment with his first day-and-date release, but has encountered resistance.

“In the arthouse market our biggest customer is Landmark, and even though Magnolia will do some day and date with them, we have to convince them it’s a good idea,” he says. “Directors, and to some extent producers and sales agents, want to see a big theatrical opening. That gives us an advantage, because we’re willing to guarantee that.”

It raises the question of a prime factor that’s led some to choose day-and-date over extended theatrical rollouts: prohibitive P&A costs. How does Schopf get around it? “We don’t get around it,” he says. “We spend the money.”

The high cost of theatrical makes ancillary all the more important, but given steep DVD declines and the crowded VOD space, Disney and Fox’s move into the arena is a risky move.

The Fox World Cinema label, launching later this year from Twentieth Century Fox Home Entertainment, will provide DVD, VOD, digital download and select theatrical distribution for Fox Intl. Prods. titles and some overseas acquisitions. (In the current Cannes lineup, South Korea’s “The Yellow Sea” is an FWC title, and another FIP production, Mexico’s “Miss Bala,” will likely be added to the slate.)

Similarly, the as-yet-untitled Disney division will bring its Walt Disney Studios Intl. Prods. foreign titles to DVD, VOD and possibly digital downloads in the U.S. It may eventually include acquisitions, though no execs are scouting Cannes for them at the moment.

All this raises concerns for many small indies like Zeitgeist and Kino Lorber, as well as newer outfits like Film Movement and Maya Entertainment.

“Everyone is competing for space, they know space is shrinking, and they need something new that takes space away from their competition,” says Palisades Tartan North America and U.K. CEO Soumya Sriraman of the new Fox banner.

“Ours is not intended to be any sort of fad or a way to just get a bigger share of retail,” responds Fox Home Entertainment exec VP of marketing Mary Daily, who notes that the main goal is providing a pipeline for the 16 films (shepherded by FIP head Sanford Panitch) now in production.

“It’s wonderful if our initiative or anyone else’s grows the overall pie for this type of product, because there are consumers who are desperate to consume it.”