Independent film distributors are busy in Argentina, but not all is good.

Overall box office shot up 40% to $166.7 million in 2010 from 2009 and are on track to increase another 8% to about $180 million this year — the highest since 2004 — and extend gains next year. The economy has been growing robustly since 2003, fueling consumer spending as salaries keep pace with 20% annual inflation of the past two years.

That’s good for ticket sales, but foreign indie films are struggling to benefit.

“The box office grew but it was concentrated in the majors,” says Alejandro De Grazia, head of Energia Distibucion. “Independent films lost market share.”

Hollywood dominates 85% of B.O., leaving a prolific local industry — the country produces about 100 films a year — and foreign indies to fight over the rest on the same screens in a market with few alternative outlets. Broadcast and cable TV have tight schedules and focus buying on mainstream fare, while VOD has yet to become profitable.

Popular on Variety

“The big problem is space in theatrical,” De Grazia says.

Blockbusters like “Kung Fu Panda 2” can go out on more than 300 of the country’s 800 screens, elbowing out indies posting good results. There are few arthouse theaters and no alternative circuit to ensure a profit without releasing in multiplexes, plus a boom in 3D screens is narrowing release options for 2D indies.

“You have to have films that can compete in this market,” De Grazia says. “We are going with more commercial films.”

His distrib pulled strong numbers this year with Robert De Niro-starrer “Limitless” and “The Tree of Life” with Brad Pitt and Sean Penn.

Likewise, Diamond Films, another indie distributor, had success with “The King’s Speech” and “Midnight in Paris” but less so with Javier Bardem-starrer “Biutiful.”

“Argentines are choosy,” says Diamond Films CEO Valeria Lavalle. “A bad review can destroy a film.”

The government is trying to limit Hollywood’s dominance. This year it introduced a scaled tax designed to discourage releases of foreign films on more than 15 screens. The tax runs from $2,100 and $84,000, depending on screen count and ticket prices, with the higher figure for releases on more than 161 screens.

The government also plans to provide low-interest credits and subsidies for the construction of more indie screens. There is demand for at least 500 screens in smaller markets around the country, according to government estimates. That would push the total count toward Colombia’s 1,500 screens, still shy of the 4,500 in Brazil and 5,000 in Mexico.

Number of screens: 800
Number of 3D screens: 80
Top indie distribs and B.O.: Distribution Company Argentina ($8.8 million); Alfa Films ($8.4 million); Primer Plano Film Group ($4.3 million); Diamond Films ($3.3 million); Energia Distribucion ($3 million)
Top exhibition chains for indie films: Cinemark/Hoyts; Showcase Cinemas; Village Cinemas
Typical minimum guarantee paid: Not available
Top 5 indie films: “Midnight in Paris” ($3.9 million); “The King’s Speech” ($2.6 million); “Source Code” ($1.3 million); “Abduction” ($1 million); “Conan the Barbarian” ($920,000)
Upcoming indie pickups: “Spy Kids: All the Time in the World in 4D” (Energia Distribucion); “The Grey” (Energia); “The Hunger Games” (Diamond Films); “The Woman in Black” (Diamond Films)