BERLIN — In Germany’s fast-changing exhibition business, the price of digital conversion and the growing divide between multiplex operators and arthouse theaters are issues front and center at this year’s Filmkunstmesse in Leipzig.

Organized by AG Kino, the German Arthouse Cinema Guild, the trade fair and festival, which runs Sept. 19-23, offers industry reps as well as the public a peak at upcoming international arthouse and independent films.

Conversion of theaters to digital — and subsidies to help them be competitive — are issues that the guild is pushing to the fore.

Digital conversion is one of the main challenges facing arthouse exhibs, and there is a growing fear that U.S. majors, by insisting on Digital Cinema Initiative standards, are endangering film diversity in Germany, limiting freedom of programming and creating a growing divide between multiplexes and smaller operators.

At first glance, digital upgrades looks great, says Christian Braeuer, AG Kino chairman and managing director of Berlin-based arthouse exhib group Yorck Kino. “I don’t need expensive analog copies anymore. I can rent out more, maybe show films from young filmmakers and use peripheral timeslots. … But with this Hollywood standard, it’s so expensive that theaters can’t afford it.”

DCI is meant to ensure a uniform and high-level minimum 2K resolution quality as well as copyright security, but at €80,000 to €90,000 ($110,000 to $123,000) per theater, arthouse and indie exhibs must rely on state subsidies and assistance from distributors to make the upgrade. That can lead to distribs and producers dictating business terms via virtual print fee deals, in which distribs compensate cinema owners for the cost of installing digital projection equipment by paying for each firstrun film screened.

For multiplex operators, such a scheme works well, but smaller exhibs, who rarely offer firstrun releases, are left in the lurch.

“It’s not exactly an easy market,” Braeuer says. “We’ve gone on the defensive, not least because of the digitization debate.”

But film diversity is certainly not in danger, counters Eva Matlok, who oversees digital cinema support at the German Federal Film Board (FFA).

“Freedom of programming in cinemas, however, will be influenced by a number of factors on the way to digitization,” she says. “These include third-party models that include virtual print fee deals for DCI-standard upgrades, which could influence film selection. Then there are distributors that for reasons of quality and security standards will only deliver there films for DCI systems. Cinema operators who cannot carry the costs of the upgrades on their own and fall through the subsidy cracks will see their programming freedom limited as a result.”

Theater subsidies in some states support non-DCI standard digital projectors and federal boards FFA and BKM are open to supporting other systems in some cases, Matlok says. “However, we have had well over 500 requests to date and not one single application with a non-DCI standard, which indicates where we’re heading. And what’s the use when cinemas with no DCI standards are no longer supplied with the films they need to survive because the distributors have other quality and security standards?”

To date, federal subsidies have so far helped support 25% of the especially vulnerable “criteria cinemas,” most of which have already installed one digital projector.

Another question that interests trade fair attendees is the role film subsidies play in helping to shape the future of arthouse cinemas.

Such coin has historically focused on film production. Yet Braeuer questions that strategy. Instead of concentrating on what he describes as the “industrial production of film” and making more movies, rather regional and federal subsidies could offer more opportunities for creative experimentation and innovation in the development of material. Currently, he says, the industry tends “to orient itself, both in production and marketing, on common cliches.”

Part of the problem is TV and its influence on production, Braeuer says. “You can certainly show a great TV movie in theaters, and it can work. But it’s no longer cinema. How do we maintain good, independent German and European film? How do we create innovation?”

It’s a sentiment echoed by some filmmakers. Jessica Krummacher, whose debut feature “Totem” premiered in Venice, says it’s difficult to work creatively with the subsidy system for that very reason. Describing it as “inflexible and driven by economic interests,” Krummacher says TV partners are eager to support pics that fit into their programming slots. Most viewers are open to other kinds of films, she believes, “but I don’t think TV programmers are yet.”Another challenge for arthouses is that when they do land a hit, such as “The King’s Speech” or “Black Swan,” it is quickly picked up by the multiplexes, which are increasingly targeting the traditional auds of their smaller independent rivals.

“It’s a challenge. But arthouse cinemas have strong profiles. And they have loyal audiences,” Braeuer says, adding that the arthouse market is stable and business is good.

The guild will be using the event to call for sustainable and flexible subsidy support to ensure that federal and regional programs continue to help smaller players with technical upgrades, especially in cinemas that focus primarily on European film. The guild is also advocating that arthouse theaters be allowed to use more affordable, non-DCI standard projectors, and it’s pushing for clearer and tougher rules regarding virtual print fee payments that help exhibs collect money from distributors and producers that screen pics digitally.

Filmkunstmesse will unspool 70 titles including Nicolas Winding Refn’s “Drive”; David Cronenberg’s “A Dangerous Method”; Miranda July’s “The Future”; Tate Taylor’s “The Help” and Marius Holst’s thriller “King of Devil’s Island.”

The lineup is intended primarily for the 900 industry attendees, although screenings of 43 selected titles will be open to the public.