BERLIN — More than 52% of theatrical screens in Europe have converted to digital, up from just 4% three years ago, yet single-screen cinemas are still struggling.

According to a report by the Council of Europe’s European Audiovisual Observatory and Media Salles, part of the EU’s Media Program, some 18,500 digital screens had been installed in Europe by the end of last year.

While the initial phase of conversion during 2009 and 2010 was driven by 3D installations, it was 2D screens that propelled the rollout in 2011.

This second phase of the digital roll-out, according to the report, is now driven primarily by conversions of larger circuits under virtual print fee schemes with the major studios, and by public initiatives, ranging from legislation (such as in France) and publicly funded, industry-wide conversion schemes (as seen in Norway and the Netherlands) to direct public-funding programs.

The study shows that small cinemas and exhibs have significant problems converting to digital. By the end of 2010 only 11% of single-screen cinemas had installed a digital screen, compared to 89% of multiplexes.

Small cinemas form a characteristic part of the European cinema landscape, with single-screen cinemas accounting for almost 60% of all European theaters.

“Though presumably not vital for overall box office results, these smaller cinemas play an important social and cultural role in many communities. The fact that these screens have not yet converted highlights the fact that commercial financing models cannot cover all European cinemas, causing a funding gap for between 15% and 20% of European screens,” the report said.

Nevertheless, the high penetration rates in various European markets means the end of 35mm distribution is rapidly approaching.

Distribs in Belgium, Luxembourg and Norway (which became the first country to go fully digital in 2011) were expected to end 35mm distribution as early as 2012. Eleven territories had converted at least half of their screens by mid-2011, including France and the U.K., Europe’s two leading markets.

The report warns that Europe’s theatrical landscape could suffer major upheaval as a result of the fast-moving digital rollout.

“Once large distributors switch to digital distribution in such major markets, demand for film stock will drop significantly, putting pressure on 35mm economics on a pan-European level. This could cause financial strain for those distributors and exhibitors still depending on it.”

Bigger companies are set to benefit more than smaller players from the transition to digital, leading to a “fundamental change in the fragmented European theatrical landscape” and posing “a challenge to the European independent sector, characterized as it is by a large number of small exhibitors and distributors.”