Launched in June by leading Humgarian arthouse film distributor Budapest Film (www.budapestfilm.hu), Filmklik allows payments to be done by cell phone, which quickly made it popular among its 1,500 registered users.

Budapest Film has invested 92 million forints (€360,000) into the new venture by acquiring the necessary software and piracy-safe (so far) encrypting technology.

"To develop the service further infrastructure- and content-wise, additional sums need to be invested," Peter Bognar, co-managing director of Budapest Film, told FNE.

He acknowledged that the digital rights necessary for online release of films is hard to acquire from worldwide distributors because of concerns about piracy in Eastern Europe. The fact that the system is audited by Microsoft is crucial in reassuring the rights-holders, who usually receive 30% to 50% of the online revenue of their films.

Filmklik offers rental of features for 48 hours (pay-per-view) for €2.80, and sells them (via download) for €5.00. It plans to eventually offer short subjects and history and nature documentaries for school use, and will organize online film competitions for aspiring filmmakers as a new form of networking.

"We expect steady growth for the next five years," Bognar said. "After three years, we'd like to break even, though we expect to recoup the whole investment only in seven to nine years. However, with the current speed of the digital revolution, this may happen in three years as well."

The innovative move, the first of its kind in the Hungarian distribution sector, reflects a shift in industry revenues from theatres toward new channels of distribution. There are no indications how big the online distribution market might become, although Western European trends look promising.

There are 200 cinemas operating in Hungary which reported 12 million admissions last year in a country of 10 million population whose movie-going has been declining.