While the A-list movie celebrities glide down the red carpet and schmooze at the parties, those who have yet to make it into the upper echelons of the cinematic community are elsewhere at the Berlin International Film Festival.

There's still a lot of flesh to be pressed and smiles to be forced, but the European Film Market (EFM) event is more than just an exercise in self-promotion. The EFM is one of the most important events on the industry calendar and one where the hard work can make or break a film.

Held at DaimlerChrysler's prestigious quarters on Berlin's Potsdamer Platz, the EFM is hardly a consolation prize for those attending. Through its connection with the Berlinale, one of the world's biggest film festivals, the European Film Market brings the raw material of the industry -- the movies themselves -- into direct contact with the movers and shakers who can secure promotion and international distribution rights.

Berlinale means business

The ERM, with its network of 25 cinemas showing the latest in film across the German capital during the festival, has benefited from the competing American Film Market (AFM) moving its schedule from the beginning of the year to November. Now an increasing number of accredited industry professionals can show their growing interest in the Berlinale's driving force -- business.

Film buyers and sellers from around the world have poured into Berlin in unprecedented numbers for the 55th Berlinale, including US power players Paramount, Miramax and Focus. With many of the films in the festival's competition already licensed in some territories, the buying focus is directed towards the European film market and its spill-over in other sections of the festival.

2004 a record year for German film

German cinema is currently booming with films like Fatih Akin’s recent "Head-On," breaking all records. With an admissions rise of 5.2 percent in 2004 and a 24 percent share of the local market, the German film industry experienced its best year in a decade.

Thanks to the success of such local films as "Traumschiff Surprise," "Seven Dwarfs" and the Oscar-nominated "The Downfall," the local industry has attracted 36.7 million cinema-goers, leading to a record market share. "All you need is a success story… in any business. You have one success-story then it opens the doors," European Film Market director Beki Probst explained to DW-RADIO.

Success brings further rewards

Traders are paying particular attention to new German actors, young directors and their films. The diversity in style and content has never been bigger. Berlinale co-director Alfred Holighaus pointed out that the many awards picked up by German films over the year prove that there's a new aesthetic standard in German cinema.

"Things are really changing," Holighaus said. "Not just that there are more German films which are seen by more German audiences, which is good news. But on the other hand, German films start to travel and start to sell all over the world."

A world premiere at the Berlinale can result in million-dollar distribution deals. And German production companies and media funds jump at financing follow-ups. What's more, their importance on the huge US film market has grown as Hollywood faces increasing financial difficulties. German media funds alone invested €12.3 billion ($16 billion) in films last year, of which a total of 80 percent went to US productions.

EFM director Probst was careful not to speak about the exact trade volume on her floor at Potsdamer Platz. "In business, secrecy is a very, very big factor. Everything is dealt in hotel rooms, bars or whatever and no one will come to you and say: 'You know what? I got that film for peanuts. I only paid one million dollars'."

Public funding a necessity

Although business has picked up, not one German production could have been shot without public funding. Last year €242 million went into new productions. And the same applies to the 750 theatrical features that were produced in Europe.

At the moment, the EU’s media program Eurimages has committed €643 million over seven years for distributors across 25 countries. Spread over 750 films, that sum is too small. According to experts, Eurimages and the national agencies should pool their resources.

Meanwhile, Germany is edging closer to introducing its own version of the UK's sale-and-lease back system, according to German Culture Secretary Christina Weiss. The government plans to make film funding fully tax-deductible under the condition that 35 percent of total production costs are spent within the country.

The investment system is meant to benefit the German film industry directly. But critics are saying the government's plans would lead to an inflation of budgets, as countless lawyers, accountants and other professionals demand sizeable fees without really helping the industry.

New fund to provide more opportunities

Possibly a better idea is the Berlinale's new World Cinema Fund aimed at supporting film makers in developing countries. As announced at the festival, the WCF has received a 20 percent boost in funding thanks to a €383,700 injection from Germany's Goethe Institute.

One of the first productions with WCF support has already received great acclaim at the Berlinale. "Paradise Now" is a drama about the last 24 hours in the lives of two Palestinian suicide bombers made by Palestinian director Hany Abu-Assad on the West Bank.

The film breaks taboos and does not provide easy answers where life is complicated under Israeli occupation. Days after the Middle East summit in Egypt, the Israeli Film Fund has committed itself to supporting the film at home. "It's going to be difficult to find a distributor in Israel that will pick it up," lamented Katriel Schory, head of the public agency. "We may have to do it ourselves."