Just three years ago, a petite young Montmartre woman with a penchant for matchmaking and stealing gnomes breathed new life into the French film industry. On the heels of the international success of Jean-Pierre Jeunet's "Amelie" -- not to mention a triumphant foray into genre filmmaking with Christophe Gans' "Brotherhood of the Wolf" -- industry experts were convinced that a buoyant and, most importantly, profitable new era was on the horizon. Gallic cinema finally had begun to combat the long-held notion that it offered little more than angst for the art house crowd.

Now, three years down the line, French cinema is struggling to capitalize on the boom year that was 2001. According to recent statistics from film-promotion body Unifrance, ticket sales for French movies across 27 major territories last year dropped more than 20% to an estimated 43 million admissions.

Overall, French cinema admissions last year were down about 6% to 174 million, and that has local industry chiefs pondering whether the 2003 figures were the result of a bad crop of movies, the tough overall economy or evidence of a paradigm shift in movie consumption: the stay-at-home movie buff.

Following a year in which Paris' outspoken opposition to U.S.-led armed intervention in Iraq prompted some to rename French fries, does the world still want movies from the nation that brought us the New Wave and "Amelie"?

The answer, according to exporters, is a qualified "yes." "I'm old enough to remember the time in the 1970s when it was enough to have any French film, and the whole world wanted to see it," says Margaret Menegoz, president of Unifrance and head of indie producer-distributor Les Films du Losange. "Then came a period when, if you mentioned French cinema, people turned away and looked for the nearest English-language movie. I've noticed that we are once again acceptable -- buyers don't turn their heads but take a look."

The irony for defenders of French-language cinema is that many of France's recent top-selling titles in overseas markets were shot in English (Roman Polanski's 2002 Palme d'Or winner "The Pianist," Francois Ozon's "Swimming Pool" and Louis Leterrier and Corey Yuen's action picture "The Transporter") or have no significant language component (Sylvain Chomet's animated feature "The Triplets of Belleville" and the 2001 nature documentary "Winged Migration"). As a result, boxoffice for French films in America was stable last year, while Britain saw ticket sales more than double.

The conundrum for French exporters is that the kind of movie that works best at home is the toughest sell on the international market. "The (French) audience wants popular comedies and action-comedies, genre films and great auteur films, roughly in that order," says Frederic Sichler, managing director at StudioCanal, the film production and distribution arm of pay TV group Canal Plus.

Indeed, the five best-performing French movies in 2003 were all comedies of one sort or another (see chart on opposite page). The rub for Gallic producers is that none has particularly strong export potential, except as remakes.

"Comedy is profoundly national: In Spain, they don't laugh at the same things as us, nor in Italy, and so on," Menegoz says. "But beside that, everything can export well. The appetite for French film exists: genre film, intellectual films, movies with strong sexual themes."

Most exporters attribute the dip in overseas sales to the ups and downs of a cyclical business, but the decline in domestic boxoffice has everyone guessing. Jean-Michel Rey, head of independent producer-distributor Rezo Films, suspects that the huge uptake in DVDs has transformed movie consumption habits.

"I'm at the front of the queue as a consumer of DVDs," he says. "I've got home cinema, and I find it extremely comfortable to watch films that way -- in particular a (Jacques) Doillon, a (Jacques) Rivette or (Michael) Haneke. The urge to see these films is not urgent; you can see them six months after (their theatrical release). I think this is a key shift, which may be confirmed this year."

In terms of boxoffice success, the biggest hit last year in France was Buena Vista's "Finding Nemo" with 7.9 million admissions. Next came the Luc Besson-produced car-action franchise "Taxi 3," with 6.15 million admissions. The only other Gallic film among last year's top 10 was the comedy "Chouchou," released through Warner Bros. Pictures' French distribution arm, which cumed nearly 4 million ticket sales.

Despite the success of "Taxi 3," Besson's Europa Corp., one of France's most dynamic movie companies, had a tough time in 2003, with two of its major releases -- Festival de Cannes opener "Fanfan la tulipe" and racing-car action film "Michel Vaillant" -- coming in well below expectations with 1.2 million and 900,000 admissions, respectively.

Paradoxically, local production hit a record in 2003, with 212 movies gaining funding from the Centre national de la cinematographie -- a surprising statistic given the difficulty in putting together financing these days.

There was a time when Canal Plus would sink money into just about every Gallic movie made. Financial woes at the broadcast group -- compounded by those of its parent, Vivendi Universal -- led to a sharp scaling back of Canal Plus' spending on local films (though the company remains the largest single source of financing for the industry).

The cut in Canal Plus coin, compounded by a parallel reduction in what free-to-air broadcasters are putting into local film, has forced independent producers to rethink their economic model. The solution, Rey says, is simple.

"Reduce the cost," he says. "I make two sorts of film today: films with a certain ambition, which vary between (€5 million and €6 million) and on which we're now forced to work as European co-productions; or moviemaking experiments on which we'll have to totally revise the production principles and costs. The exorbitant actors' fees are finished; the number of weeks for a shoot will be cut; we'll probably shoot on video. I'll make films at €1 million or a little more, and I'll find directors capable of doing that."

While French producers are increasingly looking abroad for finance partners, they face new competition on their home turf. Warners recently set a controversial precedent by gaining access to the French subsidy system to help finance Jean-Pierre Jeunet's $50 million drama "Un long dimanche de fiancailles" (A Very Long Engagement). The movie is produced by a specially created company, 2003 Production, which is headed by Warners' top man in France, Francis Boespflug.

Despite fierce opposition from some industryites, others note that this influx of Hollywood funding is being spent on an entirely Gallic movie: a French literary adaptation shot in France, in the French language, with mainly French cast and crew. What's more, the subsidy generated by the film's receipts will have to be reinvested in a subsequent French movie.

Other Hollywood majors will be quick to follow Warners' lead, some argue. "The Warner arrangement will have a negative impact on French companies," one senior French executive says. "Producers need to have a stake in certain minimum of successful movies to survive. If, in five to six years, there are several studios muscling in on the big Gallic projects, that means less to go around for local producers."

One strong indicator is the market share of French movies, which in 2003 held stable at 35% -- far ahead of the share enjoyed by local production in any of France's neighbor nations.

Flach Film's Jean-Francois Lepetit believes that is linked to the diversity of production that has characterized French output in recent years. "It's important to retain a production sector strong enough to develop projects that give this diversity," he says. "If we hadn't put in place aid systems, like obliging television companies to investment in cinema, our movie industry today wouldn't have a market share of 30% or more. We'd probably be like Italian or German cinema; we wouldn't exist."

Michel Schmidt, deputy manager at StudioCanal, says any analysis of the French market must look at the long term: "We were at around 200 million admissions in the early 1980s. It (then) dropped very low, below 120 million; now, it's come back up. When you look at the projects that are in the pipeline for 2004-05, there's no need to think the trend is going back down."

Observers expect this year to get off to a good start, with a slew of movies in the pipeline. First out of the blocks in late January will be the caveman comedy "RRRrrrr!!!" by writer-director-actor Alain Chabat, the man behind "Asterix and Obelix: Mission Cleopatra," the top-selling movie in France in 2002.

Next month will see the release of UGC's fantastic Western "Blueberry," directed by Jan Kounen and starring Vincent Cassel, Michael Madsen and Juliette Lewis, and thriller "Crimson Rivers 2: Angels of the Apocalypse," starring Jean Reno, Benoit Magimel and Christopher Lee. The original "Crimson Rivers" was a big hit for Gaumont both at home and abroad. For the sequel, producer Alain Goldman took the project to StudioCanal and Europa, which divided world sales between them. Also in February, the debut film by Yann Moix, "Podium," which stars Benoit Poelvoorde as an impersonator of 1970s singer Claude Francois (co-writer and singer of the original "My Way"), is tipped to be a breakout hit.

Cassel will return to French screens in March starring opposite wife Monica Bellucci in "Secret Agents," which is backed by sales agent TF1 International. April will see the release of Jean-Jacques Annaud's tale of two tigers "Two Brothers," which, at €59 million, was the most expensive French feature film shot last year.

In addition, several movies with strong commercial potential are scheduled for the second half of the year, notably Jeunet's latest opus.

"French cinema is indestructible," Menegoz says. "It may have a cold or a headache, but not cancer. Nonetheless, it's a permanent struggle to take care of it."