By David Willey
BBC Rome Correspondent
As the Venice Film Festival gets under way in Italy, can the country's film industry build on its glorious past and continue to compete with the Hollywood giants?
Sophia Loren's career has spanned more than four decades
Italy began hosting one of the world's most prestigious film festivals as long ago as 1932 when Benito Mussolini was one of the first to understand the importance of international exploitation and marketing of films.
Both he and the Nazis in Germany were to use the new art form for regime propaganda.
He invited along to Venice for the first festival Louis Lumiere, the Frenchman who had invented the motion picture camera and projector and had given the world's first movie show in a Paris cafe in 1895.
Italy was also the country that gave birth to Roberto Rossellini, Sophia Loren, Vittorio De Sica, Marcello Mastroianni, Federico Fellini, Pier Paolo Pasolini, Bernardo Bertolucci - who achieved stardom as some of the most important film directors and actors in the subsequent history of world cinema.
Now in the 21st Century, the Italian film industry pales into insignificance beside that of Hollywood. About 3,500 people are employed full time in film and TV production.
While the number of feature films made in Italy continues to decrease each year because of rising costs, Italian cinemagoers show a continuing preference for American made films dubbed expertly into Italian, rather than for their own home-produced films.
The figures tell the story. In 2004, over 150 first-run Hollywood films were shown in Italian cinemas, in comparison with only just over 100 home-produced films and co-productions.
Twenty-eight first-run features from France were shown along with 17 from Britain. Total box office receipts were up 10% from the previous year and the number of cinema tickets sold approached 100 million - but two-thirds of the profits went to America.
Roberto Benigni won two Oscars in 1999 for his film Life is Beautiful
Only 26 Italian-made films took more than a million euros (£684,160) at the box office in 2004. Many Italian made films attracted heavy government subsidies.
This year's Venice Festival is still predominantly an international showcase.
Only three out of the 19 films in competition were made in Italy and none is a likely winner of the prestigious Golden Lion award.
But another three are Italian co-productions with France, Poland, Russia, and the USA.
Pooling film production resources with other countries is clearly the way for the future according to senior executives in the Italian film industry.
Earlier this year Culture Minister Rocco Buttiglione went to India to sign a new co-production agreement with Bollywood which the Italians hope will open up to them a huge new market.
The Indians are particularly interested in learning from the hugely successful Italian film dubbing industry. Italian film actors traditionally boost their income with dubbing work.
Italian director Federico Fellini won an Oscar in 1993
Cinecitta, the formerly state-owned Rome film studios - also founded by Mussolini - has been privatised and equipped with the latest digital technology to cash in on the vogue for historical blockbusters and the increasing number of feature films commissioned by TV.
Nowadays it is television as much as the film industry that keeps Cinecitta in business.
Italian talk shows and reality TV productions are broadcast live, advertising spots are filmed and fiction series are shot for distribution in Italy and abroad.
Of the latter, the latest enterprise is a $100m (£56m) series entitled Rome, co-produced by HBO and the BBC, for which the scenery experts have constructed life-size replicas of Roman monuments.
When shooting of the planned 65 episodes ends, the sets will be left in place, in the hope of enticing other producers to use the studios for more films set in ancient Rome.