Juliette (Patricia Clarkson, left) has an unexpected love affair with her husband's friend Tareq (Alexander Siddig) in Cairo Time. After a month in cinemas, the movie has earned close to $500,000, its producer said. (Mongrel Media)

Canadian films lost ground at theatres across the country last year for the third year in a row.

A new report by Telefilm Canada reveals that Canadian movies took only 2.9 per cent of box office receipts last year with movies out of Hollywood continuing to dominate the market.

The take of English language box office is a paltry 1.1 per cent, with Quebec films such as Cruising Bar 2 and Babine raising the overall Canadian average.

"We have an English industry which is near basket case and in Quebec we have one of the most successful theatrical box offices in the world," says Toronto journalist Denis Seguin.

In more than 15 years following the industry, Seguin has seen little progress in development of an English-language industry.

"I've always said one of the biggest challenges facing English Canadians is developing an English Canadian star system — and the reason Quebec cinema is so successful in Quebec is because they have Québécois stars," he told CBC News.

Back in 2001, the Liberal government set a target for the English language box office of five per cent and doubled Telefilm's budget.

Yet even in a year when the box office take was up, such as 2008, share of the box office remains stubbornly low — hitting just 2.9 per cent in 2008, a drop from 3.3 per cent in 2007.

Telefilm head Wayne Clarkson says he's done the best he can with a $100-million budget for all of Canada, about the same as a single Hollywood blockbuster.

As he ends his five-year term, he's pushing for more genre films. He recently set up a comedy lab, in conjunction with the Canadian Film Centre and Just for Laughs, that's designed to refine scripts for Canadian comedy films.

"The expectation is we'll see coming in our doors, in our offices across the country, more good comedy scripts that can be financed," he said.

Paul Gross, the Canadian actor and director behind last year's box office success Passchendaele, says he believes Telefilm is churning out too many auteur films that lack wide appeal.

Other filmmakers are critical of a system in which half of Telefilm funding goes to Quebec.

Meanwhile, this year's top Canadian film, Cairo Time, is no match for its Hollywood competitors.

The new George Clooney film, The Men Who Stare at Goats, has raked in $1.4 million at Canadian cinemas since it opened on Friday.

Cairo Time pulled in a fraction of that after playing for a whole month, said producer Daniel Iron.

"We really couldn't be happier.… It's closing in on half a million now — it's indicative that the film has hit an audience," he said.

With files from CBC's Margo Kelly