Vancouver: According to new Red Sky president and ceo Mike Smallwood, the Vancouver distributor is going through a ‘period of consolidation’ and won’t have a major release until January.

The retrenchment follows the surprising departure of founding ceo Tony Cianciotta late last month and means the company will transform itself into more of a mainstream distribution business.

‘We have been known for art-house films, niche films and foreign-language pictures,’ says Smallwood. ‘We are now moving more into the mainstream, with an emphasis on generating shareholder value. We have to take care of our investors.’

And speculation is that financial issues may have been connected to Cianciotta’s ouster. Asked if his company is ‘in the black,’ Smallwood refused comment. But word in the community suggests that two of Red Sky’s major investors, Royal Bank Capital Corporation and Working Opportunity Fund, forced the changes. wof and the Royal Bank did not return phone calls.

‘He left for personal reasons and that is that,’ says Smallwood. ‘There was a difference in philosophy.’

For his part, a shell-shocked Cianciotta says: ‘It’s with reluctance that I leave Vancouver.’

In an interview, Cianciotta expressed regret that Red Sky was moving into mainstream movies. ‘In the past five years, the indie market has grown from 3% to 20% of the annual box office,’ he explains. ‘It makes more sense to work in a niche market than to compete in the mainstream.’

Cianciotta, who has signed a six-month non-compete contract, is returning to Toronto where he has kept a home since launching Red Sky at the 1997 Vancouver International Film Festival. He says he’ll return to teaching film marketing and distribution at Ryerson and plans to re-enter the distribution game. He declined to discuss specific distribution plans, except to say that he likely won’t operate as an independent distributor because of the high demands of investors.

Symbolic of the changing Red Sky culture is the new first-look agreement the company has with Maple Palm Productions, run by Dave Thomas in Toronto and Los Angeles. The agreement follows the acquisition of Canadian rights to Home Brew, the Bob and Doug McKenzie sequel to Strange Brew.

On May 10, Red Sky announced the acquisition of Canadian rights to Snap Shot, a hockey-playing chimp movie from Vancouver-based Keystone Entertainment.

‘We want projects that appeal to a much wider audience,’ says Smallwood. ‘It’s not that we won’t continue to support smaller projects, but we need that mainstream product to pay the bills.’

As an example of Red Sky’s continuing patronage of smaller films, he cites its involvement in Shiney’s Head by North Vancouver’s Cadence Entertainment.

‘We will continue to have an emphasis on investment in western-based production,’ says Smallwood.

But after a first year of success with critics and festivals, the abrupt changes beg questions about whether the Red Sky experiment is viable.

‘Red Sky hasn’t failed,’ says entertainment lawyer Arthur Evrensel, a partner at the Vancouver office of Heenan Blaikie. ‘They have reacted to market forces and the verdict is still out on whether they’ll be successful. It’s sad to see Tony leave, but I am pleased that Red Sky is still in the neighborhood.’

‘All those people [the remaining Red Sky founders] set out to serve the independent part of the market and I believe that deep down they still believe in that,’ says Vancouver producer Raymond Massey of Ranfilm. ‘From an independent’s point of view, there are fewer than half-a-dozen distributors now and only one makes money. And they are gun shy. Any kind of clamp down by Red Sky on the kinds of projects it will consider is bad news for the independents.’

‘We’re not going anywhere,’ stresses Smallwood, who was named Red Sky’s cfo shortly before his promotion. ‘We’re staying here. Our investors are not looking to pull out in the short or medium term. We have a business plan in place that is very aggressive. We will build a strong foundation with local companies and other Canadian distribution companies. Through horizontal integration we will grow the international side of the business, grow into television distribution and video distribution.’

Its 1999 slate includes 25 films such as The Devine Ryans by Imagex in Halifax, which will get a fall launch, and Hideous Kinky (through Red Sky’s distribution deal with Stratosphere Entertainment in New York), which went into theatres this month.

It won’t be until January when Snap Shot (Keystone Entertainment) is launched that Red Sky has its next big marketing push for a film, says Smallwood.

Including remaining founding partners Mary-Pat Gleeson, Anna Maria Muccilli and Dave Forget, Red Sky employs 10 people.