GOING INDEPENDENT; PARAMOUNT STARTS ART-HOUSE UNIT.

Byline: Dave McNary Daily News Staff Writer

Paramount Pictures, underscoring the importance of art-house movies such as ``Good Will Hunting'' and ``The Full Monty,'' announced Friday it has launched a specialty films division.

The move made Paramount the final major Hollywood studio to start up such an operation at a time when audiences have been showing an increased appetite for low-cost, off-beat fare. Even though the sector is termed ``independent,'' other major studios have either snapped up successful producer-distributors or started up their own in recent years, making them far from independent of mainstream Hollywood studios.

Paramount's new operation hopes to release two movies by the end of the year and as many as half a dozen films annually under the yet to be named banner, based at the studio's Hollywood lot.

``There are so many small-budget films that don't do well but the hope with specialty operations is that you'll come up with a breakout hit that doesn't cost much and gets you Academy Award nominations,'' said Robert Bucksbaum, head of industry tracker Reel Source.

``The Full Monty,'' for example, cost $3.5 million to make and has grossed more than $205 million worldwide. It also brought the prestige of four Academy Awards nominations - including Best Picture - to Fox Searchlight, which had been otherwise hitless since starting operations in mid-1996.

Paramount hired two industry veterans to handle the new division - Ruth Vitale, whose credits as president of Fine Line include ``Shine'' and ``The Sweet Hereafter,'' and David Dinerstein, a top marketing executive at Fox Searchlight and Miramax with a resume including ``The Full Monty,'' ``The Brothers McMullen'' and ``Pulp Fiction.''

Vitale, who will focus on production and acquisition, said it makes sense for Paramount to create a separate business for the art-house circuit. ``It's a different set of theaters and a different set of productions, along with an increased sophistication among audiences for these kind of films,'' she said.

Dinerstein, who will specialize in marketing and distribution, said part of Paramount's long-term goal will be nurturing young directors, actors and producers, much like a minor-league baseball team. ``We'll be trying to bring new talent into the Paramount fold,'' he said.

The decision to launch the division comes at a time when Paramount continues to bask in the glory of ``Titanic,'' which widely is expected to lead this weekend's box office for the 11th straight time. Through Thursday night, it had taken in $407.4 million domestically and should pass ``Star Wars' '' mark of $461 million by late March. Fox is handling ``Titanic'' internationally.

But Paramount, owned by Viacom Inc., has not seen much success with recent low-profile films such as last year's ``Kiss Me Guido'' or ``The Education of Little Tree.'' It launched a 10-screen rollout this weekend of the off-beat comedy ``The Real Blonde'' with Matthew Modine, Daryl Hannah and Elizabeth Berkley.

The explosion in specialty operations began with the Walt Disney Co.'s decision in 1993 to buy Miramax, which remains consistently profitable and dominated last year's Academy Awards with ``The English Patient.'' It released 34 films last year, including ``Good Will Hunting,'' made for $14 million and up for nine Oscars.

Such success stories have fueled production of low-budget films and made major studios less hesitant about taking chances on quirky movies. Additionally, exhibitors are demanding more films as they add new screens at the rate of 7 percent annually.

``As the number of screens grows, demand for all kinds of movies is getting higher and higher,'' Bucksbaum said.

STUDIO SPECIALISTS

Paramount Pictures has become the final major studio to set up a specialty films division geared toward the art-house circuit.

Specialty operations Parent studio Corporate parent

Miramax Disney Studios Walt Disney Co.

Fine Line Warner Bros. Time Warner Inc.

October Films Universal Studios Seagram Co.

Sony Classics Sony Pictures Entertainment Sony Corp.

Fox Searchlight 20th Century Fox News Corp.

Orion and Goldwyn Metro-Goldwyn-Mayer MGM Inc.

Gramercy PolyGram Filmed Entertainment PolyGram NV

Unnamed Paramount Studios Viacom Inc.

CAPTION(S):

3 Photos, Box

Photo: (1--Color) Low-budget productions like its current quirky comedy ``The Real Blonde'' will be the focus of Paramount Pictures' specialty division.

(2) Ruth Vitale

To oversee production

(3) David Dinerstein

To helm marketing

Box: STUDIO SPECIALISTS (See Text)