Here's a plot twist worthy of any Hollywood movie. To save independent films from extinction, the time may be near for some low-budget movies to play outside theaters, instead of in them.

The idea -- alternative distribution of movies via video-on-demand on cable and satellite television systems and the Internet -- is what some indie players at this week's major industry event, the Sundance Film Festival, are backing.

The low-budget film arena that produced movies like Oscar-winner Slumdog Millionaire, has struggled through hard times as low-cost digital equipment and an influx of investors fueled a glut of films at the onset of a recession.

Backers of on-demand releases say alternative distribution presents ways for low-budget filmmakers to profit without having to compete for limited space in movie theaters.

To promote the idea, Sundance is releasing three films, including Michael Winterbottom documentary The Shock Doctrine, on demand via a new program it calls Sundance Selects. Five more films will be on YouTube.

The beauty of this (video-on-demand) model is that you take a lot of the voodoo economics of film distribution out of the equation, said Jonathan Sehring, president of IFC Entertainment, who is working with Sundance.

Traditionally, a distributor pays a producer a fee to release a film, often forking over less than the production cost and promising the filmmaker a share of profits that may never be realized if a movie fails at box offices.

Utilizing TV on-demand or Web downloads, indie movies can closely target audiences and avoid millions of dollars spent to market a film in theaters, proponents say. Some filmmakers like it because their movies get seen, and distributors hope for new customers outside traditional art houses in major cities.

NEW GENERATION, NEW MARKET

We think that we can't survive as a company unless we make a concerted effort to understand the marketplace, understand the audience, understand what different opportunities are out there, said Christine Walker, principle at Werc Werk Works, whose movie HOWL opened the festival.

Works is one of a number of indie production companies that are finding audiences through on-demand or downloads, which she said leads to collaboration among distributors and filmmakers.

Maybe the distributor doesn't get as much as they might have in a traditional deal, but they're not risking as much either, she said.

Nolan Gallagher, founder and CEO of Gravitas Ventures, said his company now releases about 300 films a year on-demand at 40 cable TV operators, and the industry already is at a point where a producer can realize a profit via an on-demand deal.

Veterans like Bob Berney, co-founder of distributor Apparition, caution it is still early days for on-demand models but agree that they may be a wave of the future.

To be sure, directors who grew up watching their heroes on silver screens would like nothing more than seeing their films in theaters. But many are growing willing to bypass glitzy red carpets simply to make money doing what they love.

If video-on-demand is what is needed in order to keep (the industry) alive, then I'm all for supporting it, said Joshua Safdie, who along with his brother Benny directed Daddy Longlegs, one of the Sundance films to be release on-demand.

(Editing by Bob Tourtellotte)

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