The fate of FilmFour hangs in the balance today as Channel 4 executives attend a crunch meeting to discuss the future of the loss-making outfit.
Staff are bracing themselves for redundancies at the production, distribution and sales company, which lost more than £5m last year. Rumours are rife that dozens of staff could go.
Channel 4 insiders say at the very least the operation will be substantially scaled back, but the FilmFour name is likely to survive.
"They have decided that they cannot continue with the current business model as it exists today," said a source.
"But whatever happens we expect some sort of entity called FilmFour to continue to produce and finance films."
The issue will be discussed at a Channel 4 board meeting today and John Woodward, the chief executive of the Film Council, said he was "extremely concerned".
FilmFour is one of the strongest and best-recognised brands in UK film and television, but has suffered a string of big screen flops including Charlotte Gray and Lucky Break. Its last big hit was East is East - and that was three years ago.
But it has been credited with transforming the fortunes of the British film industry, creating international hits such as Four Weddings and a Funeral and Trainspotting in the face of formidable competition from the Hollywood film factories.
"Everyone is sick to the stomach waiting to find out what is going to happen. It will be a really sad day for British film. Even if FilmFour survives in some guise, there is no doubt it is going to be scaled back," said one film veteran.
"If it hadn't been for FilmFour in the late 80s and early 90s then we wouldn't have a British movie industry today."
Offbeat movies such as My Beautiful Launderette, Letter to Brezhnev and the more mainstream Crying Game fuelled an optimism that a British film industry could provide a valuable alternative to Hollywood.
Channel 4 later decided to set up its own distribution arm in an effort to break the stranglehold the studios held on the cinema chains and give British talent a chance.
"FilmFour is a very important part of the ecology of the British film industry, both in terms of creative risk taking and financial muscle. Its disappearance would be a real blow to building a sustainable film industry," said Mr Woodward.
Its future has come under review following Channel 4's appointment of chief executive Mark Thompson in the spring. He arrived at a channel hit by a £28m loss - its biggest deficit in 10 years - and was under pressure to make sweeping changes.
It is believed several senior figures in the film industry have begged the board not to scale the operation back and to instead focus their attention on the broadcaster's other loss-making divisions.
One possible option is for FilmFour to concentrate on its original brief, making feature films principally for TV. It may also look to bring in extra investment from outside or even look at a commercial partner.
Other options the board will examine include cutting investment in new production, pulling the plug on its theatrical distribution business and shutting its international sales arm.
Earlier suggestions of a merger with Channel 4's TV drama department have been ruled out.
