Arts Alliance Media (AAM), the venture capital firm which owns a majority stake in City Screen, is looking to expand the art house cinema chain yet further.

The company has already earmarked another unnamed London cinema outside the West End to add to the City Screen circuit, which currently stands at 18 sites. It is also looking at new venues in the Midlands and the North-East.

City Screen is the largest UK exhibitor specialising in independent film. The intention now is for all its new sites to be digitally equipped and to offer training and editing facilities.

"Our view has been for some time that the film industry would undergo a transformation, both from analogue to digital, but also from being product focused to being customer focused," AAM's founder and chief-exec Thomas Høeg told "What we want to do is to provide a growth path for City Screen which included more sites and an opportunity to become a more robust business."

Last autumn, AAM became the majority shareholder in Online Rentals Limited, the owner of DVD subscription service, Lovefilm. It is also the largest shareholder in the Metropolitan Film School Limited.

AAM, which was set up in 2003, is part of the Arts Alliance Group, which specialises in media and technology investments and was one of the original backers of The company launched its bid to run the UK Film Council's Digital Screen Network (DSN) earlier this month. Other outfits tendering for the contract are believed to include such heavyweights as BT, NTL and IBM.

In July 2003, AAM was behind the first ever HD digital screening in the UK of a film by a British director - Peter Greenaway's Tulse Luper's Suitcases - at the Cambridge Film Festival.