The staff cutbacks sweeping through AOL Time Warner following its recent merger approval have now reached as far as the New York and London offices of Fine Line Features, the specialised offshoot of New Line Cinema.

On Tuesday, Fine Line's New York staff were informed that their ranks would be pruned back to a skeletal presence as part of a corporate decision to return parent company New Line to its origins as a lean and mean mini-studio.

Then yesterday, word also began leaking out that Fine Line's ten-person London operation would be similarly cut to the bone, having only just stepped up a gear as a vital production presence in Europe.

European chief Ileen Maisel is understood to be staying at Fine Line, working out of a new location with perhaps a couple of her colleagues; the rest, however, will be paid out the remaining time on their contracts or else offered hefty severance packages.

Overall, as many as 100 of the 600 people that were working at New Line before the New Year began are being let go in an effort to slash overhead costs by at least 20%. Among the known casualties is Fine Line's head of business affairs Jamie Kershaw, who was based at the Los Angeles headquarters.

The news certainly cast a pall over this year's Sundance Film Festival, where Fine Line presented the world premieres of both Invisible Circus and the warmly received dramatic competition entry Hedwig And The Angry Inch. The event also brought news that Todd Solondz' latest film, an untitled follow-up to Happiness that is seen as a hot bet for a competition slot at this year's Cannes Film Festival, will now be released in the US through Fine Line rather than New Line.

Sundance has been the scene of several acquisition coups for Fine Line in previous years including that of Scott Hicks' Shine which was grabbed by chief Mark Ordesky from under the noses of rival Miramax Films. Last year, Fine Line swooped on another hot Sundance crowd-pleaser, paying $4m for the domestic distribution rights to Saving Grace, the UK comedy that was originally tracked out of the London operation.

Fine Line's other European activities include a multi-picture deal with Denmark's Zentropa, which was announced at last year's Cannes Film Festival following their partnership on eventual Palme d'Or winner Dancer In The Dark. Among the high-profile European projects in the works are: The Sleeping Dictionary and Ripley's Game.