Rage: Are you ready for their close-ups?

Sally Potter is waging war on cinema. Her new film, Rage, breaks just about every cinematic convention going with its stark style and relentless straight-to-camera, talking head performances.

As if that were not enough, the British director is also releasing the film for free on mobile phones in daily instalments over the course of a week, as well as on the internet, before giving it an unusual one-night-only cinema release.

Set in a New York fashion house on the eve of Fashion Week, Rage unfolds over seven days, as the preparations for a major show are interrupted when a model dies on the catwalk, apparently strangled by her own scarf. The 14 characters, coming, going and generally hanging around the catwalk, are all speaking to a mysterious young man named Michelangelo, whom we never see but who is interviewing the protagonists using his mobile phone for his school project. He is also secretly uploading the intimate footage on to his blog. Throughout, we never hear or see Michelangelo and the characters never appear together. Potter has broken down the boundary between actor and spectator, and the characters appear to talk directly to us.

Perhaps the biggest surprise of the film is seeing how effectively Jude Law becomes the transsexual Minx. Elsewhere, Judi Dench sports peroxide blonde hair in her role as a biting fashion critic, while playing the amusingly named Lettuce Leaf, supermodel Lily Cole shows that she has some real acting chops. Other characters include a fashion designer, Merlin, played by Simon Abkarian with more than a hint of John Galliano about him, a pizza boy (Riz Ahmed), a Latino seamstress (Adriana Barraza), a brand manager (Dianne Wiest), a photographer (Steve Buscemi), a Shakespeare-quoting detective (David Oyelowo), a publicist (Jakob Cedergren) and Eddie Izzard as flash media mogul, Tiny Diamonds.

The film's bold look has thrown authenticity out of the window as the characters are shot in front of constantly changing coloured backgrounds, rather than against the hubbub of the design house. Each actor was filmed close up in front of a blue screen that could then be manipulated in post-production to suit a colour associated with him or her. And while Potter has filmed using a HD camera so audiences are saved from having to watch the grainy mobile phone footage, that's the only concession the director has made to her viewers.

"It was about getting the production of the film and the final result married into one aesthetic. So the minimalism of the final film was mirrored in the simplicity of the process," says Potter, explaining her unorthodox shooting methods. "It also helped with the practicality of assembling 14 great actors. Because I only needed to shoot one actor at a time, I was able to fly out to them and it became workable. I spent two days with each actor and that was just about enough time. There were no cutaways or film sets, it was just the basic elements of film-making."

Lily Cole experienced both the benefits and the drawback of Potter's method: "In a way, just having the camera is very difficult and exposing but the other side of the coin is that you have a director who is entirely focused on you," she says. "You're able to focus on your character. In a bigger production, where there are so many elements going on, you're not the centre of attention."

It's low-budget film-making in the extreme, but the aesthetic wasn't simply chosen to save money. The 58-year-old hit upon the idea after seeing how popular her own blog had become, with over 30,000 people logging in for the latest Sally Potter news. Most of all, she became fascinated by the popularity of the films that she was making for her website, and so decided to make a film in the same style.

The low cost has also afforded the film-makers an opportunity to release the film in a way that reflects what happens on screen. The film received a fairly lukewarm reception when it premiered at the Berlin Film Festival, but Potter says her new distribution method is not a kneejerk reaction to the catcalls. "The idea was around from the very beginning," says Potter. "The shooting of the film was part of a unified whole – to make cinema and distribution part of the story itself."

The film will premiere on mobile phones. From Monday 21 September it will be available to download via Babelgum.com in seven segments with a new section released each day. There will then be a UK premiere that will be broadcast for free on the internet and on 24 September there will be a cinema premiere at London's BFI, which will be broadcast live to cinemas across the country where viewers will be invited to text in questions to Potter and the cast, while Jude Law will join in via Skype from New York. A DVD release will follow on 28th.

Potter seems to regret agreeing to screen Rage at the Berlin Film Festival earlier in the year. Watching it on a phone or an iPod, she says, might provide the best experience. "Watching the whole film in one sitting takes some concentration. Much depends on where the film is screened, though. Berlin was too big for it. We never intended to do it, but we were seduced by the fact that the director of the festival loved the film. I loved seeing it big, but I have noticed that it works slightly better in a more intimate context."

This may seem a strange statement for a director, but it reflects a new concern with how and where we watch films. Consider the number of times you've been told that a movie is worth waiting for on DVD, or felt that if you'd watched a movie by accident on a lazy afternoon on television you would have enjoyed it more than if you'd paid for it at the cinema. It goes the other way, too. When it comes to big-budget movies, nothing but the big screen and the popcorn of a multiplex will do.

The number of places where we can go to watch a film has exploded in the last decade. The rules of the game have changed, and Rage proves that sometimes where and how you watch a film is just as important as the plot, acting and directing.

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