For a fortnight every January, an American ski resort becomes the film world's equivalent of the Klondike. Shysters, agents and buyers gather in a small, snowy town in Utah for the Sundance Festival, all looking for `the next big thing'. Geoffrey MacNab previews the festival's attempt to reconcile art with commerce.

The list is impressive: Reservoir Dogs, sex lies and videotape and Shine are just a few of the titles that first surfaced in Sundance. It was there that The Full Monty was launched last year.

"Frankly, there were very few people who took much notice of it," said festival programmer Geoffrey Gilmore of the world premiere of the highest- grossing British film ever. "People thought it was a nice film, but nobody was anticipating the kind of success it has had."

Gilmore predicts that Sliding Doors, a romantic comedy which opens this year's event, will match The Full Monty at the box office. "It's a very, very special film which is going to do huge business worldwide. Gwyneth Paltrow gives a major performance."

Whether or not these are simply the blandishments that festival programmers are obliged to trot out about titles they themselves have selected, it is worth nothing that Sliding Doors is a UK/US co-production, made by a first-time British director, Peter Howitt.

Two other British hopefuls, Carine Adler's Under the Skin and Shane Meadows's 24:7, are also screening, but as Gilmore points out, Sundance is primarily an American event. It was originally called the US Film Festival and changed its name after Robert Redford's Sundance Institute took over the reins from the Utah Film Commission in 1985.

In theory, Sundance, held in the ski resort of Park City, exists to celebrate and showcase the work of American independent film-makers. In practice, say its critics, the festival has been colonised by the hard-nosed deal-makers who swarm there in ever-increasing numbers.

Even Gilmore sounds perturbed by what he describes as "the harsh market atmosphere" which surrounded last year's event. "It was like a den of vipers. Buyers were treating the festival screenings as if they were market screenings. They were walking out of films after less than 20 minutes. That's a savage way of making an assessment which also often turns out to be an inaccurate one."

While deploring these buyers' "rush to judgement", Gilmore accepts that "the greatest thing a festival can do for film-makers is to get their films sold". In his next breath, he seems to contradict himself: "One of the things that you worry about is that too many people start to see the independent world - which used to be the place where you could experiment - as no longer a place for experimentation but as a place for making certain kinds of work which can then sell."

Sundance is skewered on the horns of an all-too-familiar dilemma: it is trying to reconcile art with commerce. The irony, at least as far as the US indie scene is concerned, is that art is commerce. Six or seven years ago, Gilmore observes, an independent film that grossed between $1m to $2m would be considered a success. "These days, distributors are looking for home runs, films that will gross in excess of $10m, and if they can, in excess of $50m."

With so much more money floating about, the nature of the film-making has changed. Gilmore believes there are now two encampments. On the one hand, there are still hundreds of tyros working in time-honoured fashion with "no resources, no cast of note and a very limited budget". But there are also "mainstream independent" directors who operate with "significant budgets, significant casts," and, more often than not, big names behind them. (Ullee's Gold, one of the hits of last year's festival, starred Peter Fonda and was executive-produced by Jonathan Demme.) There is no guarantee that either party will be successful. If anything, Gilmore suggests, the more experimental and innovative films are likely to stand out while those made in what he refers to as "a mainstream aesthetic" risk being lost in the crowd.

Park City boasts some of the finest skiing in the US, but the slopes are at their quietest during the festival. Some townsfolk believe that this is because conceited Hollywood bigwigs are terrified of making fools of themselves in the snow in front of their peers.

Despite the boost to tourism, locals haven't always warmed to the annual influx of film flunkies. In reports from last year's festival, there were dark murmurings about visitors being hassled and their vehicles being towed away.

Certain critics even went as far as to suggest that Utah's answer to Cannes ought to move to somewhere bigger. Gilmore is aghast at the suggestion. "Robert Redford believes that Park City is integral to Sundance. We all believe that. We still have that kind of intimacy that you can only get in a small town. There is still the opportunity to walk down that main street and meet the person you're looking for."

It's a moot point whether Park City can go on being defined as a small town. Every year, more and more restaurants and hotels open up. As the town grows bigger, the film festival provides the inhabitants with useful practice in the apparently difficult art of being polite to strangers. In four years' time, they are going to have to deal with a mass invasion of athletes, tourists and journalists: the 2002 Olympics are being held in nearby Salt Lake City, and many of the main events are pencilled in for their backyard.

Meanwhile, Gilmore and his colleagues are doing their best to ensure that everybody enjoys themselves at the festival. They have bought new projectors and built new theatres to ensure that all the films are shown off to the best possible advantage. After a sticky 1997, the emphasis now is on being user-friendly. "We didn't want to become one of those festivals which people say they hate but feel obliged to attend."

Whether or not 1998 provides a bumper crop of indie classics, one prediction can be safely made: at least some of the films that find favour in Park City in January will wend their way to a cinema near you before the year is out.