Co-Chiefs of Paramount’s Specialty Films Unit Fired as Studio Shake-Up Continues

Continuing to make good on his pledge to remake Paramount Pictures, Chairman Brad Grey on Thursday fired the co-heads of the studio’s specialty films division.

According to sources, Grey called Paramount Classics co-Presidents Ruth Vitale and David Dinerstein into his office one after the other to deliver the news. The duo were hired eight years ago by the studio’s former chief, Sherry Lansing, and her boss, Jonathan Dolgen.

The move has been expected since last year, when Tom Freston, co-president of Paramount parent Viacom Inc., dismissed the studio’s specialty division as “an also-ran.” Freston has made clear that he wants Paramount Classics to be more competitive and lucrative. Because specialty films are made for less money than most studio productions, when they catch on with audiences they can potentially yield handsome profits.

Although Vitale and Dinerstein’s operation has consistently been in the black, it has never matched the revenue generated at rivals such as Fox Searchlight, which has made $70 million to $80 million in recent years with such breakout hits as “Sideways.”

When Freston brought in Grey this March, it was with the mandate to make edgier movies aimed at younger audiences. To that end, Grey has been vocal about his plans to reinvent the specialty division and has made no secret of the fact that he is interviewing candidates to lead it.

The most recent name believed to be in the running is Tom Ortenberg, president of Lions Gate Films Releasing. Lions Gate spokesman Peter Wilkes declined to comment.

Sources close to Grey say he does not have a lead candidate, but narrowing the field is a top priority. Among those he has interviewed are producer Michael London (“Sideways” and “Thirteen”); Endeavor agent John Lesher, who represents a number of independent filmmakers; and New York attorney John Sloss, a savvy deal maker and producer who has good relationships with indie filmmakers.

Grey declined to comment Thursday, but a Paramount spokeswoman confirmed that Vitale’s and Dinerstein’s contracts, which were to expire in mid-February, would not be renewed. Asked how quickly Grey planned to make his choice, she added, “We hope to name new management shortly.”

In a phone interview with Vitale and Dinerstein, Vitale said, “We love what we do and we’re sad to leave our filmmakers.” If possible, the two “would love to find something to do together,” Vitale said, adding that they were “extremely proud” of what they had built at Paramount Classics.

They did not know when they would officially exit the studio.

Ironically, the team is having its best year ever. “Hustle & Flow,” an edgy drama about a pimp acquired for $9 million this year, has grossed $22 million domestically -- less than the studio had hoped but still more than any other Paramount Classics release. The unit’s other recent release, Marilyn Agrelo’s documentary, “Mad Hot Ballroom,” about New York grade school students in a ballroom dancing competition, has brought in $8 million in U.S. ticket sales.

The two fired executives are in good company. Since Grey took over, he’s replaced the studio’s president, Donald DeLine, with Fox TV executive Gail Berman. Then, in July, Grey axed the motion picture group’s vice chairman, Rob Friedman, who was Vitale and Dinerstein’s boss. Paramount Classics now reports directly to Grey.

Before joining Paramount Classics in 1998, Vitale headed New Line Cinema’s specialty film outfit Fine Line Features. Earlier, she worked at UBU Productions, United Artists, Vestron Pictures and the Movie Channel.

Dinerstein came to Classics from Fox Searchlight, where he worked for three years. Before that, he was at Miramax Film. In the 1980s, he worked in advertising and television in New York.