The movie business is "out of whack," director Steven Soderbergh says. "The studio model has to be rethought."

Never one to talk idly about such things, the national vp for the Directors Guild of America has banded with dot-com entrepreneur-turned-movie mogul Todd Wagner to try out some radical new ideas. This month, they are showing their first collaboration -- the digital movie "Bubble" -- to receptive film festival audiences and critics at the Venice, Toronto and New York events. Shot for $1.6 million, "Bubble" is a far cry from "Ocean's Twelve."

The two make unlikely allies. Brainy Hollywood insider's insider Soderbergh, with partner George Clooney, runs production company Section 8 on the Warner Bros. lot. Together, Soderbergh and Clooney have produced a wide range of movies, from the star-studded big-budget "Ocean's Eleven" series to such indie films as "Criminal," "The Jacket" and Clooney's sophomore directing effort, "Good Night, and Good Luck." That's how Soderbergh got started talking with rangy Hollywood outsider Wagner, whose 2929 Prods. helped to finance their indie films.

Ever since jumping into the entertainment business in 2002, Wagner and his outspoken partner, Mark Cuban (www.blogmaverick.com), have been openly challenging established modes of distribution in Hollywood. They're building a high-tech, new-model, vertically integrated studio. Their 2929 Prods. and digital production house HDNet Films produce low-cost movies; HDNet Film Sales raises financing for them overseas; Magnolia Pictures Distribution books them on the 200-screen art-house Landmark Theatre chain; and for the first time, with "Bubble" in January, the high-definition cable channel HDNet Movies will air the films at the same time that they go out through their nascent DVD division.

"I like Mark and Todd's energy and enthusiasm," Soderbergh says. "They're free-thinking."

Soderbergh, Wagner and Cuban cooked up a deal that has had industry tongues wagging since they announced it in April. HDNet Films agreed to finance and distribute six high-definition video movies directed by Soderbergh, to open day-and-date in theaters, on HDNet Movies, and on DVD. "This is my response to certain trends in the entertainment industry," says Soderbergh, who believes that the good old days of watching 35mm movies in theaters, where they play for weeks at a time "are gone. I wish it weren't so. Everything changes and evolves and we've got to get with it, embrace it and find a way to make it work. The movies are not the way they used to be when I grew up. It's 30 years later!"

Last summer, Soderbergh shot the murder mystery "Bubble" on location along the southern Ohio/West Virginia border, with locals who had never acted. Soderbergh used three of the same high-definition Sony 950 cameras George Lucas deployed on the "Star Wars" movies. "I just wanted to make a movie about love and jealousy," Soderbergh says, "but in an environment that you don't often get to see in movies. The whole appeal was the simplicity of it. The idea was just to not tart it up. These cameras make it easy to go in without any lights, on all real locations."

Made with no established actors and none of the bells and whistles that most of us are accustomed to seeing in movies, "Bubble" is downright radical. Debbie Doebereiner, its 40-ish star, is the blue-eyed, chubby general manager of a Kentucky Fried Chicken in Parkersburgh, W. Va. Casting director Carmen Cuba scoured the area, approaching people who fit writer Coleman Hough's descriptions, then interviewed them at length on tape.

"Debbie is arresting," says Soderbergh, who paid his actors slightly more than scale and gave them all a piece of the movie. "I love looking at her. There shouldn't be anything unusual about seeing any of these people."

The lean and mean production was made possible by Soderbergh's experience making "K-Street," HBO's weekly political TV series that he and his crews shot on the fly in Washington. "It was total full-on boot camp," Soderbergh says. "I came out of that knowing that if I can survive that, I can do anything. I had so much fun doing this one. I wish I could do the rest of them right away."

That will have to wait until 2007, because of Soderbergh's busy schedule -- first, he is directing "The Good German," Paul Attanasio's adaptation of Joseph Kanon's post-war Berlin novel, which stars Clooney, and that will be followed by "Che," starring Benicio del Toro as the Latin American revolutionary. Soderbergh plans to shoot his second and third films under the HDNet pact back-to-back, he says.

With his feet firmly planted in the two worlds of big-budget studio production and indie experimentation, Soderbergh is openly critical of what he calls the "skewed studio system." The overall economics of cost vs. revenue "need to be rethought," he says. "People need to be made true partners in the real risk/reward ratio. Everybody needs to be talking about fair compensation and participation. It can be done. The force of economics is irresistible."

In January, the new paradigm will be tested when Soderbergh's no-frills "Bubble" opens at the same time in theaters, on HDNet Movies and on DVD. " 'Bubble' is just the beginning," Wagner says. "It's a process of learning the best way to package and integrate and market movies so consumers can buy a DVD in a theater or Best Buy or go to the theater or do both."

"I want them to sell 'Bubble' DVDs in the theater lobby," Soderbergh says, smiling.

As independents, Soderbergh and Wagner are willing to talk openly about subjects that are being hotly debated behind closed doors elsewhere in Hollywood. When Disney chief Robert Iger recently brought up the concept of shortening the window between theatrical release and DVD, he was fiercely criticized by the National Association of Theater Owners. "Because of piracy, the studios are already thinking about DVD day-and-date," Soderbergh says. "It's already happened. Now is the time to own it. The situation with exhibitors is going to have to be addressed. They've got to be a partner in all this. But there's going to be a new normal. That's the sad fact. The whole business has to change now. And everybody has to participate in this conversation."

Their new distribution model won't cannibalize the theaters, Wagner says. "I don't buy the argument that this is a horrible thing for exhibitors," he says. As part of the HDNet experiment, exhibitors who played the documentary "Enron: The Smartest Guy in the Room" are receiving a 1% share of that film's DVD sales.

"We're saying, 'Have a piece of what you generated,' " says Wagner, who admits he's been talking with NATO "so that we make it a good thing for everybody. This is an opportunity to rethink the rules of exhibition, to learn the most effective way to reduce costs and increase revenue and make customers happy."

While he plans to buy more theaters, Wagner hopes that the big chains that so far have resisted playing his movies will change their minds. Soderbergh has been a big help, Wagner says: "Steven's A-list credibility has made the community take us more seriously, has accelerated the process and brought it into the open. Steven will help. Writing checks for 'Enron' will help."

The day-and-date concept is not written in stone, Wagner says. Going forward, he's not just talking to studios and exhibitors. As he and home video executive Randy Wells put together their new DVD division -- "Bubble" will be their first release -- Wagner also is talking to Netflix, Amazon and Yahoo! "These are not fly-by-night companies," he says. "They have hundreds and millions of customers. The studios don't have one-on-one relationships with their customers, or have their credit card numbers. There are enough other paths available and accessible to go in other directions to get the same result. If we hit the wall, we will go under it, or over it."