The International Film Festival Rotterdam (Iffr) in the Netherlands has long held a reputation as a cinephile's delight. 'Rotterdam is one my favourite festivals for movies,' says James Schamus, head of Focus Features and one of its many illustrious supporters.

'They have the freedom to craft what a vision of world cinema can be. They can pay attention to corners of accomplishment the so-called bigger and better festivals can't do.'

Still, on the eve of the 37th edition of the festival (January 23-February 3), questions are being asked about what Rotterdam can do to stay relevant to the international industry.

Some say its status as one of the world's biggest public festivals is unchallenged. Indeed, using the futuristic Pathe multiplex as its showcase cinema, the festival racks up 350,000 admissions each year. It also offers a strong co-production market, CineMart, which celebrates its 25th anniversary this year.

Others observe that Rotterdam is becoming marginalised in the face of increased competition, not only from Sundance but from Middle East festivals such as Abu Dhabi, Dubai and Marrakech - indie cinema from the Arab world is hip right now.

So if the international calendar is full and many buyers, critics and programmers will be attending Sundance and Berlin anyway, what need is there for an arthouse festival in the Netherlands'

In the past, the immediate answer was down to the festival's inventive programming schedule. Iffr was the place to dig out film-makers who would later make waves on the international circuit.

It was in Rotterdam the industry first became aware of Christopher Nolan, whose Following screened in the Tiger Competition, and of Thailand's Apichatpong Weerasethakul and Mexico's Carlos Reygadas, whose debut Japon was supported by Rotterdam's Hubert Bals Fund.

Iffr gave premieres to such arthouse gems as Alexander Sokurov's Mother And Son and Catherine Breillat's Romance. It has supported new Asian cinema and the best in African cinema, helped to introduce Romanian cinema to an international audience and consistently unearthed Latin-American talent.

'Rotterdam always prided itself on being a champion of innovative and difficult cinema. But I think others have caught up with it,' says South African producer Jeremy Nathan, who sits on CineMart's advisory board. 'Rotterdam has been forced to redefine its identity and role in the cinema world.'

So how does it intend to do this' When festival director Sandra den Hamer left Iffr last autumn, it was expected the festival would appoint a heavyweight in the mould of former festival directors such as Marco Muller and Simon Field.

Instead, the festival board made an interim appointment, choosing visual-arts curator Rutger Wolfson, director of the Stichting Beeldende Kunst Middelburg, to oversee 'the artistic substance' of the 2008 festival. The subtext of the appointment seemed to be that the festival was bigger than the individual.

Despite the surprise appointment, on the eve of this year's festival, Wolfson was upbeat. This year, with the help of sponsor Vpro, the festival has increased the prize money for the three films that win the Tiger Competition, from $14,700 (EUR10,000) to $22,000 (EUR15,000).

Even without this, Wolfson is convinced there is plenty of incentive for producers, sales agents and directors to bring their wares.

'Rotterdam still has a very clear reputation as an artistically oriented festival. Film-makers and producers know we really care about these films and will give them the right kind of attention. It's great that we're a big festival, but Rotterdam has still managed to maintain its reputation as supportive, always on the lookout for young talent.'

At Rotterdam, the mantra has always been 'the films are the stars'. Despite occasional grumblings from the local media, the festival has consistently refused to woo Hollywood talent. This is not something that is going to change under Wolfson.

Though he took up his post only last September, has he been able to make his influence felt' 'In a modest but visible way, I've managed to leave my mark a little bit,' he says, pointing to Free Radicals, a sidebar celebrating film-makers and artists who idiosyncratically and energetically follow their own course. As part of this strand, animator Robert Breer, Japanese master Kobayashi Masahiro and Russia's Svetlana Proskurina are Film-makers in Focus.

Wolfson is also driving Rotterdam to come up with a vision of what a 21st century film festival should look like.

'It's a relevant question but a strange one,' he says. 'People will always want to come to film festivals, especially the one in Rotterdam, because they enjoy the collective experience of seeing a film. But festivals are no longer the unique opportunity to see a film. You can easily download them and see them otherwise in this changing media landscape.'

This festival is not alone in trying to redefine itself in the digital age. As CineMart head Marit van den Elshout says: 'Every festival is struggling with its position and its signature.'

Yet Wolfson's comments highlight the paradox at the heart of Rotterdam. On the one hand, the festival celebrates innovation and offbeat, marginal voices. On the other, it aspires to be an important meeting point for the international industry. Many buyers and sellers attending will have little interest in the more esoteric parts of the festival.

But Jeremy Nathan suggests this tension is to be welcomed: 'Rotterdam is a really important foundation in the global industry. It's a good tension to have - one side of the festival pushing for more commercial arthouse and then the other extreme of experimental cinema.'

Iffr runs on a budget of around $10.6m (EUR7.2m). The festival will be asking for an increase of about 15% in its state funding for the next four-year funding round, from 2009-12.

It is yet to be seen who will be Rotterdam's next director. Wolfson has not discounted the possibility he might re-apply for the job. 'The board have a list of people they want to talk to. I'm a possible candidate' he says. However, this is far from his mind right now. 'I will only think about that after this festival.'

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