There were 12 people sitting in the audience. And that was on a good night. Liese Spencer sat back in the world's smallest cinema

The Edinburgh Festival DAY 8

It's past midnight in an Edinburgh courtyard teeming with celebs and rubber-necking star-spotters when a man in an MGM blazer starts touting tickets for a double-bill of soft porn. He attracts only a handful of ragged-looking customers, which is just as well since the programme they are about to watch is being screened at a venue that styles itself The Smallest Cinema in the World.

Love Sandwich and I Was Catherine the Great's Stableboy are the saucy late-night offerings on show at Quadrangle's tiny picture palace, a lavishly decorated 12-seater plonked in the middle of the Pleasance.

At first sight there's something ludicrous about a garden shed dressed up as a movie theatre. Pseudo-Egyptian pillars and a flimsy proscenium arch are tacked on to splintering pine, with a faint whiff of creosote. But, once inside, you're ensconced in the magic rituals of film-going. As the lights dim and the tiny white satin curtain ruches up to the familiar ba-ba-ba-ba of Pearl & Dean, you find yourself slumping self-indulgently into your plush red velveteen seat and preparing to be entertained.

Pleasance director Christopher Richardson is the man responsible for ensuring that the 6ft x 12ft cinema comes complete with flock wallpaper, potted palms and a lovers' seat. His DIY design aims at portable kitsch.

"You can fit it on the back of a lorry and put it up in about an hour," he explains, "although it's taken us days."

In fact, the cinema was still being built on the hot August night of its "Gala opening". As a miniature cavalcade of Fiat Cinquecentos delivered Edinburgh's A-list to the red-carpeted courtyard, the Quadrangle team were frantically drilling ventilation holes in the walls to prevent the screening from becoming a sweat bath. Air penetrated the gloom and Sir Bernard Chumley, a man dressed as an aubergine, and other Fringe luminaries were spared a free sauna.

"A microcosmic showcase for film-makers with big ideas," is how fast- talking producer Richard Kilgarriff describes the venture. His involvement started with a phone call in the middle of the night from friends Richard Bracewell and Ed Smith, who had come up with the idea as a way to get their films seen at the Fringe. Kilgarriff sensed he was on to a winner and his "blag phone started buzzing".

MGM's backing and a budget of pounds 16,000 were soon secured, and Kilgarriff was able to commission three short films from director Bracewell. With six weeks to script, shoot and edit the films, the production team were working to a schedule more gruelling than any big studio.

"The bizarre thing," says Bracewell, "is that, had I succeeded in getting these films into the Film Festival, they probably would have been shown once, to an audience of 15, whereas we've come here and shown to audiences of 150 a day." These come mainly from people filling in time between shows - what Kilgarriff calls a "broad spectrum", and Bracewell describes as "drunks and families - sometimes drunk families".

Dressed in an MGM blazer and tie, Charlie Bryant is the louche commissionaire who tries to entice audiences by hanging his head out of a tiny box-office window and muttering: "Roll up, roll up". He admits that many visitors are "curious but strangely cautious".

During daylight, punters can choose between three shorts: Pub Fiction, a Fringe Pret a Porter and How to Write a Hollywood Screenplay, impeccably wrapped in a full programme of spoof ads and supporting features. Reactions are mixed. A Canadian woman thought the venue would be "better for Punch and Judy", while a whey-faced punter staggered out clutching a pint and complaining of claustrophobia: "Too hot, too dark, too small."

Writers and performers with experience of Fringe stand-up donated their services for free, but Kilgarriff insists that this is not a "worthy" project. "We're not art house - we're entertainment house," he says. "We know we've got to sell things, but to maintain our integrity we've also got to work with people we love and care about."

One such person should be Tom Binns, who, with comedian Al Murray, devised Pub Fiction. Unfortunately, Binns does not share Kilgarriff's warm sentiments. Disenchanted with Quadrangle, he feels the venue has been marketed at the expense of the films. "It's a shed, for God's sake," he says. "We did all that work for free because we thought we were going to get some publicity, but I don't think people even know that films are on in there, or what they are."

Angry that he "had to wait a couple of days before he was allowed in to see the film". Binns claims that once he and Murray had come up with the ideas and cast Pub Fiction, their "functional life was over".

Binns also claims that he and Murray failed to get proper credit for their work as writers, co-producers and co-directors. Although he still hopes "the right sort of people" will go and see the film and give him some money to develop it, he feels that showing it at the Smallest Cinema "hasn't worked at all".

Back in London, Al Murray has not been to the Smallest Cinema, but has heard rumblings of discontent. He admits to being surprised that it's the cinema and not Pub Fiction that has been getting the hard sell. "I don't know about you, but I don't go to Warner West End because it's got nice seats, I go there because it's showing Batman Forever."

Whether or not Quadrangle's micro-cinema is actually the smallest cinema in the world is a moot point. Indeed, its record-breaking status has already been challenged by madman Malcolm Hardee, who, armed with a torch, set up a Wendy House on the doorstep to project who-knows-what filmic delights.

Perhaps more significant is the fact that the cinema can show just about anything, anywhere. "Small film-makers get nowhere to show their films, but we can provide a space for them," says Richardson. He's excited about the prospect of "taking it to Cannes, to Sundance..."

"The shed can go where it likes," counters Binns. "I just wish they'd promote the films."

n 10am-2am, Pleasance (venue 33), 60 The Pleasance (0131-556 6550) to 2 Sept