The decision has been blamed on the refusal of a bid by administrators to transfer the licence for the site as it emerged that council officials are in talks with the Scottish Government and its Screen Scotland agency over a publicly-funded rescue attempt for the historic cinema.
The Signature Pub Group, which owns Cold Town House, The Black Bull, McLarens on the Corner, Copper Blossom and The Rutland Hotel in the city, admitted the Filmhouse would not have reopened as a cinema, but would have instead become a film-themed venue.
The move by the company, a past sponsor of the Edinburgh International Film Festival, will raise hopes that the cinema could be brought back to life.
Mystery surrounds the identity of the administrators’ current preferred bidder – amid claims from Screen Scotland that they have “zero interest” in saving the cinema.
However potential partners for a publicly-funded takeover are understood to have been involved in behind-the-scenes talks.Louise Maclean, Signature’s business development director, told The Scotsman: “We were the preferred bidder for the Filmhouse building at one point.
"It was an opportunity for us when it came onto the market.
“The Filmhouse has an amazing heritage. We could have done something quite unique with it.
"You can’t just pop up a theme bar. But it would have come with a lot of memorabilia from the glory days of film which we would have used around the building.
"We would have kept the screen in the main hub to show things like Six Nations matches. I’d have like to have seen part of the building become a kind of Prohibition-era Speakeasy bar.
"Our bid was based on the building having a licence. It was quite a simple decision when we heard about the licence decision.”
Insiders have highlighted a clampdown on new pubs agreed five years ago in Edinburgh which designated Lothian Road an area of “over-provision.”
One source said: “The licensing board’s decision is very important as it means that any buyer will not simply be able to reopen under a new guise without the permission of councillors.
“They will almost certainly face a level of public opposition, particularly given the circumstances of the closure. It may depend on how long they are prepared to wait.”
Another insider said: “There may be an impression that the fate of this building will be decided by whoever makes the highest bid and there’s no prospect of the Filmhouse reopening."That’s definitely not the case. The key funders haven’t given up on the Filmhouse. But there are clearly hurdles to be overcome given the administration process.”
In a message posted on social media, David Smith, director of screen at Screen Scotland said: “The Filmhouse has still not been sold, but the administrators have zero interest in saving the cinema, they just want the highest price they can get.
"If you want to save it, write to your city councillor, petition government. We must all continue to do all that we can.”
A spokeswoman for Screen Scotland said: “We have worked with the Scottish Government and the council across the last five months to secure 88 Lothian Road as a continuing cultural cinema.
"We understand the building has not yet been sold. We continue to work with interested parties who share our aims for the building and for cultural cinema provision in Edinburgh.
"It would be a far happier outcome that 88 Lothian Road continues to be the home for cultural cinema provision in Edinburgh.”
A spokesman for joint administrators FRP said: “We are continuing to work with the preferred bidder and hope to conclude a sale as soon as possible.”