Every one loves Malayalam cinema. Just ask them. Critics gush. Film festivals swoon. North Indian cinephiles drop references to Aattam and Manjummel Boys at dinner parties to establish their impeccable taste. But in the immortal words of Jerry Maguire: “Show me the money!” If love paid bills, Malayalam producers wouldn’t be threatening a complete indust r y shutdow n from June 1.It’s a curious paradox: 2024 was a banner year for Malayalam cinema when the survival drama Manjummel Boys, with a Rs 20 crore budget and gross earnings of Rs 240+ crore, became the highest grossing Malayalam film ever, while Gen-Z romance Premalu, with a Rs 3 crore budget and Rs 136 crore in revenue, emerged as possibly India’s most profitable film of the year. There are plenty of others that left a lasting imprint on the cultural landscape.Aavesham, an action film starring Fahadh Faasil, became a phenomenon, dominating social media with viral reels and memes. Aattam, a movie that deals with sexual harassment and brought to life by a cast of nine actors from theatre, clinched the National Award for Best Feature Film as Malayalam cinema swept eight awards at the 70th National Film Awards. The critic’s darling of Indian cinema was finally getting its due.Meanwhile, in Kerala, producers stared at their balance sheets with such desperation that you would think they were mentally cataloguing their organs by market value.The brutal economics of filmmaking has always involved risk—most businesses understand that failure is more common than success. But in Malayalam cinema, we are witnessing a particularly perverse form of capitalism: actors pocket 60% of production budgets and walk away unscathed when films tank, only to demand higher fees for their next project, according to G Suresh Kumar, vice-president of the Kerala Film Producers Association (KFPA). The producer alone bears the crushing weight of failure, he says.Industry insiders point to the case of the Tovino Thomas-starrer Identity —produced at Rs 30 crore, it collected a mere Rs 6 crore in January, approximately equal to the actor’s paycheck. While Thomas reportedly offered another date to help the producer recoup losses, the fundamental question remains: if actors inflated their rates during the OTT boom, shouldn’t they settle for less money, now that the bubble has burst?118486139The cautionary tales are piling up faster than unpaid invoices. Take Sureshanteyum Sumalathayudeyum Hrudayahariyaya Pranayakadha, starring newcomer R ajesh Madhavan. It began with a budget of Rs 4 crore but ballooned to Rs 20 crore— a 500% increase, equivalent to the cost of a typical Mammootty film —with allegedly no cost-control efforts from director Ratheesh Balakrishnan, according to coproducer Ajith Thalappilly.Thalappilly says he had to sell his Mercedes-Benz and teetered on the edge of bankruptcy, saved only by a last-minute intervention from a distributor. The director still collected his hefty paycheck, speculated to be Rs 1 crore, and demanded 30% profits from a film that spectacularly flopped, according to an industry insider who requested anonymity.THE ANTICLIMAXThis isn’t the industry’s first financial crisis. Malayalam cinema has weathered storms before, but the scale has changed dramatically. Where losses once registered in lakhs of rupees, they now balloon into double-digit crores, creating recovery periods measured in decades rather than years.What makes today’s predicament particularly treacherous is the aftermath of a false prosperity. The Covidera OTT windfall had created a dangerous illusion. Streaming platforms were snapping up every Malayalam film, regardless of quality, paying premium prices that inflated everyone’s expectations. Actors doubled their fees overnight. Directors expanded budgets. Producers borrowed heavily, convinced that streaming rights would cover their investments.Then reality hit with all the subtlety of a sledgehammer. OTT platforms “recalibrated” their approach, realising that Malayalam cinema’s audience reach didn’t justify their splurge, says an industry insider requesting anonymity. The new playbook: wait to see which films succeed in theatres, then cherry-pick the winners. For most producers, this means no OTT deal at all.118486158“Actors were thinking, if Allu Arjun can rake in Rs 400 crore, why can’t we manage Rs 1.5 crore? But when the bubble burst, they were not reducing their fee,” says the person quoted above.Even the lucky few who secure streaming contracts face brutal negotiations, delays designed to pressure desperate producers into accepting lower fees, and payment schedules stretched over months. By the time the money arrives, interest on production loans would have already eaten away any potential profit.Most Malayalam producers borrow from just four or five private financiers at interest rates that would make loan sharks blush—20-25%. Many end up bankrupt, their artistic dreams sacrificed at the altar of compound interest.In one way, Suresh Kumar and his peers are reaping what they have sown. Like today’s OTT bubble, satellite television created a similar windfall at the start of the millennium, delivering huge profits for makers, actors and producers. Kumar particularly scored big during this period as one of Mohanlal’s main producers, until the actor began producing films himself.LORD OF ALL BUDGETSThese fault lines erupted recently when Su resh Kumar publicly revealed the budget of Empuraan, starring superstar Mohanlal and directed by Prithviraj—a staggering Rs 140 crore, making it the most expensive Malayalam film ever. Kumar suggested that Tamil Nadubased Lyca Productions, which recently suffered massive losses from Rajinikanth and Kamal Haasan starrers, was being “duped” into the Kerala market with promises of returns that don’t exist.118486168This ignited a firestorm. Antony Perumbavoor, Mohanlal’s long-time producer and confidant, issued a detailed rebuttal that was later shared by both Prithviraj and Mohanlal. Despite Kumar and Mohanlal being schoolmates and former collaborators, the controversy revealed a deeper schism—not between old friends, but between competing visions for Malayalam cinema’s future.ACTORS’ COMPANIES“The fight is not among them, but between an old guard and a new guard,” says an industry insider. Filmmakers like Prithviraj are charting a new territory, creating big-budget spectacles with global ambitions. “Empuraan’s cinematography is conceived with a worldwide audience in mind. The director wasn’t afraid to hire helicopters for action sequences, while the average Malayalam producer thinks twice before renting a Range Rover,” says someone from the production team.Interestingly, amid this financial carnage, some of the industry’s biggest hits recently were produced not by traditional studios but by actors and directors themselves. Manjummel Boys came from actor Soubin Shahir and his circle under Parava Films. Premalu (along with critics’ darlings like Kumbalangi Nights and Joji) emerged from the creative triumvirate of actor-director Dileesh Pothan, writer Syam Pushkaran and Faasil.This shift reveals two simultaneous truths: established producers are becoming increasingly risk-averse toward experimental content, and creative talents are seeking autonomy over their artistic visions.Superstar Mammootty’s production company exemplifies this evolution. Through Mammootty Kampany, the veteran actor has systematically shattered his macho image, portraying characters who cry, experience loss, engage in explicit sexuality, commit honour killings and even come out as gay. In films like Rorschach, Nanpakal Nerathu Mayakkam and Kaathal, Mammootty seems to be redefining what Malayalam cinema can explore.Would traditional producers have green-lit these boundary-pushing projects? The evidence suggests otherwise. Other artist-led production companies also claim they are filling a creative void left by risk-averse legacy producers, even as they navigate the same treacherous financial landscape.118486180They believe this is an evolutionary phase of Malayalam cinema as it attempts to transform itself, reaching for audiences beyond Kerala’s borders. This ambition demands bigger stars, higher production values and technical crews of international calibre—all of which cost substantial sums that the traditional financing model cannot sustain. The legacy producers, the new guard believes, are not in sync with this new grammar of cinema trade and most have lost touch with ground reality both in terms of content and structure.Beyond these creative tensions, the industry’s structural problems extend beyond Kerala’s borders. None of the mainstream OTT platforms have appointed decision-makers who can green-light Malayalam projects independently. Approval must come from Mumbai—a process that reveals either a fundamental lack of trust in local talent or a cynical assessment of the market’s importance. Either way, it creates additional hurdles for an already struggling industry.What makes this situation particularly ironic is that all of this is happening in an industry that remains one of the most disorganised (most sets don’t even have a washroom for women), exploitative and poorly paying to writers, technicians and crew in India.The fundamental problem, everybody agrees, is mathematical— Kerala’s cinematic brilliance is trapped in a population constraint. With just 3.5 crore people in the state and industry estimates suggesting only 50 lakh regular moviegoers, the numbers don’t add up. The theoretical best-case calculation is if every regular movie goer watches a film (indicating pan-state acclaim), at Rs 200 per ticket, the film might gross Rs 100 crore.From that theoretical maximum, subtract 30% for taxes and 30-40% for distributors, and producers are left with Rs 20-25 crore before deducting marketing expenses. Now consider that most Rs 100 crore grossers require star power—actors now commanding fees in crores—along with top-tier directors, technicians and even screenwriters (at least one recently charged over Rs 1 crore for a script). Add production schedules stretching 60-90 days, and your budget easily exceeds Rs 20 crore.Where exactly is the sustainable financial model here? Even in the best-case scenario, producers are barely breaking even. Most films achieve only a fraction of that theoretical maximum, guaranteeing financial disaster. In January 2025, out of 28 films released, only Asif Ali’s Rekhachithram turned a profit, with the industry losing Rs 110 crore in a month, as per KFPA. For 2024, the industry released 200 films with only 24 achieving financial success, resulting in losses of Rs 600-700 crore.TIME FOR A RETAKEThis means for Malayalam cinema to endure this transition, it needs more than just critical adulation and festival laurels. It needs a structural reset. The unchecked rise of actor fees must be reevaluated, ensuring that the burden of failure isn’t shouldered by producers alone. Financial institutions need to step in with saner lending rates before private financiers choke the industry’s future. OTT platforms, if they truly value Malayalam cinema’s storytelling prowess, must establish regional decision-making bodies rather than treat the industry as an afterthought in Mumbai’s corporate boardrooms. Most importantly, producers must recognise that the age-old financing models— where success relies solely on Kerala’s limited theatrical audience—are no longer viable.At the heart of it, the industry must decide what it truly wants to be. Right now, it’s like a half-baked screenplay— beautifully shot, critically acclaimed but structurally unsound. And as any filmmaker knows, no amount of festival buzz can save a story with a broken third act. Does it aspire to remain a niche darling of cinephiles and award circuits, or does it have the vision—and the discipline—to build an ecosystem that thrives both artistically and commercially?Because right now, nobody loves Malayalam cinema—if you ask the people who produce it.The writer is a Kerala-based journalist