Despite its global acclaim (with films like Vidheyan , Vanaprastham , and Ee.Ma.Yau winning international awards), the industry is fragile. It operates on a small budget compared to its North Indian counterparts. Moreover, the rise of "formulaic masala" films trying to mimic other industries has led to a periodic crisis of confidence.

By the 2000s, the industry was dying. Piracy was rampant, and budgets were shrinking. Critics said Malayalam cinema was finished.