This environment creates a uniquely demanding audience. The average Malayali moviegoer is literate, politically aware, and skeptical of unearned sentimentality. They are used to reading political satire in Mathrubhumi and watching avant-garde theatre in Kochi. Consequently, the cinema they demand is one that respects their intelligence. Unlike industries that treat cinema as pure escapism, Malayalam cinema has long treated it as a legitimate art form and a public sphere for debate.
For a brief period in the 2000s, the industry faltered, chasing cheap slapstick and remake rights. But the last decade has witnessed a renaissance, arguably bigger than the 80s.
Furthermore, the "film society" movement in Kerala is one of the strongest in Asia. Villages have film clubs that screen Tarkovsky and Godard alongside Malayalam indie films. This exposure has created an audience that demands nuance. They are not looking for a hero to worship; they are looking for a story that respects their intelligence.
If you'd like to develop this topic further, tell me if I should focus on: A specific (the Golden Age vs. the New Generation)