The late 1960s and early 1970s witnessed drastic changes in the approach of filmmakers towards cinema and this was reciprocated in the quality of film viewing too. Films like Kuttyedathy, Oolavum Theeravum and Mappusakshi by P N Menon during the late 60s and early 70s were signals of these changes. These films brought back the heroes of popular cinema down to earth, identifiable for ordinary people as one among them.
The films by Adoor Gopalakrishnan, Aravindan and John Abraham during the early 1970s were reflections of 'new wave' movements all over the world, often termed as 'parallel cinema' movement. Even when Malayalam cinema reached new heights through these films, they remained as the art of a minority. A synthesis of the easily communicative, but hollow commercial cinema and the cinema enjoyed by a minority, the parallel cinema, took place during this period, which later came to be known as 'middle-stream cinema'.
M T Vasudeven Nair, with his directorial debut Nirmalyam (1973) pioneered this stream of Malayalam cinema. K G George, with his first film Swapnadanam (1975) later moved to the middle-stream and produced some of the best works of Malayalam cinema. Bharathan with Prayanam (1977) strengthened this stream and also paved the way for one of the most influential directors of the middle path cinema, Padmarajan. Padmarajan with his first film Peruvazhiyambalam (1979) and latter Oridathoru phayalvan (1981) consistently made quality films and stood as a consolation factor even when Malayalam cinema returned back to mindless commercials. K S Sethumadhavan, starting his film career in 1960s and became a strong figure in commercial cinema, produced some better works like Oppol (1980) during this period. The other most consistent director in making quality films, Lenin Rajendran made his debut with Venal (1981) and has made some notable films including his latest film, Anyar (2003). Sreenivasan who entered cinema as an actor later took up script writing and penned some of the best satires ever made in Malayalam. The two films he directed, Vadakkunokki yantram (1989) and Chintavistayaya Shyamala (1998) were hard hitting social critiques, which expanded the boundaries of comedy cinema.