In 1967 Denmark probably was the first country in the world to legalize literary pornography and in 1969 pictorial pornography for adults. The result was a short but profitable wave of erotic films that made Denmark famous as a liberal country. Palladium, the producer of Gertrud , started a series of erotic comedies. These so-called bedside comedies can hardly be described as pornographic, but rather as a combination of popular comedy and sex. Hugely profitable for some years, they vanished when, after Deep Throat (1972) and other hard-core films, the United States became the world's leading producer of pornographic material.
The 1970s became a period of diversity. The erotic films and the popular Olsen Gang comedies flourished and with the establishment in 1972 of The Danish Film Institute, art films gained support. A Danish Film School had been established in 1966 and a new generation appeared, the most original of whom was the documentarist Jørgen Leth. The state favored films for children and young adults (25% of the subsidy must be used on this category), resulting in a special trend. Such films as Nils Malmros's (b. 1944) Drenge ( Boys , 1977), Søren Kragh-Jacobsen's (b. 1947) Vil du se min smukke navle? ( Wanna See My Beautiful Navel? , 1978), Bille August's (b. 1948) Honning Måne ( Honeymoon , 1978), and Morten Arnfred's (b. 1945) Johnny Larsen (1979) describe the vulnerable, marginalized young people, presented in undramatic, low-key stories with a melancholy atmosphere. This humanistic realism could be seen as related to the Danish literary tradition for focusing on the weak dreamer and reluctant antihero.
The tendency continued in the 1980s with masterpieces like Malmros's Kundskabens Træ ( Tree of Knowledge , 1981), about desire and disillusion among school children, and Kragh-Jacobsen's children's fable Gummi-Tarzan ( Rubber Tarzan , 1981). The most famous films of the period, however, were the two Academy Award ® winners, Gabriel Axel's Babettes
State support for film production had started as support for film art, but during the 1970s and 1980s it became increasingly clear that all types of film needed state support if Danish film production were to survive. Danish movie theaters, which numbered 462 in 1960, 180 (with 347 screens) in 1990, and 166 theatres (379 screens) in 2003, depended on Danish films with popular appeal. In 1989 a new support system—the so-called 50/50 system, now the 60/40 system—was established, which, with some restrictions, gave 50 percent of the funding (yet only up to 3.4 million Danish kroner), later 60 percent and up to 5 million Danish kroner, if the company could provide the rest, on the condition that the film could be expected to have broad appeal (approximately 175,000 admissions). This support created a new wave of popular comedies, and especially successful in the domestic market were films that imitated the style of popular family films from the 1950s and 1960s, such as Krummerne ( The Crumbs , 1991) and sequels.
A new tendency appeared with Ole Bornedal's Nattevagten (1994, remade in the United States as Nightwatch , 1997). Breaking with humanistic realism, it presented an effective horror plot with splatter and suspense totally foreign to Danish traditions. Where the unwritten rule of artistic Danish cinema was always to keep a distance from Hollywood mainstream genres, Nattevagten faced the challenge. The film was a refreshing landmark in new Danish cinema and was followed by such other mainstream films as Bier's comedy Den eneste ene ( The One and Only , 1999), which was hugely successful with the Danish audience. It was not the traditional "folk comedy" or family entertainment, but a romantic comedy in the style of Mike Newell's Four Weddings and a Funeral (1994).