It may have received scathing reviews, but The Happytime Murders is one of the most inventive muppet movies since the 1979 original, refiguring the muppet universe so thoroughly that it’s hard to believe that any of these felt figures ever starred in children’s cinema. As the trailers suggest, that’s partly because The Happytime Murders is more sexually explicit than any previous muppet release – or, rather, because it grants muppets sexuality to begin with, from which point virtually everything they do seems perverse or fetishistic in some way. Yet the biggest departure here is in the demanour and mannerisms of the muppets themselves, who are universally dour, downbeat and depressed, unless they’re momentarily amped up by a sugar high. Mainly consisting of buskers, hookers and low-grade businessmen, and nearly all homeless or transient, they’re all second class citizens in the version of Los Angeles where the film unfolds, which couldn’t be more different from the glitzy, glamorous Hollywood extravaganzas of previous muppet releases.

At first, then, it seems as if the muppets we once knew have undergone some kind of drastic downward mobility that has relegated them to a rung far below the humans with whom they once collaborated. Whereas Sesame Street, in particular, was a celebration of inner-city neighborhood, those neighborhoods have either been replaced by gentrified wastelands or degenerated to abject slums in the Los Angeles that the film inhabits, effectively displacing the charming good will, and sense of neighborly fraternity, that made the muppets so charming in the first place. As one character after another reminds us, “it’s a human world; we just live in it,” meaning that our tour of this muppet world is destined to be fairly profane, as well as shot through with a kind of inchoate rage that rubs up against the cosy textural surfaces of the muppet world in quite disarming and disorienting ways. You might call it the flipside of the aspirational Los Angeles glimpsed in early muppet films, and a desecration of the aspirational vibe of the muppets themselves, who always seemed capable of singing, laughing or performing their way out of anything that life threw at them.

As the film proceeds, however, it becomes clear that these muppets haven’t really experienced any downward mobility. Instead, The Happytime Murders retrofits the franchise to envisage an alternative timeline in which muppets were never really equal to humans. This doesn’t exactly negate the message of Sesame Street, but does present it as a fantasy, or as an anomaly, within a broader pattern of muppet misery and exploitation. While Sesame Street  may never be named in the film, its surrogate is a series called The Happytime Gang, which, we learn early on, was the first ever television series to blend muppet and human experiences to universal acclaim. As the film begins, The Happytime Gang has finished, is about to enter syndication, and is about to cement its position in the American televisual consciousness, making it particularly disturbing when a masked killer starts to take out members of the series one by one. In effect, it’s like watching a period drama about the core members of Sesame Street being killed one by one just before the series was syndicated, on the very threshold of being embedded in the American psyche.

That melancholy scepticism regarding Sesame Street, in particular, is the really confronting thing about The Happytime Murders. Yet it’s also what allows the film to speak so eloquently to the distinct role that the muppets played in brokering a connection between white and black cultures in America as well – a role that has been progressively denuded by recent, more sanitisied muppet releases, but that is taken as an incitement to a more scathing commentary by The Happytime Murders. Early in the film, it becomes clear that passing for human amounts to passing for white, since the main way in which muppets tend to pass for human is by bleaching their skin, while the endemic sugar problem in Los Angeles is attributed to muppets in much the same was as crack was to African Americans.

Any serious engagement with the muppet’s civil rights heritage needs to engage with the police force, especially at the present moment, so it’s perhaps not surpising that all this is mediated through an estranged muppet-human police partnership – Detective Phil Phillips, played by Bill Baretta, and Detective Connie Edwards, played by Melissa McCarthy. In a surprisingly affecting backstory, it emerges that Phillips was the first and last muppet cop, having been dismissed from the force after – apparently – finding himself unable to shoot a fellow muppet to protect his partner. So much attention did the case receive that it eventually prompted an ordinance, known as the Phillips code, prohibiting muppets from operating in the police force at all, forcing Phillips into private practice, and into the world-weary investigative persona that gives the film its uniquely noir tone. When Connie and Phil both find themselves assigned to the Happytime case, the stage is set for a familiar clash of estranged partners, albeit one that takes on quite comic and uncanny overtones when one of those partners is a muppet, and in a world in which human-muppet life is so problematic.

In many ways, that muppet noir is the most startling and entertaining aspect of The Happytime Murders, no matter how much it may have been marketed in terms of its more sexually risqué content. Certainly, at times, this is an ingenious and irreverent exercise in muppet porn, as Henson sets out to imagine all the polymorphous ways in which muppets might be sexualized, starting with a scene in a sex shop in which the distinction between muppets, and the sex toys that they use, becomes almost impossible to parse. Yet even those explicit moments are most memorable when they converge with the noir overtones, whether through Maya Rudolph’s fantastic cameo as Phil’s secretary bubbles, or through an ingenious twist on the femme fatale that sees Basic Instinct quoted in muppet language. All of that peaks with Melissa McCarthy, since the great secret of The Happytime Murders is that this is one of her best roles of the last few years, even or especially as she mainly has muppets as foils, since that gives her an improvisational abandon and anarchic latitude that sees her wheeling, freeform, through many of the scenes like they’re one of her iconic out-takes. And, in the end, the entire film feels a bit like an out-take – a crazy tangent in the midst of something more sustained – though that’s also what produces its experimental panache as well, along with its renewed sense of the strangeness and surrealism of the muppet world.