Empathy for the devil: Stephen Daldry on sex scenes, war crimes and Billy

Stephen Daldry might have spent much of the last year worn out by a punishing work schedule, but when we meet in downtown Manhattan shortly before Christmas he is relaxed and refreshed. The evening before our interview, for the first time in a long while, he slept for eight hours. The theatre and film director spent 2008 combining directing Billy Elliot on Broadway with making his third film, The Reader.

"It was an extraordinary time," he reflects. "I'm only just beginning to recover from it in the last couple of days." What did his working day consist of? "Starting early, mornings on The Reader, afternoons on the show. Then you have a gap of about three hours, so back to the film, and then back to Billy Elliot. I have worked that hard in the past but it definitely was a mountain."

Such intensive labour has paid dividends. Billy Elliot, adapted from Daldry's debut film chronicling a Tyneside boy's dreams of becoming a ballet dancer during the miners' strike, with music by Elton John, is a Broadway phenomenon making over a million dollars a week. Since it opened at London's Victoria Palace theatre in 2005, the minors and miners saga has become a global cultural colossus, playing in Sydney and Melbourne with an American tour and South Korea to come.

Nearing $20m, Billy Elliot's Broadway budget is triple that of its West End cousin. "Inevitably, they just don't get the humour," Daldry, 47, says of Broadway punters. "I still think the audience has difficulty understanding what's being said sometimes. For example, there's slapstick humour to the boxing teacher hitting the kid, which in England we find funny, but I think they just see a teacher hitting a kid." Or when Billy's grandmother reminisces about her youth with her various erstwhile dance partners on stage, "some audiences go, 'How come he's got 12 grandfathers?'"

Just as Daldry's 1992 National Theatre hit revival of J B Priestley's socialist play An Inspector Calls tapped into a growing mood that the waning Conservative government was uncaring, Billy Elliot has benefited from its Broadway opening coinciding with multiple economic bail-outs: "The audience understands 'It's a community under crisis' as opposed to 'What is this strange English labour dispute that we're being asked to sympathise with?'" But with an average ticket price of $108, Billy is not cheap. "It's outrageously expensive," Daldry admits. He wants to introduce a discount family ticket. "It's tricky because the show's sold out, but I think it's worthwhile doing it to diversify the audience."

Daldry , who has a five-year-old daughter with his performer wife Lucy Sexton, says each boy playing Billy offers a different theatrical experience and that accounts for why he never gets bored with the show: "You invest so much in these kids that watching them achieve, or indeed sometimes watching them fail, is a heartbreaking experience either way." Its success has been a "total surprise", he maintains, but Seoul presents a challenge. "A journalist from South Korea said to me, 'There are a number of problems: we have no ballet dancers, no trade unions and casting Billy's friend is going to be difficult because we have no gay people in South Korea.'"

Charming and frequently humorous, Daldry speaks his mind but in a highly diplomatic fashion. If Billy Elliot has been a critical and commercial triumph, the response to The Reader has been polarised, attracting what Daldry terms "a fantastically interesting array of opinions". Based on Bernhard Schlink's novel, and adapted by David Hare, The Reader features Kate Winslet as Hanna, a tram conductor in Fifties Germany who has an affair with 15-year-old schoolboy Michael (David Kross). Years later, as a law student, he is shocked to witness Hanna on trial as a Nazi war criminal.

The Reader had a turbulent transition to the screen. Anthony Minghella was to have directed the film until Daldry persuaded him otherwise ("I think I was being persistent and Anthony was being a sweetheart") and Winslet originally turned it down owing to a scheduling conflict, returning when Nicole Kidman fell pregnant. During post-production, both producers, Minghella and Sydney Pollack, died. Executive producers Harvey Weinstein and Scott Rudin then became embroiled in a public dispute over the film's release.

Weinstein wished to bring The Reader out sooner than Rudin and Daldry wanted, but eventually a compromise was found, giving Daldry the time he needed to finish it. Yet further conflict between Rudin and Weinstein led to the former removing his name from the credits. The issue, Daldry says, "was essentially about control between those two. Who was controlling what. Both of those two are control merchants. So they started really having a big battle about the finishing."

Their public fall-out must have been a huge hassle. "Not for me," Daldry says. "It was a hassle for them. I just carried on working." It was familiar for him as the pair also had a falling-out in 2002 over his last film, The Hours. "They couldn't find a way through. The real shame about it for them is that it wouldn't have happened if Anthony or Sydney had been alive. Losing those two key people, who actually are the real producers, was the tragedy. Because there was no buffer between Harvey and Scott, those two imploded on each other." Daldry says Rudin is still one of his best friends and Weinstein has been a "mensch".

While The Reader has plenty of admirers, some critics strongly objected to the erotic nature of the relationship between Hanna and a boy half her age. Daldry has also been accused of portraying Hanna, whose role in causing the death of 300 Jews is never seen onscreen, in too sympathetic a light. "People have been very offended by it and I find that baffling," Daldry responds. "That interests me that there's still a real need culturally to define perpetrators of one sort or another in the Holocaust as criminally insane, nutcases, mad people, sadists and monsters. I thought we'd moved on from that 20 years ago."

Daldry intended The Reader to provoke debate but has been taken aback by the controversy. "It's like the sex in it. What is there to worry about here? Come on! I think it would have been better received here if it had been subtitled." He insists that what he terms "moral slippage" is necessary for a film dealing with German post-war generational guilt. "Some people don't like the level of contradiction and complication with character motivation. That feeling of empathy for a character who has perpetrated war crimes, people feel very uncomfortable with and I don't have any problem with that. It's what I intended... people really don't like it." He laughs, a glint of mischief in his eye.

The Reader's reception has evidently left Daldry wondering where he stands in Hollywood: "I think there's a rule to American film-making and I'm now deeply aware this is not within the landscape of normal American film-making." Having his film viewed through the prism of the winter awards dogfight has proved dissatisfying. "It would be better if it wasn't released now. Not because of time – all of that was fine in the end. It's just do you want to be in a donkey derby?"

Daldry's private life has been the source of speculation – prior to his marriage he was thought of as gay and had a long relationship with set designer Ian MacNeil. His film career, too, eschews categorisation. "I'm not really a director for hire," he says. "You read these scripts and go, 'This is a really great script, but Paul Greengrass would make this so much better than me.' I usually say, 'I know who would be good for this. It's not me.'" However, he still hopes to film adaptations of Michael Chabon's bestseller The Amazing Adventures of Kavalier & Clay and Kate DiCamillo's children's tale The Miraculous Journey of Edward Tulane about a bunny on the loose.

Daldry made his name running west London theatres The Gate (1989-92) and the Royal Court (1992-8), and he's keen to direct another play soon. There's also a long-running desire to make a musical of Graham Greene's Brighton Rock with the Pet Shop Boys ("I shall ring Neil Tennant and find out. I haven't seen Neil, I haven't seen anyone, I've been in Germany for two years.") His present inactivity won't last long: "I always say, 'I really need to take a break'. It's three days in and I'm getting pretty bored."

He wants to stop smoking and embark on a physical expedition: "The last one was climbing Mount Everest, this one will probably involve cycling." Daldry has a Golden Globe nomination for The Reader, and Billy Elliot will surely feature at next June's Tony Awards, but he is dismissive of awards ceremonies. "They're a redefinition of boredom... the most important thing you need to know about an awards show is where is the nearest smoking opportunity." It's a typical Daldry stance. Should he find himself in the running for an Oscar for The Reader, he'll be the only one at the Academy Awards who's been nominated for every film he's made and yet be the person most wishing he wasn't there.

'Billy Elliot' is at the Victoria Palace Theatre, London SW1 (0844 248 5000), booking to December 2009. 'The Reader' opens in cinemas tomorrow