Before computers and fancy accounting software, Hollywood studios presented budgets on paper, with a thick black line used to separate certain types of expenses from others [source: Medoff and Fink]. While most budgets are done on computers these days, the idea of grouping expenses above and below the line has stuck. From the smallest film budget to the biggest blockbuster, producers continue to group expenses in the same way, making it easier for accountants and investors to understand how the costs associated with a given movie stack up.
Above-the-line costs typically include just a few line items, but they're big ones, and account for a significant portion of the film's budget. So what typically falls above the famous line? Cast salaries, for starters, including those $20 million paychecks earned by the most sought after A-listers, but also the cost of hiring less recognized actors to fill major roles. Also included above the line is money paid to producers and directors, which can be substantial, depending on the film. Finally, above-the-line costs usually include the cost of the story itself, including payment for screenwriters and securing the rights to make the story into a film. All production costs not included in these categories, such as crew salaries, lighting, travel, props, sets and craft services, fall below the line.
Other than the nature of the expenses involved, above-the-line costs share some other commonalities. Primarily, they set the tone for the film's budget; you can't make a $20 million film if your biggest stars want $10 million each just to show up. Above-the-line costs also vary from movie to movie based on who's involved, while below-the-line costs are more stable -- a lighting rig is going to cost about the same on every set. These costs are likely to cover pre-production, while below-the-line costs typically cover expenses incurred once filming actually begins.
Finally, and most importantly, above-the-line costs are fixed. Once you sign a certain star or director, you're stuck with the cost of that person for the duration of the picture. While below-the-line costs tend to be more flexible -- you can save money by changing where you shoot a certain scene or cutting the scene entirely -- above-the-line expenses are pretty much set in stone.
Curious how Hollywood budgets work in the real world? Read on to discover some real-life examples of above-the-line expenses at work.