What does 'below the line' mean in movie production?

Perhaps the easiest way to define below-the-line expenses is to focus on what's not included in the category. Most expenses related to creative talent, such as actor salaries and the cost of directors and producers, fall firmly above the line. Any fees associated with screenwriting or securing the rights to a screenplay are also above the line. Once these costs are out of the way, virtually every other dollar spent making a movie is accounted for below the line.

So what kind of spending is included in below the line expenses? Start with salaries. Other than the millions paid to the cast, nearly every salary in the budget falls below the line. This includes the cost of any assistant directors, art and special effects folks, set designers, lighting technicians, cameramen, sound people and costume crew. Wardrobe, hair and makeup costs also belong to this category, as do any costs associated with "casual talent," or extras.

Beyond salaries, below-the-line costs also include the costs of production. This could include money spent on sets and props, music licensing and composition fees, trailers, craft services, publicity, travel and insurance. Basically, any money that isn't going to an actor, producer, director or screenwriter can be categorized as a below-the-line expense for accounting purposes.

In addition to their location on the balance sheet, below-the-line costs share a number of common features. Unlike above-the-line costs, they cover the cost of production, not pre-production, and are variable rather than fixed. In addition, they usually remain fairly stable between projects, while above-the-line costs can soar or tank depending on the key players involved in a production.

In Hollywood, the term "below-the-line" also has another connotation. It refers to the people whose salaries fall within this category, which is usually the crew or production staff on a film as opposed to the more recognized names. If your salary falls above the line, you've likely seen your name in lights; if it falls below the line, you're lucky if anyone has time to spot your name as the end credits scroll across the screen.

Unless you're an accountant or Hollywood executive, you may be wondering why the distinction between above-the-line and below-the-line costs matters so much. You may be surprised to learn just how big of a role below-the-line costs play in film production and why they might matter even more than headline-grabbing star salaries and other above-the-line expenses.

To put it simply, below-the-line expenses make up the bulk of the budget for most films. Typically, above-the line-expenses are limited to just one-third of a film's budget, while below-the-line costs make up the remaining two-thirds. On low-budget films, the percentage of funds dedicated to below-the-line expenses grows even higher, while the portion devoted to big names and above-the-line salaries shrinks. Movies with mega-sized budgets may be able to devote as much as 50 percent of funds to above-the-line costs, but for the average production, below-the-line costs reign supreme [source: Goodell].

So what if you've established your budget, allocating a balanced portion to above and below-the-line expenses, then find yourself facing unexpected costs? Once you get to the filming stage, your above-the-line costs are set, and below-the-line expenses provide the most realistic means of slashing costs and keeping your budget on track. Simple methods of saving may include cutting out expensive scenes, choosing locations that allow free filming or repurposing costumes and props rather than investing in new ones. All these options reduce the overall film budget by lowering below-the-line expenses, and all can be accomplished at virtually any stage of a project.

Below-the-line costs also provide a final, often-overlooked opportunity to trim a film's budget. Many cities and states offer tax incentives to filmmakers to help encourage local filming. Why? Filming a movie is a complex process which requires a great deal of vendors, resources and materials. By bringing film crews to an area, authorities are hoping to spur economic development through job creation and increased demand for local goods and services. What does that have to do with below-the-line expenses? Many of these credits, including ones offered by the states of California and New York, are specifically aimed at covering below-the-line expenses. After all, states realize little local benefit when a well-known celebrity receives another $20 million check, but the benefits of hiring local crews, caterers and other below-the-line personnel can be recognized for months or even years to come.