Understanding Above-the-Line and Below-the-Line Costs in Filmmaking

For example, the COGS for an automaker would include the material costs for the parts that go into making the car plus the labor costs used to put the car together. The cost of sending the cars to dealerships and the cost of the labor used to sell the car would be excluded. Because COGS is a cost of doing business, it is recorded as a business expense on the income statements. A Line Producer may also hire key members of the crew, negotiate deals with vendors, and is considered the head of production. Line Producers are rarely involved in the development of the project, but often play a crucial role in costing the production in order to provide investors with the confidence to invest in the project.

At this point, you’re probably asking “What is ATL?” or “What does ATL mean?” ATL expenses refer to the costs that directly contribute to your company’s day-to-day operations. Common examples of ATL expenses include labor costs, the cost of raw materials for production, and certain utilities that fluctuate based on operations. You can use above-the-line accounting to track the direct costs of producing your goods or services.

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Expenses considered to be above-the-line typically include those which are directly related to production of a good or service. This varies slightly depending on whether the business is involved with manufacturing or is a service business. Above-the-line costs are the costs and expenses that directly relate to the production of a product or the provision of a service. That’s all activity on the income statement that relates to profits and not the transactions that only impact the cash flow statement or balance sheet.

The Relationship Between ATL and BTL Costs 💰

Integrating cash flow forecasts with real-time data and up-to-date budgets is a powerful tool that makes forecasting cash easier, more efficient, and shifts the focus to cash analytics. Above-the-line costs tend to vary more over the short term than below-the-line costs. Think of script breakdown as your film’s master blueprint – the hidden force behind every successful production. From blockbusters to indie gems, this meticulous process transforms screenplay into organized magic, ensuring every prop, costume, and special effect gets its moment to shine. The origin of the “above-the-line” and “below-the-line” terminology has a fascinating connection to mid-20th-century advertising practices. For a first time producer, this toolkit has guided me on a great starting point and has really energized my writer/director into taking this move to get his film made very seriously.

• Or any transaction that does not impact the company’s ongoing revenue or profits.
• In an entrepreneurial world brimming with challenges, every bit of clarity helps.
• As a result, the final product will be of higher quality, completed on time, and within the established budget.
• The primary differences in above-the-line costs between the service and manufacturing industries is that the service sector typically includes the cost of administration as a component of gross profit.
• BTL expenses, on the other hand, may not be fully deductible in the year they occur and are typically considered itemized deductions on tax returns.

Above-the-line costs are those above the gross profit line, while below-the-line costs include costs below gross profit, namely operating expenses. Operating income–also called income from operations–takes a company’s gross income, which is equivalent to total revenue minus COGS, and subtracts all operating expenses. A business’s operating expenses are costs incurred from normal operating activities and include items such as office supplies and utilities.

For a more in-depth look at film budgets, be sure to read our article “What is a Film Budget?”, which provides a comprehensive guide to budgeting for movie production. The status of movie stars can require personal makeup artists and costume designers, adding thousands of dollars to BTL staffing costs. This is just one example of how film production costs break down into ATL and BTL categories, each influencing the other.

Administrative Expenses

The line signifying gross profit acts as a divider, and everything counted before it, like those data storage and labor costs. It’s a prime example of how business practices from one industry can reshape terminology and organizational structures in another, fundamentally changing how we approach production budgeting today. A different interpretation of above the line can refer to all income or expenses related to normal business operations. That’s all activity on the income statement that relates to profits and not transactions that only impact the cash flow statement or balance sheet. In that case, below the line would include only extraordinary or non-recurring income or expenses. Or any transaction that does not impact the company’s ongoing revenue or profits.

When above the line costs considering an acquisition, leaders will often consider whether there are synergies in above-the-line costs that can boost profit margins. In this post, we will cover what above-the-line costs are, why they are used in profitability analysis, and some considerations to make when determining which cost to include above-the-line. Save time, cut costs, and let Filmustage’s AI handle the heavy lifting — all in a single day. I have an investor that requested a detailed plan with financial projections within 2 weeks, so I pulled the trigger on your Gold + Financials Filmmaker Bundle.It was the best money I’ve ever spent! In economics an isocost line shows all combinations of inputs which cost the same total amount.

• Filmustage’s intuitive design combines classic templates with spreadsheet flexibility, enabling you to customize every aspect of your budget, from data fields to tax considerations.
• It reports its operating revenue as $ 3 billion and operating income as 8 million in a quarter.
• They are the sales cost of goods sold (COGS), cost of sales, and cost of services (COS).
• The COGS are the expenses incurred in the normal operations of the business to generate the revenues.
• For example, these costs cover printer paper and fax machines, management and human resources, advertising campaigns, and the salaries of the accounting department.

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Line producers are also in charge of coordinating all post-production efforts such as editing and special effects. Cost of goods sold (COGS) refers to the direct costs of producing the goods sold by a company. This amount includes the cost of the materials and labor directly used to create the good. It excludes indirect expenses, such as distribution costs and sales force costs.

Above the Line vs. Below the Line – Key Differences

From indie shorts to blockbusters, financial mastery is the hero of every successful production. This platform simplifies the estimation of costs, streamlines script breakdowns, and eliminates manual errors, allowing for faster and more accurate budgeting. Filmustage’s intuitive design combines classic templates with spreadsheet flexibility, enabling you to customize every aspect of your budget, from data fields to tax considerations. The distinction emerged from accounting practices related to agency commissions. When advertising agencies booked traditional media placements – including television, cinema, radio, press, outdoor advertising, and magazine spots – they earned substantial commissions.

A. Above-the-Line (ATL) Expenses:

Below-the-line costs represent the engine room of film production, typically consuming 60-80% of a project’s total budget. These expenses turn creative visions into tangible reality through a complex web of technical expertise, equipment, and logistics. Because above-the-line costs are directly related to the company’s final product, they tend to vary more over the short term than above-the-line costs.