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Subtext is any content of a creative work which is not announced explicitly by the characters or author, but is implicit or becomes something understood by the observer of the work as the production unfolds. Subtext has been used historically to imply controversial subjects without drawing the attention, or wrath, of censors. This has been especially true in comedy, but it is also common in science fiction, where it can be easier and safer to make social critiques if it is set in a time other than the (author's) present.
Subtext is content "under", and hence, "sub", or hidden beneath, the actual dialog or text. To gather subtext the audience must "read between the lines". This is crucial to a clear and accurate understanding of the word. If it is stated explicitly, it is by definition not subtext, because it is no longer hidden. In fact, writers are often criticized for the failure to artfully create and use subtext. Such writing is faulted for being too "on the nose", meaning the characters always mean what they actually say. Among other things, this robs the text of dramatic tension and can make the whole thing too boring and obvious. 
Subtext is often also inserted in narratives where explicit themes are unable to be shown or expressed due to the desire to appeal to a general audience. Examples are sexual or other adult references in a story nominally marketed to children. Their inclusion sails right over the kid's heads but the adults appreciate a chuckling nod to the fact that they too are in the audience.
Subtext is not costumes, set pieces, or design, although these cultural cues may 'set the table' for the understanding and interpretation of the subtext.
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One of the best uses of subtext, and one that is used often in screenwriting classes for exactly this reason, is the brief moment from Chinatown, where Faye Dunaway says that Katherine is 'my sister', and at another time, 'my daughter', when questioned by Jack Nicholson. His first reaction is to slap her for uttering such nonsense. But she can only repeat the seeming contradiction despite the beating, and suddenly Nicholson understands. He 'reads between the lines' of the words she is using to understand not only what she is really saying to him, but all the danger that unspoken statement reveals about the story, the characters, their past, their motives, and so on, which Nicholson (and the audience) has neither foreseen nor understood until that moment, which is pretty far into the movie. Now it is true that she also says "she's my sister *and* my daughter" at the end of the beating, but that's a reveal, not on the nose writing. And even that reveal does not explicitly state the implications Nicholson now finally grasps, because those implications - much bigger than just a single isolated act of incest - are also not explicitly stated. "My father and I... understand? Or is it too tough for you?".
Although the definition references creative works, it should not be surprising that usage of terms like 'subtext' and 'reading between the lines' have generalized to many other social contexts. An example of the power and controversy of subtexts in a socio-political context would be slave songs from the plantations of the south. Swing Low, Sweet Chariot is a call for escape and rescue from their real world present environment, not the hope that a supernatural god will swoop down from heaven and usher them into a better place when they die. Ironically, or perhaps foolishly, it was the knowledge of this history that led the FBI to believe the hit song of the 1960s, "Dancing in the Streets" by Martha Reeves and the Vandellas, was actually a coded call for riots. [circular reference]
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- Lattanzio, Ryan (2014). "Orson Welles' World, And We're Just Living in It: A Conversation With Norman Lloyd". EatDrinkFilms.com.
- Seger, Linda (November 1, 2011). "Chapter 1: Subtext: Definition and Exploration". Writing Subtext. Studio City,CA: Michael Wiese Production. ISBN 978-1-932907-96-4.
- Dancing in the Street