Setup-and-payoff is probably one of the most important concepts to be mastered on the road to producing professional-grade screenplays. Some writers equate it with cause-and-effect, but in fact cause-and-effect is only one type of setup-and-payoff -- and it's the most obvious type to boot. A script that uses only cause-and-effect may succeed in telling its story, but it won't be as effective as one that mines the full potential of setup/payoff.
Let's take a step back and define each term as it relates to a movie. Cause-and-effect means that one event happens as a direct result of a previous event; the audience is either explicitly made aware of the connection, or can piece the two halves together if they think about it. Setup-and-payoff means that the impact of an event is amplified by a previous event.
Sounds complicated and academic, I know. Probably better to put it into context. We'll look at two versions of a hypothetical sequence, taking place somewhere in the middle of a hypothetical movie. The first will simply use cause-and-effect; the second will add setup-and-payoff.
* * *
Scene 1: A masked man sneaks into a house through the kitchen window and rigs the toaster with an explosive.
Scene 2: Steve wakes up in the morning, makes his coffee, and puts his bread in the toaster. When he presses the button: Kaboom.
* * *
Scene 1: Steve wakes up in the morning, makes his coffee, and puts his bread in the toaster.
Scene 2: The next morning. Steve wakes up, makes his coffee, and puts his bread in the toaster.
Scene 3: A masked man sneaks into the house through the kitchen window and rigs the toaster with an explosive.
Scene 4: Steve wakes up, makes his coffee, and puts his bread in the toaster. When he presses the button: Kaboom.
* * *
So let's compare the two.
In the first version, Scene 1 is obviously a cause waiting for an effect. Then in Scene 2, suspense builds as the audience wonders whether Steve's going to use the toaster.
In the second version, the bomb-planting scene becomes much more frightening. What was obvious setup in Version 1 becomes a payoff of its own in Version 2. Having seen Steve's morning routine, they'll be biting their nails because they know he's going to use that toaster.
There's a catch here, of course: We're not going to get away with writing a screenplay that devotes two entire scenes to a guy making coffee and toast. Therefore, we'll need to find other ways to justify their existence in the narrative. Perhaps in the first scene, Steve is excited about starting a new job, going about his morning tasks with a nervous energy; but in the second scene, he's been dumped by his girlfriend -- so he trudges around the kitchen halfheartedly, debating with himself over whether to call her. Now these scenes have a legitimate purpose: major life changes dramatized through breakfast preparation.
That's better, but still not perfect -- because we're really working in the wrong direction. Rather than coming up with interesting elements to insert into Scenes 1 and 2, what we should really be doing is examining our earlier scenes in the script (remember, this sequence takes place somewhere in the middle of the movie) and figuring out how to re-stage a couple of them in the kitchen. Since those scenes already exist, we know they're essential to the story and they won't feel shoehorned in.
So, if there's a scene wherein a friend from Steve's past confronts him at work, we can rewrite it such that the friend bangs on Steve's door first thing in the morning, interrupting his carefully regimented routine. They argue while a frazzled Steve tries to maneuver around the friend to make his coffee and toast. Or, we could take a scene about Steve trying to buy flowers for his girlfriend and change it so he's doing that while making breakfast -- because he forgot about their anniversary until the morning-of. Now, rather than struggling to justify scenes that are pure setup, we've incorporated setup into scenes we already needed.
I realize that all this barely scratches the surface of setup-and-payoff, so I'm sure I'll have more to say on the topic at a later date.