This happens a lot. AMC shot a show that my daughter was in. They completed filming the entire show and 3 months before the release they mothballed it for the tax write-off.
this post was submitted on 10 Feb 2024
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They also remove the responsibility of paying residuals.
Either way at it, they fuck the public twice.
Isn’t business great!
Can anyone ELI5 how it's preferable for these studios to write off finished productions like this vs. releasing them and making additional profits?
Make 10 things for $10.
Try to sell each for $100, say only one sells.
Rather than take a lower price, you write off the 9.
Your taxable income is now $10. And your average profit per thing is $90. Which is good for stock prices.
Mix in Hollywood accounting, and you might even still not have a taxable income. Plus, those other 9 aren't competing against the 1 that made it. They're concentrating all the profits in one thing, which makes marketing easier
But really, it all comes down to manipulating stock price.
But you didn't try to sell the other 9? You made them for $10 each and then threw them straight in the trash.
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(5 replies)
Mix in Hollywood accounting
there's definitely some accounting shenanigans going on.
Do they write off the other nine things for $90 or $900 based on the value of the materials or the estimated value of the work. I assume if they say, "we earned $100 but it cost us $900 to do that," on your taxes that you can get your taxes owed down to about zero.
I'll admit I'm not an expert in the specific tax laws related to this industry, but as an accountant I've always suspected these narratives were a myth. The only way it makes sense to me is if the highest marginal tax rate these studios have exceeds 100%, or if they are somehow able to write off more costs than they actually spent somehow. If anyone knows of a specific tax law that makes this work I'd love to hear about it.
There are two other reasons I think are more likely, and the reality could be both.
First, there could be some timing difference where they had amortized some costs over a longer period initially, but are now moving them all to the present. So those expenses would reduce their tax burden this year, but no longer have any effect on future years. Sacrificing long-term benefits for short-term benefits, a common strategy today when corporations seem to be hyper fixated on the next quarter's reports. The confusing part to me is that, as far as I know, this decision is independent of whether they release the movie or not. But I could be wrong there.
Second, this could save additional costs. I'm not an expert in this industry, but I imagine that even after the video itself is finalized and ready to go there are still more costs to be incurred in marketing and distributing it. The money they've spent to make the movie is already gone, so the question becomes do they think that they can earn more money in revenue than what it costs to do all that? Especially factoring in scaling costs. For example, some actors or other credited workers might get royalties in the form of a percentage of gross or net revenue (there are famous examples of accounting tricks being used by studios to screw actors out of royalties by showing negative net revenue for profitable films). It could be that something impacted another adjacent revenue stream like merchandising or a videogame tie-in, that further changes their original profitability calculation.
if they are somehow able to write off more costs than they actually spent somehow
Hollywood accounting in a nutshell
Various examples can be found on Wikipedia - https://en.m.wikipedia.org/wiki/Hollywood_accounting
I totally agree that it is most likely a way to balance short - and long-term income, but I guess I'm not financially savvy enough to see how a well established studio would prefer the former.
To your second point, especially for an established IP with universal appeal like the movie in question, I just can't understand how anyone thinks the return on marketing and distribution vs. potential income would be a net negative. Remember, they've already made the movie, so the productuon costs are sunk.
In any case, I appreciate the detailed response.
Netflix offered to buy it, which would've dropped WB's marketing costs to zero. WB said no.
Yeah, I'd also like to understand this better.
There is no risk involved. It's like building a house and burn it for more insurance money.
One problem is that WBD is able to write the film off as worth $35 mil, but when someone offers to buy it for that, they won’t sell it.
https://uproxx.com/movies/coyote-vs-acme-netflix-amazon-offers-rejected/
The Internet was supposed to free creators from corporations. Corporations learned how to entrap creators there too.
Counting on you, some brave animator/early movie theatre accessor somewhere, to leak this...
If only the tax writeoff worked by freely releasing this kind of stuff to the public...
From what I've gathered in passing, the reasoning of their getting to write it off at $80m (or whatever number) is that they finished the product and then couldn't get $80m for it.
If they get to be compensated by the public (the govt via tax write offs) then the project should be released to the public for free, since the public paid them the asking price effectively speaking. Make it so protected shit is still protected (ips, characters, whatever) but the project itself becomes public domain as part of the write off.
If for any other reason, prove it was finished. As a taxpayer covering the bill for their bullshit, I don't buy that all these things are actually done to the point they say it is it they're so quick to bury a project.
Is there a Wile vs Acme movie, or did they cut a well known actor a check to spend a day in a courtroom to cut some scenes to say there's a Wile vs Acme movie?
There must be a Coyote vs Acme movie since early and random screenings had positive reactions.
Imagine if the de Medicis had these kind of accounting tricks to get rich. Imagine if they commissioned works from the guys you know from the Ninja Turtles and then just burned them to get a tax write off.
Not saying this movie is the new Sistine Chapel, but it's really sad that artists' work is just thrown in the trash like this. There might have been a couple folks who were huge fans of the Wile E. Coyote cartoons and super excited to work on this, and now nobody gets to see it.
Yeah like me. I'm fucking pissed. There hasn't been a non "Space Jam" Looney Tunes movie in I don't know how long and I'm a little steamed that the first thing I hear about one is it's cancellation due to the usual corpo fuckwitticisms
I'm not pissed... but I'm really irked by this. A movie where Wile E. Coyote sues ACME sounds hilarious to me.
Creators have to get out from underneath the studios, they aren't interested in your content anymore, they have all the content they need to look profitable and sell off too Disney one day.
Unfortunately they all have the money =(
Another confirmation that WB is 100% evil.
it's mostly the new ownership. wb isn't in charge anymore.. discovery is. and they've been shit for ~ 20 years, at least.
Kind of tragically hilarious that their name is Discovery when they are hiding and killing creative works.
It fits. They're like British Archaeologists from last century. They dig up works of art created by others, judge their value, and lock them up in a vault.
they went all-in on fake 'reality' bullshit years ago.
There have been several WB movies that have named dropped WB as one of the villains of said movie.
Movies that only existed because WB demanded a sequel.
Can someone explain what a tax write off is? I have this one movie that is finished that I spent 80 million to make. I decided to "write it off". So when I get to pay my taxes I get a 80 million discount?
Oh my God....
This is absolutely just the plot of The Producers.
Is the film just completely deleted, or can it leak eventually?
The absolute best we can hope for right now is if someone finds a way to leak the movie. It probably won't be a finished/good-looking copy, but at least it will be seen...
But they BETTER not touch The Day The Earth Blew Up.
I only heard about it because of the news surrounding this. And I'm upset because the idea of the movie sounded dope as shit. Plus my dad's favorite character is Wiley and it would have been fun to watch with him.
That sounds pretty cool.