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WB Discovery are in hot water due to their decision to shelve several already done movies and not releasing them, Batgirl and Coyote vs. Acme among them to get a tax write-off for them.

I don't understand how it works. From my understanding, write-offs are for expenses that the business had for its operation. And since those movies are already done, their entire budget should be a write-off as a business expense. But if the film is then abandoned it doesn't encore any more expenses and so shouldn't have anything else to write off.

So from my understanding not releasing a film and releasing it making no money at all would be the same from the tax point of view. So even if it made just 1$ it would be better than it not making anything at all.

How come it's better to shelve the movie than release it to minimal earnings?

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There are different accounting rules for "writing off" expenses that are true operational expenses versus the cost of creating an asset (like a movie). When you spend money to create an asset, that cost cannot always be deducted in the year it occurred, often is has to be spread across the life of the asset.

So "writing off" a movie by shelving it would allow the studio to deduct the entire cost immediately rather than spreading the deduction over several years.

DISCLAIMER - this is a description of cost amortization in general - there are certainly nuances to the movie industry that may yield a better reason.

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According to Deadline, this might have been due to accounting reasons related to the merger of Warner Bros and Discovery:

In both cases, the filmmakers were told that it came down to a “purchase accounting” maneuver available to Warner Bros Discovery because the company has changed hands, and also changed strategy from the previous regime. This opportunity expires in mid-August, said sources, and it allows WBD to not have to carry the losses on its books at a time when the studio is trying to pare down $3 billion in debt across its divisions.

[...] Sources don’t expect other films to get killed like this, because the accounting opportunity expires by the middle of this month.

Also, apparently you are underestimating the additional costs related to actually finishing, releasing and distributing the movies:

Rather than spend vast sums pumping up the budgets of each film to compete in theatrical marketplace, and then spend $80 million in global P&A, the studio felt that scrapping both movies was a better choice, when coupled with the purchase accounting maneuver.

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    In accounting this is called 'taking a big bath', meaning - if you are going to have a bad year, especially a loss, you "might as well" take all the losses available to you. This is basically for two reasons: (1) From a public shareholder perspective, a $500M loss might be almost as horrific as a $750M loss, but a $500M loss today and another $250M loss next year might then seem catastrophic; and Mar 8 at 15:32
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    .... (2) from an executive's self-interest perspective, if they have a bonus structure that says, basically 'you get a bonus when net income is above some threshold', then the bigger loss doesn't actually 'lose' you any additional compensation, whereas having the extra part of the loss happen next year, would mean 2 years of lost bonus. This is an example of how simplistic bonus structures can make management's incentives misalign with actual long-term company goals. Mar 8 at 15:33
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    @Grade'Eh'Bacon I can't meaningfully upvote a comment, so just want to thank for the truly enlightening comment.
    – SIMEL
    Mar 8 at 19:04
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Release has costs -- promotion, manufacture, distribution. Unless the release makes significantly more money than those costs, it may make more sense to shelve the product and put that money into something expected to produce better return. Even a direct-to-video release has costs that may make it a bad investment.

This isn't unique to movies. It isn't that uncommon to get partway through a project and decide it isn't worth continued investment. Not every product idea is a good one, not every implementation is successful enough to be worth continuing.

Sometimes the right thing to do really is to just accept that you have wasted your money, discard the prototype, and walk away.

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  • This isn't the case with these movies. It isn't a case of cutting your losses. Not only because they were supposed to be released on streaming, which has a negligible cost, but because the stated reason for it is for a tax write-off: "A subsequent Variety report indicated that WBD had concluded that writing off Batgirl for a tax break would be the most "financially sound" way of recouping its costs" From the Batgirl wiki, "Warner Bros. Discovery shelved the film in November 2023 so it could obtain a $30 million tax write-down" from Coyote vs. Acme wiki.
    – SIMEL
    Mar 8 at 11:24
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    @SIMEL, tax write offs are not magic. Money was still spent and, seemingly, wasted on a product that won’t provide a net return. All the tax write off does is reduce your taxable revenue, but the money has been spent. Even streaming and such have further associated costs. Why spend more money on a product you think isn’t worth it? Mar 8 at 13:52
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An alternative worth considering is that there are also intellectual property (IP) considerations. IP is valuable to a company and if they feel a product doesn’t do the IP justice, it may be worth shelving it instead of releasing and doing harm to the brand. What you often see of a particular IP is what has been selectively released, after having been produced from documents defining that IP’s usage.

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