They’ve just cancelled their upcoming film “Coyote vs. Acme,” and everyone is calling it a tax write-off, just like they did with the cancelled Batgirl film.
Having spent so much on the production of these films, how is it beneficial to them to cancel the film outright? What is a tax write-off in that sense?
In: Economics
No one seems to have got this right so I’ll take my crack at it.
The government believes that you have to spend money to make money. You aren’t taxed on the money you spend to make things. Those are called expenses and they can be a various forms from physical hardware to paying people salaries. Governments only want to tax you on what you have earned from what you made, which is called profit. Expenses are used to reduce profit and that’s okay with the government.
In this particular case Warner Brothers chose to not release a product because it feels it will not perform well on the market. However there is still a tremendous amount of expense that is accrued while making the product. Since the belief of Warner Brothers is at this won’t sell well, they won’t even creating additional expenses of distribution and post-release marketing because they feel that would be spending good money after bad.
So in the eyes of the government with regards to taxable income, since Warner Bros won’t make any money on this film, and it cost roughly 70 million to make, Warner Brothers gets to write off or reduce their taxable burden by that 70 million and therefore will pay less taxes in 2024 fiscal year.
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