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
So here’s the quick and dirty.
WB spent about $70MM making the film. That’s their cost *so far*.
If they want to release it to theaters, they have to effectively put money forward for cinema slots. Theaters would rather put a movie in place that they know will drive ticket sales than one that won’t.
They have to advertise. And dumb as it sounds, that’s generally 1.5% the cost of the film. So now you need to make $170MM to break even.
Except that’s not considering the part the theaters take. They make some money on every ticket, so you may have to make it to $200MM to come out ahead.
Well, was the director promised 20% of gross domestic ticket sales? That’s $40MM. So you need more like $250MM to pay that gross percentage.
But if they reduce their profit by $70MM for the year by just writing it off, they save $14.7MM in taxes. That makes the cost of the movie only $55MM.
If they market it and release it, they have to pull about $195MM to only lose $55MM. And that might be a gamble on other projects.
If there’s another movie with the same demographic focus that they want to market instead that they think will do better, then they can focus more resources on that movie and pull a better win than the write-off.
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