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
The eli5 is that it’s complicated.
There’s not really a way to “make money” with a tax write-off; at best, you’re negating some losses that otherwise would have occurred. Yeah, they’ll get some money they wouldn’t have had before, but there’s no way to turn a profit this way.
Basically, by ditching the movie and taking the write-off, they don’t have to pay as much in taxes as they would originally have done so. But they also forgo any profits they *could* have made. So, basically, they’re saying the $15m they will save on taxes will be greater than net profit they would have made had it been released.
In this case, Coyote vs Acme cost $72m to make. Probably cost another $72 to promote. Their tax write-off will get them about $15m. So someone, somewhere, is saying, rather than spend $150m on this movie and release it, we’ll write it off. We’re out $72m no matter what, but then we can salvage another $15m.
So:
Tax write off: Cost: $72m – $15m = $57m loss
Released, but bombs: Cost: $150m – revenue (say, $80m) = 70m loss
Released, but is a hit: Cost: $150m + revenue (say, $200m) = $50m profit
Someone, somewhere, doesn’t think this is a $200m movie but a $80m movie.
(Note that, again, this is complicated. Technically, they can release it *and* write it off, especially if it bombs, but it depends on how the rest of their business is doing and how they want to apply it.)
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