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
A “tax write off” is just a way of saying that you’re claiming that something is a business loss on your taxes. In this case, Warner Bros would be claiming that all of the money that they spent so far to produce this movie is a loss, that would offset that amount of profits that they make on other projects throughout the year. Maybe I earned $500 million in profit on movies this year. I decided to cancel a film that I’ve spent $50 million producing so far. That $50 million loss can be subtracted from my profits, so I’m only being taxed on $450 million in profits instead of $500 million.
The reason why they might do something like this is that they expect to earn so little money on this film that it’s not worth spending any extra money to finish, market, and distribute it, and it would just be more beneficial from a financial perspective to just cut their losses and get some of that money back via taxes. It’s not a magical money-making scheme, Warner Bros is still losing millions of dollars, the tax write off is just softening the blow of that a bit.
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