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
Warner Bros believed that the additional costs involved in releasing the movie would not be recouped.
So they had two options:
* Release the movie. They have already spent *A* money on it. Spend *C* on additional costs – that is, finalizing production, promotion, deployment to streaming platforms. Anybody who gets paid in residuals (a percentage of the profit) is included in *C*. Gain *P* profit, however that might be. Pay (*P* – (*A* + *C*)) x *T* in taxes on that profit, where *T* is the applicable tax rate. Overall, the outcome is *P* – *C* – *A* – (*P* – (*A* + *C*)) x *T*
* Don’t release the movie and claim it as a total loss. Businesses that take a loss don’t have to pay taxes on it. Their tax burden at the end of the year is reduced by *A* x *T*.
Warner Bros believed that *A* x *T* is greater than *P* – *C* – *A* – (*P* – (*A* + *C*)) x *T*
Latest Answers