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Warner Bros shelves finished ‘Coyote vs. Acme’, takes $30M tax write-off

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Re: Warner Bros shelves finished ‘Coyote vs. Acme’, takes $30M tax write-off

#11

Post by rokkitmensch »

philipov wrote: post #7
codefeenix wrote: post #3

Writing off a business expenditure just reduces your tax liability. It is similar to putting money into R&D for a potential product and then not producing the product. Yeah you tried, paid consultants, paid for hardware, labor, etc.. but realized that it wouldn’t workout as planned or wouldn’t end up being profitable.

It's more like doing the R&D and producing the product, but then deciding not to sell it. In fact, it's literally that. You make it sound more reasonable than it should because you stops things at the research phase rather than after producing the entire movie.

As noted elsewhere in this thread, production is barely half the cost of returns. Marketing is the other half. What you see here is a rejection of the sunk-cost fallacy.

Re: Warner Bros shelves finished ‘Coyote vs. Acme’, takes $30M tax write-off

#12

Post by prepend »

upon_drumhead wrote: post #2

Can someone explain how this makes any sense at all? They burned 70 million on making the movie and they'll recoup 30 million in tax write-offs, but if they released it, it's pretty certain to make way more than 30 million. And the claim that they're cash strapped after making 1.4 billion on barbie? I just don't understand this at all. Does anyone?

It basically means they don’t think they’ll make less than that if they would release.

So they’d rather have $30M immediately (since 2023 is almost over) than release and have to perform accounting over the life of the film plus supplemental (streaming, other licenses) that they expect would result in less than $30M when all is said and done.

Re: Warner Bros shelves finished ‘Coyote vs. Acme’, takes $30M tax write-off

#13

Post by clouddrover »

upon_drumhead wrote: post #2

Can someone explain how this makes any sense at all? They burned 70 million on making the movie and they'll recoup 30 million in tax write-offs, but if they released it, it's pretty certain to make way more than 30 million. And the claim that they're cash strapped after making 1.4 billion on barbie? I just don't understand this at all. Does anyone?

They'd probably need to spend another $70-$100 million promoting it. So they need to get let's say $170 million returned to the studio to break even. The judgement must be that they won't achieve that.

For example, Indiana Jones and the Dial of Destiny failed commercially at the box office:

https://www.the-numbers.com/movie/Indiana-Jones-and-the-Dial...

Disney spent $300 million making it and will have spent at least $100 million promoting it. And it only generated $381 million of revenue at the box office. The studio doesn't get $381 million back, they get a percentage.

Disney may have made up some of the deficit with home video purchases and streaming subscriptions, but seems likely that they've lost $100+ million on that movie for now:

https://variety.com/2023/film/news/indiana-jones-5-mission-i...

The main problem was lack of budget discipline. $381 million at the box office would have been a decent result if the production budget was more like $50 million.

Re: Warner Bros shelves finished ‘Coyote vs. Acme’, takes $30M tax write-off

#14

Post by malablaster »

aqme28 wrote: post #8
upon_drumhead wrote: post #2

Can someone explain how this makes any sense at all? They burned 70 million on making the movie and they'll recoup 30 million in tax write-offs, but if they released it, it's pretty certain to make way more than 30 million. And the claim that they're cash strapped after making 1.4 billion on barbie? I just don't understand this at all. Does anyone?

Even if they only made 1 million on the movie, how would that not still be preferable? It makes no sense to me

Someone who knows what they’re talking about can correct me, but I would guess that a $30 million tax write off would “earn” them $6 million given a 20% tax rate. Maybe they believe the movie would earn less than that?

Re: Warner Bros shelves finished ‘Coyote vs. Acme’, takes $30M tax write-off

#15

Post by Mindwipe »

upon_drumhead wrote: post #2

Can someone explain how this makes any sense at all? They burned 70 million on making the movie and they'll recoup 30 million in tax write-offs, but if they released it, it's pretty certain to make way more than 30 million. And the claim that they're cash strapped after making 1.4 billion on barbie? I just don't understand this at all. Does anyone?

> but if they released it, it's pretty certain to make way more than 30 million.

It's pretty unlikely this film will make $30 million, and they would have to spend at least another five to ten million to release it (profit participation from talent, marketing (which is probably contractually obligated), finalising post production, mastering, distribution etc etc.). The effects work is nowhere near done etc.

> And the claim that they're cash strapped after making 1.4 billion on barbie?

Warner has a lot of debt. AT&T dumped all the debt they used to buy the company in with the Warner asset when they sold it to Discovery. That debt is rapidly going to cost a lot to serve interest payments too. Warner needs short term cash, and it needs a lot more than the (good) profits off a single film.

Re: Warner Bros shelves finished ‘Coyote vs. Acme’, takes $30M tax write-off

#16

Post by Mindwipe »

philipov wrote: post #7
codefeenix wrote: post #3

Writing off a business expenditure just reduces your tax liability. It is similar to putting money into R&D for a potential product and then not producing the product. Yeah you tried, paid consultants, paid for hardware, labor, etc.. but realized that it wouldn’t workout as planned or wouldn’t end up being profitable.

It's more like doing the R&D and producing the product, but then deciding not to sell it. In fact, it's literally that. You make it sound more reasonable than it should because you stops things at the research phase rather than after producing the entire movie.

Principle photography is done for this film, but it's effects heavy and there's nothing to suggest the effects work is anywhere near done, and releasing stuff also costs money.

You seem to feel like this is a completed master sat on the shelf, but it's likely not more than 60% complete to something that could be released.

Re: Warner Bros shelves finished ‘Coyote vs. Acme’, takes $30M tax write-off

#18

Post by marak830 »

rokkitmensch wrote: post #11
philipov wrote: post #7

Earlier quoted context omitted.

It's more like doing the R&D and producing the product, but then deciding not to sell it. In fact, it's literally that. You make it sound more reasonable than it should because you stops things at the research phase rather than after producing the entire movie.

As noted elsewhere in this thread, production is barely half the cost of returns. Marketing is the other half. What you see here is a rejection of the sunk-cost fallacy.

I'm struggling to see how their costs for releasing with 0 marketing are that much higher than scrapping.

Re: Warner Bros shelves finished ‘Coyote vs. Acme’, takes $30M tax write-off

#19

Post by fzeroracer »

Frankly I'm of the increasing opinion that if you do a tax write off on a creative work that you should be required to put it into the public domain. You've already made it clear that you believe that the value you would gain from it is $0, ergo it doesn't make sense to let companies vault content forever once written off.

For example, a bunch of TV series were written off last year, which means that content has been taken down both from streaming and purchasing. It is effectively completely inaccessible outside of piracy.

Re: Warner Bros shelves finished ‘Coyote vs. Acme’, takes $30M tax write-off

#20

Post by chiefalchemist »

malablaster wrote: post #14
aqme28 wrote: post #8

Earlier quoted context omitted.

Even if they only made 1 million on the movie, how would that not still be preferable? It makes no sense to me

Someone who knows what they’re talking about can correct me, but I would guess that a $30 million tax write off would “earn” them $6 million given a 20% tax rate. Maybe they believe the movie would earn less than that?

Plus, there's the cost of marketing and other post-release business activity. If they shelve it now those resources are saved, or at least re-appropriated.

Even if they believed they could break even from an accounting and tax perspective, there's still opportunity cost. That is, it might make sense to quit now and move on to something with more upside.

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