Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

Deleting and destroying finished movies

rogerebert.com

Post reply on HN
Print view View original

281–290 of 369 posts

Re: Deleting and destroying finished movies

#281

Post by Sebb767 »

SoftTalker wrote: post #194
sokoloff wrote: post #107

Earlier quoted context omitted.

If they irretrievably destroy it, its value becomes zero. That's the essence of being able to claim the tax loss (to "finally determine the value"). It's no different from having a stock position in a company that's in limbo. You can't claim the tax loss and keep the position. You have to get the clearinghouse to take the position for $0 in order to claim the loss. The studio's position is that they've already incurr…

I can't deliberately set fire to the money in my bank account and then write that off as a loss. The movie is an asset, it has some value, the way to determine that value is to make a good faith effort to sell it (auction or broker of some sort) and if it sells for less than you have spent making it, then you can write off the difference as a loss. Deliberately destroying the asset and then writing off the entire amo…

> The movie is an asset, it has some value, the way to determine that value is to make a good faith effort to sell it (auction or broker of some sort) and if it sells for less than you have spent making it, then you can write off the difference as a loss.

Except you can't simply sell this movie. Releasing it might lead to reputational damage if the movie is not up to par (as many sister comments have pointed out) and selling it will be even worse, as whoever buys it is now entangled with your IP in addition to possibly tarnishing your reputation.

Re: Deleting and destroying finished movies

#283

Post by Sebb767 »

JeremyNT wrote: post #198
fred_is_fred wrote: post #102

Earlier quoted context omitted.

I’m with you. People see this as some kind of scam, but this is a basic business loss as far as I read it. Just like making a dumb IoT juice squeezer and losing money on it. Every single company on the planet does this.

But I don't understand why destruction is required for the write off. An IoT juice squeezer is a physical item that costs something to make every additional unit. Every unit you make can actively lose you more money. Compare to a film.The marginal cost of each digital copy of a finished film is basically zero. The money is already spent. The only thing I can come up with here are royalties, but they should be based o…

> If you release a turd movie that cost 100M to make and only nets you 5m in revenue after royalties, can't you still write off the 95m and have almost 5m more than you would otherwise? How would writing the entire 100m off ever be preferable?

Releasing the movie is not free. You still need to finish the product, market it, find a distributor and manage sales channels, just to name a few. Also, a bad movie will reflect badly on your studio and everyone in it; if the movie is in a series, it might even impact the lore of your universe negatively.

Movie studios are not stupid, 5M of revenue plus 95M of write-off would be more money than 100M of write-off. But you can easily end up with 5M of revenue and 110M of losses and some non-monetary damages extra, so writing off 100M is the best option.

Re: Deleting and destroying finished movies

#284

Post by Sebb767 »

graeme wrote: post #164
s1artibartfast wrote: post #123

Earlier quoted context omitted.

Taxpayers arent paying anything, Taxes are on profit after costs. The company spent 90M of its own money, and hasn't made any income? Why souldnt they be able the claim the 90m they spent as an expense?

My guess is this is actually an accelerated capital loss. From a profit-loss perspective the net loss is the same whether they release or not. But the accounting net loss is smaller initially because the movie is on the books as having capital value. It might take decades to reduce that to zero. Destroying the film does so instantly so you get to book the full loss immediately. Never really understood why we use depr…

> Never really understood why we use depreciation in the first place to be honest, rather than just making all expenses immediately deductible. Presumably there’s some explanation

It's actually advantageous for most companies. If your company makes 20M in yearly profits and builds a new HQ for 100M and you deduct it immediately, you'd have one year with no taxes and a loss of 80M and 9 years with full taxes. If you write it off over 10 years instead (which reflects you actually using that house for this amount of time), you'll pay less taxes in all those years and save more overall.

Re: Deleting and destroying finished movies

#285

Post by littlestymaar »

jb1991 wrote: post #271
littlestymaar wrote: post #266

Earlier quoted context omitted.

You don't “calculate” orders of magnitude, that the point of manipulating them in the first place. And an order of magnitude colloquially means “one more digit”, hence the original remark. I appreciate the irony of nitpicking about a concept that merely exist to allow for low precision napkin math.

But in this case, the "napkin" math of 95 years would be off by 200 years! Hardly a useful estimate for this particular topic. Still confused where you come up with 105 years as an order of magnitude from 30.

> But in this case, the "napkin" math of 95 years would be off by 200 years!

Which is fine, because 300 and 100 are the same order of magnitude ;).

> Still confused where you come up with 105 years as an order of magnitude from 30.

30 ≈ 10^1

105 ≈ 10^2

Here you go.

Re: Deleting and destroying finished movies

#286

Post by darick »

refurb wrote: post #280

This article screams a lack of understanding of finances. A finished movie doesn't cost $0 to release. There is considerable spend on promotion, distribution, etc. If you don't do it, then movie revenues would be much lower. It doesn't make sense to spend $10M to make say $30M, when just destroying the film gets you $30M in tax benefits.

From my reading of the article they had offers to buy the film which were more than the $30M tax benefit, but they declined them. If they sell the rights they don't have to handle release.

Re: Deleting and destroying finished movies

#287

Post by sokoloff »

djur wrote: post #246
sahila wrote: post #235

Earlier quoted context omitted.

If ycombinator hires 3 engineers to rewrite hacker news 2.0, pays them for a year, writes off their salary as an expense, and then later decides that actually 2.0 is way worse than what’s currently out and trashes it, should ycombinator not be allowed to write off the investment?

No.

Do you think that every failed A/B test should be not a valid business expense? Only winning tests are valid business expenses?

If an employee is paid for a sick day, PTO, or parental leave, or to attend a team-building event: what have they created with that money? The government must not allow such giveaways from the tax coffers!

All kinds of individual activities are permitted in profit-seeking businesses and not all of them are subject to “in order to deduct this, you have to have omniscient judgment and every individual action must locally optimize your business”.

Re: Deleting and destroying finished movies

#288

Post by sokoloff »

sahila wrote: post #237
sokoloff wrote: post #153

Earlier quoted context omitted.

I agree with your first paragraph, but my experience with the second is that I’ve always been offered it at that figure. (The insurance company is negotiating with you to buy the car from you. They may not want to present it in those terms, but that’s what’s going on. You own it; they have an obligation to you; in some cases, it’s advantageous to all sides for the insurance company to buy the wreckage from you. If th…

Go one step further with the car, you salvage the car, they say it’s worth $100, does the insurance company have to sell it to me if I offer $101?

Of course not. That’s implied by my agreement with GP’s first paragraph.

Whoever owns private property decides its disposition. Depending on what you mean by “you salvage the car”, either the car was never owned by the insurance (in which case they obviously can’t sell it for any price) or it is owned by them (in which case they still don’t have to sell their private property at all, nor to a $1 over-bidder, and not necessarily to the highest bidder).

Re: Deleting and destroying finished movies

#289

Post by Applejinx »

imgabe wrote: post #213
s1artibartfast wrote: post #207

Earlier quoted context omitted.

Warner Brothers has not only intent, but a demonstrated profit margin, which they are deducting the movie from. Why shouldn't they be able to deduct there very real losses.

They're not real losses. They could sell the movie. They could release it. They're deliberately forgoing those options and deleting it. You don't have a loss until you attempt to generate revenue and find that the revenue is less than your expenses. If you just throw your product away, that's not a loss. Ultimately we write tax policy for the benefit of society, not for Warner Bros. In theory, we could write tax law…

>In theory, we could write tax law so that it made financial sense for a factory to produce widgets and send them directly into an incinerator

Indeed we could, but unfortunately we already have cryptocurrency.

Agreed on every other aspect of your observation.

Maybe when it's 'an amazing and new Road Runner movie', the waste has a more appealing face?

Re: Deleting and destroying finished movies

#290

Post by djur »

sokoloff wrote: post #287
djur wrote: post #246

Earlier quoted context omitted.

No.

Do you think that every failed A/B test should be not a valid business expense? Only winning tests are valid business expenses? If an employee is paid for a sick day, PTO, or parental leave, or to attend a team-building event: what have they created with that money? The government must not allow such giveaways from the tax coffers! All kinds of individual activities are permitted in profit-seeking businesses and not…

If a tax benefit relies on destroying an asset, to claim the benefit it should be necessary to demonstrate that you've made a good faith effort to sell it for fair market value. Courts supervise this kind of thing in bankruptcies all the time. Seems reasonable to put a high (multi-million) floor on the write-off before this kicks in.
Post reply on HN