What is a "tax write off"?
What is a "tax write off"?
Let's say that I have this one movie that is finished that I spent 80 million to make. I decided to "write it off". So when I get to pay my taxes, do I get a 80 million discount?
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If you write off 80 mil you're basically saying that you lost 80 million on an investment.
So let's say a different movie you made makes 80 million, and this one lost 80 million, you basically made zero money and shouldn't have to pay taxes.
So if I get this right: I lost 80 million by making this movie and shelving it. I made another movie that I spent another 80 million but made 40 million in profit. Then, instead of paying taxes for 120 million (the 80 million it made + 40 million extra) I'll pay only over the 40? This would start to make sense about Warner Brothers...
If you spent 80 million making the other movie, I'm not sure if you have to pay taxes on it, or just the 40 million profit. If the latter, than you wouldn't pay any taxes. Someone come in here and straighten Tiger and I out please!
If you invest 80 million and make 80 million in return, it's a wash, and you wouldn't pay any taxes because you didnt make any money.
You would have to invest 80 million in a movie, scrap it, and then 80 million in another movie, which goes on to make 160 million in order to have 80 million in profits to offset with an 80 million write off. This would result in a net $0 made for tax purposes.
I don't get how it makes sense to scrap finished movies instead of releasing them then. Why claim 80 mil tax write off, when you can make 20 mil and claim 60 mil tax write off. Unless the tax rate is ≥100% you're losing money doing that
Likely, scrapping a movie isnt completely finished and there would be additional post-production costs that would have to be paid to make the product ready for release. If they're not expecting much return by releasing it on streaming or something like that, then it could make sense to not finish.
Sell it to Netflix for $10M and Netflix pays the post production costs.
Seems to me it's more likely due to some contractual obligations that they don't have to pay if the movie isn't released at all. It's something you don't really see happen with other studios than WB. WB probably just has some weird shit going on in their contracts. They just say it's a tax write off (which is true) but don't mention it's really because they put something in some contracts that says they only have to pay if the movie is released.
No. You're doing the math wrong.
You make 2 movies that cost $80m each, you have spent $160m. One of them gets shelved and makes no money, one of them makes $120m. You are still at a $40m loss. You haven't made any money to pay tax on at all. You have only lost money.
You are approaching this with the preconceived notion that is some kind of scam, which it's not.
The only benefit to shelving the first movie is if you think it'll cost more money to finish, market, and release it than money it will bring in. They are cutting their losses, not magically generating money out of thin air.
But what doesn't make sense to me is if let's say WB sold the movie to Netflix for $20 million, They're still taking a loss of $60 million and could still write that off, can't they? Why is it better to write of an $80M loss than it is to make $20M and write off a $60M loss? Why forego making some money back on an investment (even if it's a small percentage) only so they can write off a larger loss? Even if they sold a movie to Netflix for $1M they're still making $1M and can still write off the loss of $79M and it's still better for them isn't it?
This is why it feels like shenanigans. Why completely shelve a movie instead of putting it on a streaming service to recoup some of the loss? They streaming services will put basically anything on them nowadays.
Oh it's because if you sell something for 20 million that cost you 80 million and the person you sell it to makes more than 20 million you are are giving profit to your competitors and your board of directors will fire you for being bad at your job. It cant just be a decision that's good for you, it has to also not show that you were wrong about its value and give that value away to you competitor to make you look bad. The good if the intended audience isn't factored in beyond hours much they expect to make of released
If they claim it as a loss it's very hard to ever use it again so they effectively have to ignore it's existence forever.
This is how i understand it. I'm sure the community will correct anything it got wrong and i thanks them for it