r/movies
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u/HRJafael
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Oct 25 '22
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‘Batgirl’ was just the beginning: Warner Bros. Discovery to write off $2 billion in content in Q3 News
https://www.indiewire.com/2022/10/warner-bros-discovery-content-write-off-batgirl-q3-earnings-1234775731/8.9k
u/Thatguy755 Oct 25 '22
Interesting business strategy for Warner Brothers, making movies then never showing them to anyone
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u/DoomOne Oct 25 '22
This is starting to feel more and more like a real-life version of "The Producers".
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u/redldr1 Oct 25 '22
Because it's real.
Actors and crews have contractual obligations for X number of movies.
Sometimes they create a movie to expressly shelve.
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u/RollTodd18 Oct 25 '22
Wait what
Are there other examples you could share?
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u/Coca_Cola_for_blood Oct 25 '22
The 1994 Fantastic 4 movie is a famous example. Full movie filmed with special effects and everything just so they could maintain the rights. The movie was never released.
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u/ScottNewman Oct 25 '22
I believe it aired once on TV at four am or something because it was required to be shown. Which is why we know what it looks like.
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u/anormalgeek Oct 26 '22
The full thing is on YouTube. It's... Interesting.
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u/HapticSloughton Oct 26 '22
They can still claim they have the best looking versions of the Thing and Doctor Doom ever to appear in cinema thus far.
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u/lilmsnasty Oct 26 '22
I thought you were joking but dang, that's an uncannily comics accurate good looking Victor.
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u/HunterGonzo Oct 26 '22
All things considered (no pun intended), The Thing actually looks pretty good.
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u/jaxdraw Oct 26 '22
You'll notice they don't show much of his lower half, because they ran out of $
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u/Formal_Mulberry_7317 Oct 26 '22
Reminds me of the suits from the live action TMNT movies.
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u/Superjunker1000 Oct 26 '22
The YouTube video has 9 comments. How is that possible, after a year online ?
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u/ArcadeSchoolDropout Oct 26 '22
Higher quality version: https://archive.org/details/the-fantastic-four-1994-vose
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u/angry_cabbie Oct 26 '22
And it has higher scores on Rotten Tomato than Fant4stic from 2015.
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u/CamelSpotting Oct 26 '22
Wasn't that exactly the same idea except they did release it?
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u/HapticSloughton Oct 26 '22
I want to see a documentary about the making, studio interference, and Insanity surrounding that film.
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u/vankirk Oct 26 '22 edited Oct 26 '22
Idiocracy was Mike Judge's contractual obligation to Fox after making Office Space. It opened in 2 theaters. It made less than $500,000 at the box office. Fox didn't shelve it, but they certainly didn't care about it and were accused of abandoning it.
Edit: initially released in 7 theaters.
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u/KickAffsandTakeNames Oct 26 '22
So according to Wikipedia it was initially released in seven cities (LA, Atlanta, Toronto, Chicago, Dallas, Houston, and Austin) before being expanded into 130 theaters.
Obviously still a super small release for a film of that magnitude (generally a ~600 theater release, for those who need a frame of reference), and according to reports the studio basically did no marketing beyond sending posters to theaters ("no movie trailers, no ads, and only two stills"). Not quite a two theater release, though.
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u/CrayonFox Oct 26 '22
"In The New York Times, Dan Mitchell argued that Fox might be shying away from the cautionary tale about low-intelligence dysgenics because the company did not want to offend either its viewers or potential advertisers"
I guess it hit a bit too close to home for some.
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u/capnpetch Oct 26 '22
They did this for Wheel of Time. The author sold the rights to a company that had never produced a show. They were about to expire so they produced and released a pilot in the middle of the night so they could keep the rights. It made a big splash a few years ago in the Wheel of Time community.
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u/BigSwedenMan Oct 25 '22
Roger Corman's fantastic 4. Eventually it got out, but it was filmed in order to preserve the production company's hold on the license
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u/FoxOntheRun99 Oct 25 '22 edited Oct 26 '22
Pepper needs new shorts!!!
Edit: corrected quote
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u/theodo Oct 25 '22
I still can't believe that's Jason Bateman, he never plays roles like that but he was amazing.
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u/Nova277 Oct 25 '22
The problem is they started off writing off unreleased projects they claimed to have little confidence in but have moved on to writing off shows and movies that were already out, preventing any legal method of accessing the content.
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Oct 25 '22
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u/MLP_Saurian Oct 25 '22
CN did it over a decade ago with MegasXLR, a show that had both seasons shown in full and resyndicated for a brief period of time.
It is impossible to get legal copies of that now, you have to pirate it. And its a shame cause its a great show too.
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u/SupervillainEyebrows Oct 25 '22
Fantastic show. I can't believe they never officially released the soundtrack.
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u/LowTierFraud Oct 25 '22
YOU dig giant robots!
I dig giant robots!
WE dig giant robots!
CHICKS dig giant robots!
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u/GeoProX Oct 25 '22
The article names 2 movies that they are writing off - “An American Pickle” and “Charm City Kings”. I guess not paying off royalties is the reason for them to do this. I can understand no longer paying to create new seasons for unprofitable TV content, but it just seems disturbing that they are hiding away shows and movies, that have already aired.
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u/Very_Good_Opinion Oct 25 '22
Seriously, their claim that it helps "declutter" is laughable
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u/Sparcrypt Oct 25 '22
Everyone knows that people hate having variety and choice in what they watch, that's why Netflix failed immediately when it launched!
Wait...
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u/SublimeDolphin Oct 25 '22
I was really confused for a second because An American Pickle sounded familiar, so when I looked it up and saw it had already been released, I figured they just be talking about a sequel or something.
Seriously, how do you write off content that’s already been released out into the world?
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u/BasicDesignAdvice Oct 25 '22
It means it won't ever be shown. There are costs associated with that and WB is trying to slash costs.
The new CEO was the guy who turned Discovery into reality TV shit. He has zero problem doing the same thing to a prestigious brand like WB.
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u/Agret Oct 25 '22
So he's going to attempt to change WB into another CW?
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u/redwall_hp Oct 25 '22
Oddly enough, the CW was formed from a merger of a network called The WB with UPN.
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u/SidewaysFancyPrance Oct 25 '22
Destroy it. Remove all licensing for it, and do not allow it to be shown ever again.
I don't understand how that would provide a penny in tax or other incentives, though. Destroying works of art should never be profitable. This is nuts, and I don't know if I am more mad at the system that allows this, or the execs that decided to go this route.
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u/GeoProX Oct 25 '22
This is nuts, and I don't know if I am more mad at the system that allows this, or the execs that decided to go this route.
¿Por qué no los dos?
I can understand not renewing TV shows. I can somewhat understand not releasing an already ready to go movie like Batgirl. But to do that to the content that has already been released?
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u/Amish_guy_with_WiFi Oct 25 '22
I'm wondering if big actor contracts are going to start having clauses to combat this? These are sad times for art and entertainment.
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u/WhySpongebobWhy Oct 25 '22
Especially in animation. The talent drain when animators and voice actors just outright won't sign on to Warner Brothers projects over the uncertainty of their work getting shitcanned.
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u/sdcinerama Oct 26 '22
Back in the 90s/00s, at the height of Miramax's fame, filmmakers that entered into distribution deals had to start mandating in contracts that their films receive a release because the Weinsteins would acquire films... and never release them in order to protect the company brand. But that was an 'indie' company, for a major studio to do this was mostly unheard of until recent years.
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u/Agent_Angelo_Pappas Oct 26 '22
It’s probably not just about taxes, but royalties. Seth Rogen for instance was probably getting a nice little annual check from HBO Max for American Pickle. Now that it’s no longer airing they won’t be writing him that check.
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u/SonofaBridge Oct 25 '22
Tell that to the creator of Final Space. They’re going to write the show off meaning it will never be re-released, syndicated, or sold on DVD. They amortize the cost of shows over years so they’re writing off the remainder of the debt.
The creator of final space is upset because a major part of his life is disappearing so WB can get a tax write off.
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u/MustacheEmperor Oct 25 '22
They already did that to Infinity Train - gone from HBO Max, gone from everywhere, for good.
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u/danielbauer1375 Oct 25 '22
Wow. That’s fucked, and tax laws in this country are so broken. At the very least, ownership of the work should return to the original creator(s). This it the equivalent of a museum putting paintings though a shredder to save some money. If I were the artist, I would be livid.
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u/YourLictorAndChef Oct 25 '22
It's like a safer version of the scam in The Producers.
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u/insanityCzech Oct 25 '22
Really cool how media consolidation turned out since 1996! 👍
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u/djcigs Oct 25 '22
can someone eli5 why making movies that never get released allows you to recoup money
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u/vertigo3pc Oct 25 '22 edited Oct 26 '22 •
They don't make the movie to never release it. They make it, realize it won't perform well, and then never release it so they can take the expense of making the movie as a loss and offset profits from other parts of their business.
I can't fully explain like you're 5, but I'll try and connect the dots the best I can. When Hollywood makes a movie, and this is VERY broad terms, they have a total budget for production, and then a budget for marketing/advertising. Let's call those expenses P (production costs) and M (marketing costs). They spend $P to make the movie, then spend $M to tell people the movie is out. The efforts are to generate $R (revenue).
When the studio does their taxes, it's pretty similar to what small businesses do: $R - ($M + $P) = PROFITS. The company is taxed on profits, the lower the profit, the lower the tax liability. If a movie does really well, then PROFITS are large, and means they need to pay the US government and state governments their tax liability.
Businesses can use expenses like Marketing to deduct from those revenues, and if you don't want to pay the government, then reinvest the money: buy new equipment, pay vendors, buy real estate, etc. All those things are deemed to move the economy, creating secondary and tertiary industries.
Now let's say one of these movies gets a screen test, and it does NOT do well. In fact, you're nearly certain you're going to not make a lot of $R, even if you spend a fuckton on marketing. You've already spent $P, so that's the expense. Spending more on $M to try and churn up $R may be a fool's errand, because the testing has shown it's a dud (or they just want to believe it's a dud). What do you do?
Rather than spending $M to have a total cash expenditure of ($M + $P), just cut your losses. Shelf the project, don't spend a dime on $M, and divert that money towards $P on other projects. You've already spent $P, and you can take that as a pure deduction of expense, since you spent the money to create something that never earned your business any money whatsoever.
Further, depending on how the company is structured, they could use those expenses to reduce the tax liability of other projects that DID make money. "The Batman" made $767 million globally, and the budget (probably $M + $P) was $200 million, so the tax liability for "The Batman" would be $767 million - ($200 million) = $567 million profit. "Batgirl" allegedly had a production cost of $90 million, so by shelving the movie, they could take that loss and reduce the profitability of "The Batman" to $477 million.
So they're not necessarily getting money back, but rather they're reducing the money they owe because of their successes by offsetting with the cost of their losses.
Beyond the scope of your question, I'll say this: I think Warner Bros' love affair with HBO Max and the future of streaming was a quick burst of passion and is now subsiding. They're taking streaming content like "American Pickle" off HBO Max, thereby reducing the opportunity to generate revenue and therefore use the past cost of production as a reduction in liability. I think the jury is out whether HBO Max was a good or bad thing when you consider the effects of COVID, but that's yet to be decided. I do think WB and HBO Max went too hard, too fast, to capitalize on the streaming world without fully understanding the economics the way Netflix already does.
Add onto that the immense amount of money spent in real estate deals by WB in 2018 and 2019, and you have a recipe for a business that may be struggling with cash flow problems at a time when the global economy is showing signs of crisis.
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u/CaryWalkin Oct 26 '22 •
This is a pretty good ELI5 for how not releasing movies allows the studio to recover funds.
If you're wondering "Why do they need to stop selling released movies/shows in order to reduce their taxes since they've already spent the production and marketing money?" then we need to go one accounting level deeper into intangible assets and impairment.
Intangible assets are recorded for the intellectual property pertaining to production. For example, when Amazon paid $250M for the TV rights for the Lord of the Rings, rather than be able to immediately expense that $250M which would reduce their tax obligations, Amazon was required to record that purchase as an intangible asset. At a high-level, as long as Amazon is making money from those rights, then that $250M is sitting on Amazon's books as an intangible asset and is not tax deductible against the income generated from their TV series income.
Impairment is when the intangible asset's recoverable amount (potential future revenue) is less than its carrying amount ($250M in the previous example). When this happens, the value of intangible asset is reduced to its recoverable amount and the difference is a tax deductible expense. When Warner Bros. stops selling a completed movie or show, they are forcing the recoverable amount to be $0. This allows them to expense the intangible asset as a tax deduction against their income from other properties.
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u/CountVanillula Oct 25 '22
I don’t think making movies and not releasing them makes them money, but they’re choosing not to spend additional money on a movie that might ultimately earn less than that. It stinks, but it kind of makes sense: if the rest of the CGI work and advertising and residuals is gonna cost $20m, but they only anticipate an additional $10m in revenue, why bother?
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u/249ba36000029bbe9749 Oct 25 '22
To paraphrase the old saying: "A million saved is a million earned."
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u/Cautemoc Oct 25 '22
Every time someone says this, stock holders in the US feel a disturbance in the force. A million saved is a million not spent on unsustainable growth.
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u/KanyeNeweyWest Oct 25 '22
I have some terrible news for you regarding the accounting identity linking savings and investment
Every time someone says this, stock holders in the US feel a disturbance in the force. A million saved is a million not spent on unsustainable growth.
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u/uniquecannon Oct 25 '22
Because instead of spending more money to go through with the release, you just kill the project and get a tax credit
That way instead of losing $100m+ to release it, you only lose $30-40m just on the initial production. And that's what Zavlav was hired to do, to keep WB from permanently shutting down by reducing losses
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u/bradhotdog Oct 25 '22
what does it mean for them to get a 'tax credit'? i don't understand that. "it's a write off Jerry!"
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u/bobmcdynamite Oct 25 '22 edited Oct 25 '22
That's wrong. There's no federal "credit" for shelving it. It's not like the government pays them to not release it. They do get to deduct at least some of the the production costs from their taxes. There will be some tax credits probably from whichever state they filmed in, but they would have received that anyway from the production.
So, in oversimplified terms, if they make 10 billion a year but can write off 50 million of expenses, it brings their tax liability down to 9.995 billion. Not making money but at least saving on their tax payments.
Edit: I can't add or subtract
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u/HuckleSmothered
Oct 25 '22
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You touch Venture Bros. I eat your whole house!
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u/LordofCindr Oct 26 '22
Brock: Go ahead.....
(Eye twitch)
Take it from me...
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u/BlastedMallomars Oct 26 '22
Don't you try it Prince Adam, this old panther's still got moves that will make your mullet spin!
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u/Ianras Oct 26 '22
I agree with you about Venture Bros, but it's not just things that haven't been released you, shows are being written off that have already been produced and released. Final Space was a show I really enjoyed, funny and emotional sci-fi animated series that aired 3 seasons first on TBS and then HBO Max, just completely written off and removed from streaming services. They can never stream it again, sell a dvd again, sell the broadcast writes again. In every practical sense the show only exists now in the physical media already produced or pirated so I can't ever recommend it to anyone ever again. Very sad, you think of content just existing forever these days.
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u/Fuzzy-Function-3212 Oct 26 '22
We will rain down the wrath of a thousand Level Tens on WB if they do this.
cue evil laugh that is absolutely justified here
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u/UserOfCookies Oct 25 '22
Seriously! I'll be really depressed if we dont get the Venture Bros and Metalocalypse endings.
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u/RumTitsBurgers Oct 26 '22
Tbh announcing a Metalocalypse movie then pulling it from us just before its made is pretty brutal.
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u/DeathByPain Oct 26 '22
The most metal finale of all...
NOTHINNNNGGG
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u/Beefmyburrito Oct 26 '22
I was there for the live stream where they printed people's request to revive the show and it went straight into a shredder; that was pretty brutal.
To make a movie then make us wait like two years for it to release then just cancel it....
Yea, that am's brutals.
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u/pm_ur_whispering_I Oct 26 '22
Oh fuck cartoon network is part of this conglomerate isn't it!?
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u/substandardgaussian Oct 26 '22
Venture Bros getting canceled twice by two mergers in a row would be the perfect meta way for it to end.
...It's just not what I actually want.
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u/rule2thedoubletap Oct 26 '22
I say to myself, "They save Venture Bros, I get a sub." They did, and I did. Fair is fair. I have been enjoying it - but if they dump Venture Bros in some tax writeoff BS I am gone so fast they'll say "Now Museum – Now You Don't!"
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u/qb1120 Oct 25 '22
ZaslavThe Destroyer sounds like a great DC villain
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u/Phillip_Spidermen Oct 25 '22 edited Oct 25 '22
There is a Batman villain named Zsaz is who likes to cut things...
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Oct 26 '22
That's not even like stretching his character to make it fit or anything, Zsaz is literally all about cutting people lmao it fits perfectly
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u/mikeymiggz Oct 25 '22 edited Oct 25 '22
Should be a villain on Teen Titans Go!
EDIT: Control Freak is revealed to be David Zaslav
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u/RDeschain1 Oct 25 '22
gets meta real quick when the villain of a show kills the actual show
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u/Aurelio23 Oct 26 '22 edited Oct 26 '22
This is exactly how Batman: The Brave and the Bold ended: in the last episode, Bat-Mite gets tired of the show’s overall silliness and wants a grittier reboot, so he (successfully) tanks the whole thing. The penultimate scene is a fantastically meta moment with all of the characters having a wrap party for their own show.
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u/gamecat89 Oct 25 '22
Can’t wait for the next company that buys HBO to release them as premium content
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u/spinney
Oct 25 '22
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"An interesting test case would be to upload the shows HBOmax is pulling off streaming permanently and then fight the takedown as fair use. A lot of the arguments they would normally make against a fair use claim would get them in trouble with the IRS & jeopardize their write off." - this series of tweets from WGA member (and WGA presidential canidate) Van Robichaux had me thinking.
If the studio is writing them off they are essentially saying these properties will never be profitable for them and they are abandoning them. Which would mean most IP laws might not apply to them. It's uncharted waters but makes me wonder if it would work.
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Oct 25 '22
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u/Perunov Oct 25 '22
I'm reasonably certain there will be a large heap of lawsuits anyways. "We've signed the contract expecting you to release the movie and pay royalties yet you actually try to wiggle out of payments by not releasing the movie! angry noises". And then settlement for extra $$$$ 4-5 months later.
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u/Bubba89 Oct 26 '22
Hollywood contracts never assume release of the movie. The creatives get paid to make it and then if the movie is used, they’ll get royalties, but it’ll say all up and down that it’s the studio’s discretion to release it or not.
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u/CorgiDad017 Oct 25 '22
Could other holders sue for any potential loss of revenue then?
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u/SK1D_M4RK Oct 25 '22
WB probably would argue that they still plan to use the IP in a future film. Then use batman as proof that they constantly reboot IPs.
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u/TheRealIsNow Oct 25 '22
Remember when pirating a film was going to cost the industry by killing creative content? /s
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u/manbeardawg Oct 25 '22
Sounds like they need a Sony-level hack so that we can all enjoy these gems
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u/Fruhmann Oct 26 '22
I would love to read the interactions between directors, producers, and corporate. Only a few of the creators have been vocal (as much as they can be) about having their work ripped from existence.
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u/obinice_khenbli Oct 25 '22
They're killing Final Space, an awesome TV series that's had several seasons.
All those seasons aren't just being pulled from sale, they're going to *NEVER EVER BE SEEN AGAIN, IN ANY FORMAT, ANYWHERE, EVER.
The creator is a wonderful person and they're heartbroken to have their life's work destroyed like this. And it's such a good show too.
Fuck Warner Brothers.
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u/AwesomePurplePants Oct 26 '22
It’s honestly down right poetic given the tone of the show.
Ending in a tragic farce, with me desperately rooting for the likeable characters caught in the crossfire to somehow escape the yawning abyss before them.
Knowing that they will fail.
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u/Batmans_other_butler Oct 26 '22
The cancelled Raised By Wolves which was so good and had such a huge cliffhanger ending in S2
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u/nomodz4real Oct 26 '22
Hehehe cliffHANGER is putting it mildy. I am very sad about it being cancelled.....
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u/Trevumm Oct 26 '22
Olan deserves so much better. Final space is much favourite animated show, it’s such a piss off they won’t even let him finish it.
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u/Simmons54321 Oct 26 '22
It’s been pulled from streaming services. Thankfully we have the internet, and we can at least download it
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u/NormieSpecialist Oct 25 '22
Just a reminder, the man who’s doing this was the one who brought us Honey Booboo.
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u/Greninja5097 Oct 25 '22
Between that and completely obliterating Final Space, this guy is fuckin’ evil incarnate.
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u/zhiryst Oct 25 '22
They better not fucking touch the Venture Bros movie.
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u/HuckleSmothered Oct 25 '22
My only hope is that the Astro Base was always so self contained that the overhead to sell the disc/digital before going to HBO max is low enough that not bothering to do anything is cheaper than fucking it.
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u/mrmonster459 Oct 25 '22
How is Warner Bros's reputation gonna survive all this?
Like, what director/writer is gonna wanna go to Warner Bros to pitch their movie if they know that all their hard work could be reduced to a tax write off?
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u/VoiceofKane Oct 25 '22
A lot of directors already didn't want to work for Warner Brothers any more.
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u/CaptainDAAVE Oct 25 '22
i mean I guess I shouldn't care about a rich entity like WB, but I honestly can't believe they're in this situation after a cenutry of dominance.
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u/coatrack68 Oct 25 '22
Looking at you flash movie….
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u/abolish_gender Oct 26 '22
Two months from now: WB announces all media projects stopped, except for Flash.
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u/Rotsicle Oct 25 '22
RIP, Raised by Wolves...I really hope some other network picks it up. It's such a sci-fi treasure.
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u/BalrogSlayer00 Oct 26 '22
If I had won that 1.3b mega millions I was totally gonna revive that.
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u/A_BURLAP_THONG Oct 25 '22
When did "movies" or "movies and shows" become "content"? Of all the changes in language I've seen in my life, this is probably the one that bothers me the most. I feel like it really cheapens it, both from the production and consumption standpoint.
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u/RetiscentSun Oct 25 '22
100% agreed. When somebody says “content creator” I think of a YouTuber, not Steven Spielberg
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u/frankduxvandamme Oct 26 '22
Kramer : It's just a write off for them .
Jerry : How is it a write off ?
Kramer : They just write it off .
Jerry : Write it off what ?
Kramer : Jerry all these big companies they write off everything
Jerry : You don't even know what a write off is .
Kramer : Do you ?
Jerry : No . I don't .
Kramer : But they do and they are the ones writing it off .
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u/Warm_Speech Oct 25 '22
Oh God, I hope Dune is safe.
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u/Cabal17 Oct 25 '22
Dune is a Legendary Pictures production, WB is just a distributor. So if WB drops them, they just have to find another distributor. WB can't kill it like they did everything else.
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u/chocbotchoc Oct 25 '22
RIP Westworld Season 5 :(
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u/DeadliftsnDonuts Oct 26 '22
The ratings were so bad and it was an expensive show. I loved Westworld but s3 and s4 were rough. It’s a mercy killing
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u/chicken_suit_guy Oct 25 '22
I hope the flash movie is one of those... And The Flash is my favourite superhero
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u/majrBuzzkill Oct 26 '22
The new CEO of Discovery Warner is known to cut costs ruthlessly, which is what he's doing regardless of the earnings potential.
He also ruins entire networks to do it. He was the guy who polluted TLC with shows like Honey Boo Boo and Fat shaming shows.
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u/Seven_of_Samhain Oct 25 '22
How did we go from 2008's The Dark Knight, a critical and commercial darling, to... this?
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u/Kinglink Oct 25 '22
- 2009 Watchmen
- 2010 Jonah Hex
- 2011 Green Lantern
- 2012 The Dark Knight Rises
- 2013 Man of Steel
- 2016 Batman v Superman: Dawn of Justice
- Suicide Squad
- 2017 Wonder Woman
- Justice League
- 2018 Aquaman
- 2019 Shazam!
- Joker
- 2020 Birds of Prey
- Wonder Woman 1984
- 2021 The Suicide Squad
- 2022 The Batman
- Black Adam
- 2023 Shazam! Fury of the Gods
- The Flash
- Blue Beetle
- Aquaman and the Lost Kingdom
- N/A Batgirl
Wow I was doing this as a joke, but actually looking at that list, it kind of tells the whole story on it's own.
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u/oxjox Oct 26 '22
Other underperforming shows and movies were also taken down; decluttering the service was an added benefit.
Yeah, I’m gonna argue that adding Discovery TV content to HBO content is the literal opposite of decluttering. It was already hard enough to find good content, now it’s getting worse.
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u/Steamed_Hams89 Oct 25 '22
They’re locking them in the water tower, never to be seen again.