Deleting and destroying finished movies

https://www.rogerebert.com/mzs/coyote-vs-acme-canceled

by cialowicz • 2 years ago

315 361 2 years ago

delichon• 2 years ago

The contrary argument, that a creator has the right to destroy their creation, is made in the Gary Cooper movie "The Fountainhead" (1949).

aquova2• 2 years ago

Even then it's not quite an apples to apples comparison. From what I understand, everyone directly involved in the making of this film is proud of the work and wants it to be released, it's just the bean counters and executives (who I would not consider the "creators" of the film) who want to destroy the creation for ego and tax reasons.

denkmoon• 2 years ago

Why bring ego into it? It's just bottom line thinking, that's all. Is there any good reason to think ego is a part of it?

feedforward• 2 years ago

You're right, it's just part of the absurdity of Rand's vision. In the real world people do work and create something, but some bean counters figure out the heirs who own the majority stake of a company can make a few more bucks by destroying the thing, so it is done.

jowea3• 2 years ago

Which is also part of the argument on TFA, bringing what in part of Europe is known as "moral rights of artists".

Waterluvian• 2 years ago

Yeah. The problem arises when there’s many creators and they disagree. Or when a creation has already been duplicated and given to the world and they think they have any right to claw that back.

nyc_data_geek• 2 years ago

Sure, that sounds fine, but the taxpayer ought to not be responsible for footing the bill in any way. The studios do this for the tax writeoff, which is tantamount to robbing the people paying taxes (eg:us) blind.

gruez24• 2 years ago

It's not "robbing the people paying taxes" because the money was never theirs to begin with. Taxes are paid on profits, and if profits are not made they're not owed.

Suppose I make a painting worth $1000. If I had sold that, I would have been required to pay taxes on that at the marginal rate, say 40% so $400 worth of taxes. Instead of doing that, I set it on fire. Does that mean I just robed taxpayers of $400?

sib2• 2 years ago

Many of the people on this site are involved in technology (software and/or hardware) product development. If they work for a company that spends $10M in development salaries & related costs to build a product, and then decides not to release that product, the company certainly deducts those development costs from its revenues when it files its taxes.

This is true even if some third party had made an offer to acquire the product - there are many valid reasons why the first company may choose not to sell it.

kevingadd• 2 years ago

Are any of the people responsible for this phenomenon actually creators? Isn't it usually investors and accountants doing it for a tax writeoff?

BobaFloutist2• 2 years ago

Ah, the work of fiction based on an Ayn Rand novel?

Considering I'm operating from a very different set of values than she was, I doubt I would find the movie particularly persuasive.

kuratkull2• 2 years ago

I'm of the opposite opinion... now what?

tzs• 2 years ago

Movies are often as much or more the work of their director as they are the work of the author whose book they are based upon. In this case, a reviewer said this:

King Vidor turned Ayn Rand's preposterous 'philosophical' novel into one of his finest and most personal films, mainly by pushing the phallic imagery so hard that it surpasses Rand's rightist diatribes

bhickey• 2 years ago

Do they get to realize the entire loss in the year it occurs?

cnees• 2 years ago

Destroying it should be legal. Writing that off as a loss should be considered fraud, especially when there's an offer for it.

gruez24• 2 years ago

Writing that off as a loss should be considered fraud, especially when there's an offer for it.

From wikipedia:

In law, fraud is intentional deception to secure unfair or unlawful gain, or to deprive a victim of a legal right.

Where's the deception here?

dymk4• 2 years ago

It's defrauding the taxpayer

ClassyJacket• 2 years ago

That they lost money on the film.

Barrin92• 2 years ago

"One of WBD’s most notorious post-merger decisions was deleting an entire finished feature, “Batgirl,” that had an estimated budget of $90 million, to claim a tax write-off"

I feel like if someone reads that in a thousand years they're going to look at us the same way we look at some ancient tribe worshipping idols. Years of work and cultural artifacts destroyed for the accounting department, that's nuts.

Andrex• 2 years ago

It's not destroyed, it exists somewhere. And IMO it's just as likely it sees release in the next 1000 years as it is accidentally destroyed or lost.

Movie studio regimes change all the time, and it's possible to un-tax-write-off a work (it's just a giant pain in the ass).

Adult Swim got Sym-Bionic Titan and IGPX back from the dead, and they're owned by the same parent company (Warner Bros.)

chx2• 2 years ago

I wonder, is it even possible to truly delete a movie?

I am surprised Batgirl didn't leak. How do you even prevent that?

It's just bits.

voltaireodactyl• 2 years ago

The short version is that almost everyone with enough access to make a local copy of the movie is financially and/idealistically incentivized enough by future opportunity within the industry not to risk it.

For everyone else, there’s law enforcement supported by unlimited budget for prosecution from the industry.

mixmastamyk• 2 years ago

Most studios moved to a high security environment a while back. Only Covid reopened things a bit, and not sure how long.

fl73054• 2 years ago

How do you even prevent that?

Keep the working copies on computers in a special lab with no external network access.

Restrict access and physically search the people leaving the lab.

Not fool proof, but it will reduce leaks by a lot.

But yeah, once you send out thousands of review copies, there's no stopping the leaks.

chx2• 2 years ago

But usually a movie is worked on by multiple VFX companies and whatnot.

blincoln• 2 years ago

Seems like a less controversial solution would be to allow the same tax write-off if the studio releases the film for free distribution (e.g. via the Internet Archive), either into the public domain, or under a license like Creative Commons Noncommercial if there's concern about implicitly allowing derivative works by competitors or similar.

TheCleric• 2 years ago

Exactly. You want the tax break? The work now belongs to the taxpayers. Seems fair to me.

advael7• 2 years ago

I think the tax writeoff should only be available for doing something like that. It's insane that corporations failing at ventures is so incentivised that they'll fail on purpose, and we shouldn't be offering tax breaks for behavior that serves no public good

This kind of law is especially offensive in the context of rhetoric about social programs, wherein we create all sorts of onerous means-testing on the logic that someone, somewhere might actually be incentivized to use social services to ameliorate various forms of poverty and destitution

In both cases, there is a balancing act wherein allowing too many false positives can create perverse incentives, and allowing too many false negatives fails to accomplish what the policy set out to do. I think a massive corporation taking a loss for making something unpopular is not an outcome we should be trying to prevent with government programs at all, but we are consistently prioritizing it over preventing outcomes like homelessness

nerdponx5• 2 years ago

I don't understand the move in the first place.

Do tax write offs for corporations work differently than for people? What's the point of spending $90m just to reduce your taxable income by $90m? It's not like corporations have progressive tax brackets.

Or did they acquire the movie as part of the acquisition, and are now somehow able to claim a write-off for something they didn't actually spend any money on?

CSMastermind• 2 years ago

It's insane that corporations failing at ventures is so incentivised that they'll fail on purpose, and we shouldn't be offering tax breaks for behavior that serves no public good

I believe the argument is that businesses would take less risks without the security provided by those tax write-offs. Presumably the increased tax revenue from businesses taking risks and having success outweighs the tax losses from risks taken, failed, then written off.

verisimi• 2 years ago

Why are movies given tax breaks at all, is the question.

fred_is_fred2• 2 years ago

I think this specifically is a write off, same as if you made 500,000 widgets and nobody bought them.

prepend9• 2 years ago

It’s not specific for movies. All businesses only pay taxes on profit. And the expenses spent to produce things are a “tax break” to offset revenue.

This is done because it’s hard to pay taxes if you don’t make a profit as your money is already spent on other stuff like resources, people, etc.

sib2• 2 years ago

Since - as only one example of the complexity involved - the music used in the film is almost certainly licensed and must be paid for, and the studio does not "own" it, there's no way that they can simply release it for free distribution or put it into the public domain...

qingcharles3• 2 years ago

And having had this issue myself with a Hollywood movie, where the rights for the music in the final cut were too expensive, trying to replace the music is always horrible. Especially, as in this case, where you would likely have to go with public domain music.

tpmoney7• 2 years ago

That seems even worse for all the people affected doesn't it? Anyone who had residual contracts now not only gets nothing like they were before, but their work is still actually being distributed, even if the studio in question is getting nothing for it. I feel like the first court case we'd see after something like this would be all the actors suing some "Rejectflix" company that springs up to provide a curated streaming site for these things.

AlbertCory11• 2 years ago

Where do you draw the line? If an artist pays a model and paints her, is the artist to be prohibited from destroying the painting because it sucks, and because the model wants credit? What about a music producer who pays a studio band to record a song that turns out to be terrible -- is the producer prohibited from deleting it?

It's the tax write off for destruction that's fucked up, as @cnees says. Failures are part of the process of creation. If the producer says the market value of the work is zero, they've committed tax fraud if it's not.

The solution to their "attribution" problem was found by directors a long time ago when they didn't want their names on a film: it's directed by "Alan Smithee."

https://www.imdb.com/name/nm0000647/?ref_=fn_al_nm_1

fl73054• 2 years ago

is the artist to be prohibited from destroying the painting

Perhaps not prohibited. But we could make it so they lose all IP rights.

Copyright is intended to promote the creation and distribution of new works. It is not a natural human right, like ownership of your physical things.

Terr_• 2 years ago

Perhaps not prohibited. But we could make it so they lose all IP rights.

I'm not sure how that would work. Suppose I make two draft comics of my original character ExampleMan. One features a dark brooding morally ambiguous anti-hero, and the other is a wholesome family character.

Are you saying if I destroy one draft and publish the other, the character comes partially or wholly into the public domain? Or that I am prohibited from claiming the time and money used to make one of the drafts as the legitimate business expense?

Would same logic also apply to a patents of a company that creates 10 different prototype engine designs, and decides to only bring one of them to market?

gruez24• 2 years ago

But we could make it so they lose all IP rights.

If they're actually destroying all copies as claimed, then IP rights is irrelevant.

zokier• 2 years ago

In what sense is ownership of physical things natural human right?

sokoloff6• 2 years ago

I don't think they need to claim that "no one would pay even $1 for the rights to the movie in its current state" but rather the lesser "in our judgment, the best thing for us as a profit-seeking studio is for us to not release this movie".

Damage to the Batgirl franchise brand, damage to the studio reputation, damage to the relationship with the stars, legal fees, etc. could all be reasonably factored in to the studio's judgment to scrap the current WIP.

AlbertCory11• 2 years ago

You are confusing "not releasing it" with "claiming a value of zero."

Schnitz• 2 years ago

Where do you draw the line? If someone buys the Mona Lisa and burns it for the tax credit, is the owner to be prohibited from doing so based on the public interest?

AlbertCory11• 2 years ago

Try being realistic. Is "cultural treasure" your line?

Notatheist• 2 years ago

I feel the Mona Lisa's destruction would be more valuable to culture than its continued existence. Imagine the headlines, the people with stories of having seen it in person, the conspiracy theories...

derivative72• 2 years ago

If I pay 25% marginal income tax and I make a profit of 200 million dollars, I get to keep 150 million. If instead I decide to buy the Mona Lisa for 200 million dollars, and burn it I walk away with nothing but the satisfaction of not have given one cent to the government. Please tell me how my evil mastermind plan to burn the Mona Lisa works anyway?

prepend9• 2 years ago

If someone buys the Mona Lisa and burns it for the tax credit

This is not how taxes work.

If I buy the Mona Lisa for $100 and burn it for the tax credit. That would only yield me a $100 deduction so a savings of $46 in taxes (and I live in the most tax heavy portion of the US for purposes of my example).

So I would lose $54 in your example. Why would anyone do this?

pradn5• 2 years ago

Yes, explicitly! There are these things called "moral rights".

"The moral rights include the right of attribution, the right to have a work published anonymously or pseudonymously, and the right to the integrity of the work. The preserving of the integrity of the work allows the author to object to alteration, distortion, or mutilation of the work that is "prejudicial to the author's honor or reputation"."

I'm sure it applies even though Leonardo is long gone.

https://en.wikipedia.org/wiki/Moral_rights

lekangoo• 2 years ago

We can draw the line right here. We don't need spurious analogies when we have a clear case where a company is abusing the tax system.

nerdponx5• 2 years ago

We don't need to draw any line. Larger corporate entities should get progressively smaller caps on deductions. Hard cutoffs breed adverse incentives.

prepend9• 2 years ago

How is the tax system abused?

ysofunny• 2 years ago

where to draw the line?

when other people get their hands on the files

we must admit (and later on embrace) the digital possibilities we have. if the artist or model want it deleted they best make sure nobody copied it first else, in my opinion, they must convince every person holding a copy from voluntarily agreeing to destroy it.

nobody should have a right to force other persons to act against their own will even if they created some artifact they no longer fully control

zoky• 2 years ago

The solution to their "attribution" problem was found by directors a long time ago when they didn't want their names on a film: it's directed by "Alan Smithee."

That’s not exactly how that works. A director can’t just decide to take their name off a film because they don’t like it. They have to petition the DGA for permission to do so, which is only granted in the event that the director can show that the producers took creative control away from the director and substantially changed the product from the director’s creative vision as a result. In practice, this rarely happens, as the DGA is extremely reluctant to allow directors to take their names off of movies simply because they weren’t happy with how it turned out.

Also, “Alan Smithee” isn’t actually used as a pseudonym anymore, but that’s beside the point.

AlbertCory11• 2 years ago

Your point, whether you realize it or not, is that Hollywood is heavily unionized. The contracts that all the talent sign specify who owns the final product, and what will happen to it if it's a bust.

So that's the real answer. The unions have to make this an issue. Or maybe they already have.

prepend9• 2 years ago

It's the tax write off for destruction that's fucked up

How so? They aren’t selling it. So its value is $0.

If the artist burns the painting, its value is $0. Is it bad because the artist could have sold it and chose not to?

And it’s not fraud, because if the studio ever chooses to sell, they will pay taxes on 100% since they already deducted all expenses.

I’m not really sure what you’re arguing. What’s the alternative? The IRS forcing you sell at a liquidated value so you only deduct 90% instead of 100%?

This seems like a really odd argument.

theshrike792• 2 years ago

How so? They aren’t selling it. So its value is $0.

If its value is $0, I should be able to buy it for that price.

AlbertCory11• 2 years ago

It's not "odd." Anything you build can have a "salvage value." Someone would take it off your hands, be it a building, a car, or a movie.

Unless, of course, everyone's unions agreed on destruction, via their contracts.

smarx007• 2 years ago

At claiming a tax break.

A tax write off is intended to help you when you suffer a loss. In this case, a company does not suffer a loss but inflicts it on itself by destroying its asset without even trying to liqudate it properly.

cryptonym2• 2 years ago

Change the rule so destroying in purpose no longer qualify for tax break and someone will accidentally the only hard drive.

pradn5• 2 years ago

Why does someone have to demarcate exactly where "the line" is to make a judgement on this situation?

You can simply ask yourself "do I want to live in a world where this happens" - and any decent person would say "no".

The presence of a "slippery slope" is not enough to prevent going down a path, even somewhat.

A film takes hundreds of people to create - how does it feel for them to just have years of their lives fall into the void?

hyperhello• 2 years ago

Many people believe that banning disliked things is not what laws are for. If it was you’d see the powerful banning everything they didn’t like, making the law tyranny, and the powerless banning everything they didn’t like, and you get the French Revolution.

dylan6042• 2 years ago

A film takes hundreds of people to create - how does it feel for them to just have years of their lives fall into the void?

Very few of those hundreds of people care about the project. Maybe the producer and/or director cares, and maybe the writer. There's a funny shirt that crew members wear with the phrase "I'm just crew. I don't have to know what it's about" that sums up exactly how much they care. Even the actors don't care, and a lot will admit they never even see the finished project.

Essentially, the majority of people are just hired hands.

onionisafruit• 2 years ago

Yes I want to live in a world where this happens. It’s a wonderful world even if this particular aspect isn’t great.

persnickety• 2 years ago

In a world where "this" means what exactly?

That's what the line is for.

s1artibartfast17• 2 years ago

You can simply ask yourself "do I want to live in a world where this happens" - and any decent person would say "no".

I think any decent person would say yes.

I'm sure it is a bummer for those people, but they were paid to do a job, and don't own the film.

yjftsjthsd-h• 2 years ago

A film takes hundreds of people to create - how does it feel for them to just have years of their lives fall into the void?

Were they not paid for their labor? It might not feel great, but I struggle to see a moral problem; if a project or even whole company I used to work on/at goes under I might have feelings about it but in the end I shrug and move on (and this is not a hypothetical for me).

nox101• 2 years ago

Should this apply to everything? Someone buys a cupcake. Instead of eating it they throw it away. Is the person that made the cupcake owed something more than the $ they already got for it because the cupcake was not eaten and so their time fell into the void?

How about all the people that built a house or car that a movie production destroys? (less often now that everything is CGI).

Also, if the movie sucks, it often reflects badly on all of those people. They try to get work on a new movie, people look at the old movie, see it sucks, don't hire them.

jfdh6• 2 years ago

On the flip side the artists and engineers in the Western Entertainment Industry dont complain about Tax subsidies, govt grants and advantages they have in terms of access to capital, cheap outsourced labour to do boring or dirty work etc. that artists and engineers sitting elsewhere somewhere else dont.

When the rest of the world looks at them, propped up by an extremely unequal playing field engineered by the financial class, there is nothing Fair to see.

imgabe9• 2 years ago

The line is at claiming a loss for tax purposes. Destroy the film if you like, but then you get no tax break.

There's a similarity with the "hobby loss rule". In order to be a valid business who can deduct business expenses like losses, you have to demonstrate that you have a "profit intent". That means that you make at least an attempt to turn a profit on your work. If you don't, it's considered a hobby and you don't get to deduct any expenses.

If Warner Bros is going to make movies just to delete them without even trying to sell them, that sounds like they're just indulging in a movie-making hobby rather than being in the movie business.

s1artibartfast17• 2 years ago

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.

_giorgio_• 2 years ago

They can't decide that the value is zero if they got public offers from Amazon, Netflix etc

It's clear that the loophole is to ask Amazon and Netflix to make a secret offer.

Public auction is the solution if they do it for tax reasons and not for artistic integrity.

konschubert3• 2 years ago

I don’t get your point. If you run a business, money that you spend is subtracted from your earnings.

Are you alleging that they made the money for fun? That they never intended to release it?

That’s they spent 10 dollars to save 3 dollars in taxes?

And then you pay taxes on earnings.

That’s not cheating and it makes a lot of sense if you think about it.

Veserv2• 2 years ago

That is easy. If they claim the contract-encumbered work is worth 0 dollars for tax reasons, then anybody (who does not intend to commit breach of contract) should be allowed to buy the fully encumbered work for 0 dollars and the original owner can take the loss/write-off.

That should get like the central 90% of cases. Probably need some fine-tuning to get the rest and reduce opportunities for abuse (maybe some minimums, deposits for legally complex products, etc.), but the core concept should be sufficient to develop a robust solution.

throwaway69123• 2 years ago

Public auction seems appropriate

cryptonym2• 2 years ago

I create multiple movies, one works well and I think to myself I pay too much taxes this year. I sell the next one for 0 dollars to my cousin so I can write it off immediately. If the movie works, money stays in the family, if it doesn't I already got deductions and it was a no-op for my cousin.

gmerc• 2 years ago

“Where do we draw the line” is the most common argument for inaction on a complex dilemma.

Society can always choose to draw the line. We always draw the line - criminal code, taxation, copyright.

The answer is - you gather a work group legitimized by democratic process and figure it out.

lobocinza3• 2 years ago

The issue is that the people complaining only like the democratic process when it agrees with them.

konschubert3• 2 years ago

If the market value was nonzero, why would they be scrapping it?

They could still count the delta between their production cost and the money they got as a loss and deduct that from their taxable income, no?

They have no incentive to underestimate the value of the final product.

Income - expenses = taxable earnings.

As a business, the money you get by earning a dollar is always bigger than the taxes you pay on it.

If they’re scrapping it, they are clearly deciding that the cost of finishing and marketing this movie is greater than the value of the movie.

What am I missing?

Majromax• 2 years ago

What am I missing?

I'm a bit confused about the accounting details as well, but I think the key bit is that a scrapped movie becomes an immediate tax write-off, whereas a released move must depreciate its costs over time.

By writing the movie off entirely, Warner Brothers foregoes the marginal profit from releasing the movie (income less distribution costs, considering the movie itself to be a sunk cost), but in return it can claim the tax benefits now rather than over time. At some implied internal interest rate (where a dollar today is worth more than a dollar next year), that makes sense.

Unless there's some detail that I've missed in the above, Warner Brothers seems very desperate to bolster its current accounting profits at the expense of longer-term financial health.

andybak• 2 years ago

I don't believe that the artist's wishes should always win out. We would have lost Kafka if his wishes were followed.

I don't believe copyright should always win out. We nearly lost Nosferatu.

As for ownership? We lost a wonderful portrait of Churchill because it displeased his wife.

There are countless lost works - late Sibelius, a ton of Brahms, Bacon and Monet paintings. History judges such things severely.

Unless you believe in a specific variant of life-after-death then an artist's wishes only carry moral weight whilst they are still around. Destruction has effects that last forever.

qingcharles3• 2 years ago

Does art belong to the artist or the public? I only ask because of things like the alterations to Star Wars by Lucas. It felt like he was modifying something that no longer belonged to him.

At the other end of the spectrum you have the Bobs who refuse any manipulation or sequels to Back to the Future and turned down Universal's offer of a 3D conversion of the movies, which I actually thought might be OK.

Procrastic• 2 years ago

How about a floor of, say, $1mn USD expenditure?

Spend less than that on a media product, and you can axe it as you like without any release.

Spend more than that, and if you want a tax write off it goes straight to the public domain.

simonw• 2 years ago

I wonder what would happen if a bunch of extremely bankable talent - the Christopher Nolan, Greta Gerwig, Tom Cruise crowd - quietly got in touch with Warner Bros and made it clear that they would avoid working with any studio that had a track record of cancelling completed projects for a tax write-off.

mdasen2• 2 years ago

I'm sure this is happening already. People aren't going to want to bring projects to Warner Bros Discovery given all the crap they're pulling. WBD will be the option of last resort when someone else won't take your project - or the place you need to go when WBD owns the IP behind certain characters like Batman.

add-sub-mul-div• 2 years ago

Warner Brothers reportedly lost Nolan for pissing him off with their dumb straight to streaming strategy. And then he made Oppenheimer for another studio. And they still did this.

wmf2• 2 years ago

Nolan has talked about going back to WB in recent months.

lupusreal• 2 years ago

"Why deleting finished programs should be a crime."

Be honest, at least some of you have finished a project before deciding to axe it instead of publishing it. It is any creators right to decide not to publish something.

If the issue is the tax treatment of these circumstances, then fix that.

loughnane3• 2 years ago

Commenting before I've read the article:

That's ridiculous. There's no obligation for anyone to bring something to market regardless of how far along it is.

After I read the article:

Still not persuaded. It reads like motivated reasoning, the person doesn't like things not getting released and says that governments should step in. There's some mention of taxes and lost work, but nothing tht holds water.

As an example: if it cost you $100M to make a film and you write that off you could reduce your tax burden by as much, netting a $15M lower tax bill if your rate was 15%.

By contrast if you release it you've no guarantee of that $15M, especially once promotion and other costs are factored in. If it's a trash movie that'll also damage the firm's reputation---something that's tough to quantify but no less real.

That's not great, but its I wouldn't want to live in a society where that was criminal.

Then there's this:

nobody who did any sort of work on a project that consumed years of their lives will ever be able to point to it as evidence of what sort of work they’re capable of doing

That's the status quo in most jobs. Things don't ship all the time.

It's a bummer, yeah, but that's it.

shadowgovt2• 2 years ago

Honestly, if we want to disincentivize Hollywood from burning movies, that's the loophole to close. Stop letting them take a movie that generates a net loss as a write-off.

This would have monumental consequences to the Hollywood business model.

advael7• 2 years ago

The argument isn't that WB shouldn't be able to scrap projects. The argument is that the tax break for doing this is bad and should not exist

loughnane3• 2 years ago

If we're to do that are we going to force every company to release a product they've developed, or otherwise the code/blueprints for it?

Aside from the reputation hit I mentioned, the unreleased film might have some neat ideas they want to recycle into another, better project.

There's a case to be made that we should eliminate tax breaks for all "R&D" work, but this article doesn't persuade me. It reads like it was written by someone who'se unhappy that they're work won't see the light of day, which I get. I've developed several products that at the last minute the exec team decided wasn't worth the capex to tool up...it's just a part of the game.

dahart3• 2 years ago

Except the post very much is arguing studios shouldn’t be able to scrap projects. Did you catch the end? “governments exist (in part) to regulate corporations, in order to stop them from doing things that are deleterious or destructive to the public good and to individuals who work for them.” This isn’t saying the tax break is bad, it’s saying that deleting a film is what’s bad.

nerdponx5• 2 years ago

If $15m of taxpayer money is being paid out as a write-off for a finished movie, I feel like I as a taxpayer should have the right to see the movie. Nobody is forcing anyone to sell anything.

s1artibartfast17• 2 years ago

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?

fred_is_fred2• 2 years ago

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.

JeremyNT• 2 years ago

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 on some percentages of revenue right?

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?

Something is clearly weird where this is advantageous. It's not clear from the article why this trick actually works for movies.

empath-nirvana• 2 years ago

IMO this is a labor relations issue and it's exactly the sort of thing that unions should be negotiating with studios, just like they negotiate film credits and residuals and all kinds of other things.

The real victims here are people who signed the contract to do the work, many of whom probably got box office participation who are going to be denied some of their compensation through no fault of their own. And even people with no stake in the box office presumably did the work for "experience" on their resume that is essentially getting disappeared.

I think this problem is somewhat self limiting because film makers signing contracts with WB are going to add clauses to prevent this from happening again.

lbarrow• 2 years ago

Without commenting on the larger issue the article brings up, this specific point doesn't survive scrutiny to me:

  Some of the company’s tactics post-merger were garden-variety ruthless, like eliminating 87 series from its streaming platform Max, so that they won’t have to pay union-mandated residuals to the talent that created already-existing programs or pony up funds to produce more seasons of existing ones (such as “Our Flag Means Death,” one of the company’s most popular and critically acclaimed comedies—canceled after just two seasons).

In the streaming era, it's very easy for the revenue created by hosting an older piece of content to be dwarfed by residuals. Streaming services get customers largely by releasing popular new titles; it's entirely predictable that pushing for higher residuals would drive services to sunset series faster, and it's entirely reasonable for services to stop hosting titles that lose them money.

wmf2• 2 years ago

Financially, HBO's decision makes perfect sense as you said but it still sucks, especially if those series had no physical release. If a book or DVD goes out of print you could at least track down a used copy but for streaming there's nothing.

BLKNSLVR2• 2 years ago

Residuals feel analogous to copyright in some way.

areoform• 2 years ago

There are three conversations currently being had here,

One revolves around corporations deleting works that they've paid for.

The second centers on the rights of artists (and is framed via first person, therefore it's at the human level).

The third focuses on corporations, the government and society writ large.

The offered prescriptions and takes on each differ by each scenario.

It's important to recognize that it's, most likely, not possible to create a rule, or even a set of rules, that fits all scenarios for the above categories. But it is likely worth asking questions about the scenario at hand; an executive removed from the production & artistic creation process has decided to use deletion of art works as an accounting strategy to offset debt from a Leveraged Buy Out. A question worth asking is what other irregularities are going on,

   > Financial engineering has always been central to leveraged buyouts. In a typical deal, a private-equity firm buys a company, using some of its own money and some borrowed money. It then tries to improve the performance of the acquired company, with an eye toward cashing out by selling it or taking it public. The key to this strategy is debt: the model encourages firms to borrow as much as possible, since, just as with a mortgage, the less money you put down, the bigger your potential return on investment. The rewards can be extraordinary: when Romney was at Bain, it supposedly earned eighty-eight per cent a year for its investors. But piles of debt also increase the risk that companies will go bust.
    > 
    > This approach has one obvious virtue: if a private-equity firm wants to make money, it has to improve the value of the companies it buys. Sometimes the improvement may be more cosmetic than real, but historically private-equity firms have in principle had a powerful incentive to make companies perform better. In the past decade, though, that calculus changed. Having already piled companies high with debt in order to buy them, many private-equity funds had their companies borrow even more, and then used that money to pay themselves huge “special dividends.” This allowed them to recoup their initial investment while keeping the same ownership stake. Before 2000, big special dividends were not that common. But between 2003 and 2007 private-equity funds took more than seventy billion dollars out of their companies. These dividends created no economic value—they just redistributed money from the company to the private-equity investors.
    >
    > As a result, private-equity firms are increasingly able to profit even if the companies they run go under—an outcome made much likelier by all the extra borrowing—and many companies have been getting picked clean. In 2004, for instance, Wasserstein & Company bought the thriving mail-order fruit retailer Harry and David. The following year, Wasserstein and other investors took out more than a hundred million in dividends, paid for with borrowed money—covering their original investment plus a twenty-three per cent profit—and charged Harry and David millions in “management fees.” Last year, Harry and David defaulted on its debt and dumped its pension obligations. In other words, Wasserstein failed to improve the company’s performance, failed to meet its obligations to creditors, screwed its workers, and still made a profit. That’s not exactly how capitalism is supposed to work.

https://www.newyorker.com/magazine/2012/01/30/private-inequi...

pk-protect-ai• 2 years ago

Isn't Hollywood very well known money laundering machine?

kuratkull2• 2 years ago

Kinda weird to bring legislation into it. Should my employer not be allowed to delete my code because it's my special little snowflake?

josephcsible• 2 years ago

Your employer should be allowed to delete your code, but not be rewarded with tax savings for doing so.

jowea3• 2 years ago

I don't see how it is socially beneficial to incentivize wasting millions worth of human effort with taxation benefits.

I don't think it is exactly the same thing with a more utilitarian thing like code. Even then, I'm not convinced outright tossing code out should be incentivized.

ecocentrik• 2 years ago

This argument reminds me Robert Rauschenberg's, Erased de Kooning https://www.sfmoma.org/artwork/98.298/

froh2• 2 years ago

my saddest story there is "frank'n stein" a hilarious comedy movie and theatre play toying with the Frankenstein plot.

I've seen the movie and it made ma watch a local play and I loved both.

when I tried to get hold of the DVD years later I learned that the heirs to the author Ken Campbell had withdrawn all rights. this removed all prints from all libraries too. the thing is _gone_. because the heirs hated their gene provider so much.

I was amazed this is possible... "freedom of speech"? nope. intellectual property.

verve_rat2• 2 years ago

That seems... wrong?

You can't unpublish a book by withdrawing the right and force the destruction of already sold copies. I believe DVDs fall under the same first sale doctrine, so this story seems to be missing some details.

froh2• 2 years ago

it's not a normal book, it's a theatre play, a script. and the license owner can restrict the rights for these to be useless unless relicensed. it was mind bending to me. and yes, it feels wrong.

mdasen2• 2 years ago

To me, the weird thing is that the tax write-off doesn't even seem to make sense.

Let's say you spend $80M making a film and you write it off for a $30M benefit. You're still in the hole $50M. Let's say that you sell the film for $20M and write off the remaining $60M loss for a $23M benefit. In the latter case, you're only in the hole $37M instead of $50M. That's a lot better.

Is there some weird accounting rule where you're allowed to write off full losses, but not partial losses? I understand writing off losses: if you make $100M on one project and lose $50M on another project, you pay taxes on the $50M you've made - but you're only getting a fraction of the money back. It's better to get 100% of $20M plus a fraction of $60M than getting a fraction of $80M.

No one seems to be explaining how this is working in Warner Bros Discovery's favor. Sure, I get canceling popular shows where the actors might be looking for more expensive contracts. I might think it's short sighted given that you need popular shows to keep your subscribers, but I get what they're trying to do. I understand licensing content to a competitor for a quick pay day. Again, it seems short sighted, but I get what they're trying to do. What I don't get is why it's better for them to completely scrap content than to let it flop upon release. The only possible explanation I can see is that they'd be able to claim the tax relief earlier. If they released it in late 2023, they'd have to wait to claim any losses since they'd be making money off it into 2024. If they cancel it in 2023, they can take the write off for 2023. It must be something else, right?

crooked-v• 2 years ago

It doesn't work in their favor. It does, however, work in the favor of Zaslav's specific desires about slashing content that has to pay residuals in favor of residual-free reality shows and documentaries.

jowea3• 2 years ago

I'm also scratching my head at why this could make sense from a purely financial point of view, doubly so if the film is expected to be at least good. One of the paragraphs in TFA proposes it's some sort of company vision and trying to avoid embarrassing themselves. I would proposition that being known for scrubbing completely projects is rather embarrassing too specially in the view of contractors for future projects but what do I know.

To my knowledge, the company has never given anyone a justification beyond debt reduction and a bit of vague gesticulation toward a corporate vision that the film supposedly didn’t sync with. Public outcry caused the company to backpedal in November 2023 and say that they would sell the movie elsewhere, but Drew Taylor of The Wrap has reported that the company never entertained any negotiations about their asking price, demanding not a penny less than $70 to $80 million for the privilege of owning a project that they would only gain $30 million by scrubbing from their own ledgers. The offer to sell the film was, to put it mildly, not undertaken in good faith. It appears that the company would rather take less money by writing off the movie than sell it for even a few dollars more than that, because they might risk having a rival turn it into a success, which would further embarrass them for never even having tried to market it themselves, even though it was built around “intellectual property” (i.e., adorable cartoon characters) that are as inextricably linked with Warner Bros. as Marianne is with the nation of France.

philsnow• 2 years ago

Criminal fraud issues aside, I would think that all of the artists had a reasonable expectation that the work they were doing would be released, and would then become part of their resume.

Since it didn't get released, they collectively and/or individually might very well bring a civil suit against the company for lost compensation (where compensation is defined as some combination of cash and reputational gains, and this latter part became zero).

bongodongobob• 2 years ago

I worked for a month on a server migration project that ended up getting axed.

I have 0 expectation of any sort of retribution because I don't get to put the migration on my resume.

That's an insane expectation.

BLKNSLVR2• 2 years ago

Depends on expectations and contractual agreements on how someone gets paid for their work. Entertainment can be a wildly different beast to that which us regular paycheck folks deal with.

s1artibartfast17• 2 years ago

the part that I dont understand is why the production costs aren't always deductible, no matter what happens to the movie.

When I run my company, I can deduct labor and material costs. I dont have to resort to any special measured to qualify for them.

Is this about some accelerated ammonization schedule?

merrywhether• 2 years ago

WBD is a public company, can the shareholders sue or otherwise punish the board/CEO? I'm not sure where those boundaries are, just top of mind because of the recent Musk action. That seems like the appropriate source of any enforcement on this angle, as shareholders are most affected by these decisions and have standing.

erik_seaberg• 2 years ago

Does WB get the whole writeoff in one year, but only if they value the movie at zero and destroy it without ever releasing it? Otherwise I don’t see how doing this is better for them than recouping whatever they might.

jimjimjim• 2 years ago

Legal or not, it still reeks of evil. But it seems quite a few people are OK with evil. Very disappointing.

anon373839• 2 years ago

Can anyone with an accounting background explain what is actually happening on the books to make this economically advantageous? By forfeiting any revenue on these films, the studio is reducing its tax burden but isn’t it increasing its overall economic loss?

tgsovlerkhgsel• 2 years ago

So how do these tax write offs actually work?

I'm assuming that when the film is produced, they spend money to receive an asset, no different than e.g. buying a machine.

With a machine, they could write it off over time, or (I assume) they can delete the movie/scrap the machine to immediately book the remaining value as a loss?

If they don't do that, I think a machine is valued according to the purchase price and written off over X years. How does a movie get valued and written off?

There's a good argument for banning write-offs for salvageable assets that are scrapped (regardless of whether it's machines, inventory or movies) - I've heard the tax impact argument made for the destruction of still-usable assets too.

mindslight• 2 years ago

Seriously! So many exasperated comments talking about unfair "tax breaks" and whatnot, and very little examination of the mechanics that actually would support this. It's like the Seinfeld "write off" scene.

From the sec 174 discussions, I had thought that movie production didn't even have to be capitalized? Or maybe that's wrong?

But even with capitalization, you'd think that selling the movie to someone else would accomplish the same thing - fast forwarding the depreciation - but with some additional immediate cashflow, part of which goes to taxes.

Unless the goal is to float this narrative for a year or two. Call the movies worthless for now, but retain control. And then finally "relent", re-value them upwards, and monetize? This would skip the current depreciation period and push taxes into the future.

ThinkBeat3• 2 years ago

Could we not just skip the 30 years of copy right protection or whatever it is now and just release it to the public domain?

No money will be made, but if people should want to they can view it.

I am sure Internet Archive or some organization would be willing to host such movies, and not make any attempt at making a profit from it.

Even better would be to turn all the assets that went into the creating it into the public domain as well.

They should be able to say "Well this movie is total sh*t and we want a tax write off, once it is all done and we have recovered that money we will make it available to the public (at no cost to us))

Is the problem that if anyone was allowed to watch it, they may conclude that the movie had potential and thus the tax write off is not made in good faith?

ronsor• 2 years ago

You're off by almost an order of magnitude there. It's 95 years of copyright protection nonsense, not a mere 30.

Edit: very few would complain if it were only 30

jb19913• 2 years ago

That is much less than “almost an order of magnitude.“

cryptonector2• 2 years ago

GP probably meant "30 years left for whatever particular movie".

UncleMeat3• 2 years ago

You can reasonably imagine a movie that has negative brand value. In a ridiculous scenario, imagine if the first attempt at Iron Man 2 was 90 minutes of Robert Downey Jr engaged in hardcore sex and shouting racial slurs at people. Even if some people are interested in watching (or even buying) this, it should be clear that a studio has the right to destroy it.

The studio spent $100m to make this thing. Maybe a competing studio would like to buy it for $50m so they can destroy the MCU or whatever. But the studio considers the brand harm to be so great that there is no way that they'll sell it. Should the studio have to artificially reduce their expenses by $50m because of this potential buyer even though the studio in no way agreed to this price?

ThinkBeat3• 2 years ago

You raise a valid point that I had not considered when it comes to reputation.

I agree that the studio has the right to destroy films. I do think that is unfortunate when they do.

I dont think, but I have no data so its pure speculation, that at least the majority of movies that get destroyed would not have much of a influence on the studio's reputation. Perhaps more for actors or directors.

On your second point I dont quite follow. In my post my suggestion is that after the studio has received its tax credits, the film would be available in the public domain for free.

Post tax break the movie has little utility for the movie.

This may require an adjustment in tax law. I am in no way well versed in that and I have little idea how it works.

The tax code could be amended for this scenario that the work being used for tax credit does not have to be destroyed.

(Again your 1st point is valid and a concern)

qingcharles3• 2 years ago

As someone stated above, there might be rights issues with the music and other elements used in the movie where the IP creators expect to get paid with every viewing etc.

compumike• 2 years ago

If we eliminated the accounting fiction called "depreciation", and instead simply had all expenses deductible in the year they were incurred or paid on a cash basis (with net losses carrying-over to future years), this wouldn't have happened.

bbor• 2 years ago

IDK if meta comments are ever allowed but: it appears HN has changed this headline, dropping the imperative clause “…should be a crime”. Why? I get that they want polite conversation on here, but pretending that the whole thesis of this essay doesn’t exist seems like an ineffective and terribly obscurative way to do that. But I’m probably missing something?

cryptonector2• 2 years ago

@dang: Actual title: Why Deleting and Destroying Finished Movies Like Coyote vs Acme Should Be a Crime

EVa5I7bHFq9mnYK• 2 years ago

"... deeming it bad-to-the-point of un-releasability (how they could prove this when no one outside the production had seen it remains a mystery"

Not a mystery at all, the name is enough.

plastic3169• 2 years ago

Isn’t this how game companies operate often? They guard their brand by not putting out mediocre products.

AnarchismIsCool• 2 years ago

I think the issue here isn't that they are deleting the movie, it's that they're deleting other people's work.

Remember, a corporation is a group of people joining together to create something they couldn't individually. Yes, there's a bunch of contract law we pile on top of that to make the concept borderline worthless, but bear with me.

If the employees created the movie, and the broader corporation declares it a failure and attempts to write it off, the people who created it should then be given the copyright or the copyright should be revoked such that those individual artists can do with it as they please.

Anything else is just someone coming over and stomping on your sandcastle because employee contract law is insane.

pmontra• 2 years ago

Companies invest money to create products. Some turn into a profit, some don't, some don't even make it to the market. At the end of the year they sum revenues and expenses and either a profit or a loss. If a movie makes zero money it's only an expense and that already reduces the taxes on the revenues. SO why do studios have that tax write-off on top of normal tax on the revenues - expenses figure?

bradley13• 2 years ago

This...doesn't make sense? The expenses of producing the movie can already be offset against their profits. That's how business works: you only pay taxes on money you earn after expenses.

So how, exactly, do they get an additional write-off for destroying the film? If you deliberately destroy something of value, why should you get to write that off your taxes? Consider: They certainly own a lot of computers. If the CEO walks through the building smashing all the computers with a sledgehammer, the IRS is not going to let them write off the destruction. That would be stupid.

So why can they do this with a movie?

bluesign• 2 years ago

Probably there are some costs involved after publishing the movie. Some minimum guarantee royalty commitment to some people involved, like actors etc.

kryptiskt• 2 years ago

If they released the movie to the public domain and set up a torrent, wouldn't the value of it be zero to them? And that in an even more irrevocable manner than destroying the copies they have (since you can never be sure that anyone has squirreled it away). Then they would get literally all the critics off their back.

refurb• 2 years ago

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.

darick• 2 years ago

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.

AndriyKunitsyn• 2 years ago

Hey, it's just like in the plot of GTA V :D

I thought it's something absurd Rockstar made just for the plot, but apparently it's a common thing.

kingkawn• 2 years ago

Jus change the law so total tax write offs put the film into public domain rather than destruction

Deleting and destroying finished movies

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