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."
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.
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.
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.
Why shouldn't they be able to deduct there very real losses.
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.
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?
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.
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.
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.
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).
That's what the line is for.
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.
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.
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?
If they're actually destroying all copies as claimed, then IP rights is irrelevant.
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.
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.
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?
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.
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.
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.
So that's the real answer. The unions have to make this an issue. Or maybe they already have.
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.
If its value is $0, I should be able to buy it for that price.
Unless, of course, everyone's unions agreed on destruction, via their contracts.
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.
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?
"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.
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.
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.
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
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
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.
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?
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.
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?
Edit: very few would complain if it were only 30
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?
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)
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.
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.
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.
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.
This would have monumental consequences to the Hollywood business model.
Why souldnt they be able the claim the 90m they spent as an expense?
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?
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?
> 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.
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).
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?
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.
Considering I'm operating from a very different set of values than she was, I doubt I would find the movie particularly persuasive.
> 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
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).
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.
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.
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.
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.
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.)
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.
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.
I am surprised Batgirl didn't leak. How do you even prevent that?
It's just bits.
For everyone else, there’s law enforcement supported by unlimited budget for prosecution from the industry.
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.
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?
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.
Not a mystery at all, the name is enough.
I thought it's something absurd Rockstar made just for the plot, but apparently it's a common thing.
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.
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?
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.
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.
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.