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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. A

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.

shadowgovt 3y 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.
advael 3y 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
- loughnane 3y 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.
  - advael 3y ago
    Again, eliminating a perverse tax incentive doesn't "force" anyone to do anything. Why is it self-evident that we should subsidize failure at the level of a corporation to prevent balance sheets going negative, especially when we are so against doing the same for an individual to prevent them from becoming homeless?
    - loughnane 3y ago
      Don’t think it’s self-evident. My point was only that if I were to accept OPs argument I’d have to accept them larger argument to abolish the existing subsidies, and the article didn’t persuade me that to do so is the best way to go. I’d like to read an argument against subsidizing development.
      - advael 3y ago
        One argument is that that particular kind of subsidy is incredibly easy to game, and so you tend to create more reward-hacking than actual benefit
        joe_guy 3y ago
        They're turning $10 into $3 except at the scale of millions of dollars. What hack or gaming did they perform?
        advael 3y ago
        In this case, refusing offers to sell in favor of a strategy that simply wastes the time and effort of everyone involved in the production with no recourse. This should at the very least not allow them to write it off their taxes. Admittedly, a lot of the problems that enable this situation are more about how IP and ownership work as well as the consolidation of the entertainment industry (and every other industry for that matter), but I think the fact that there's a monetary incentive for this kind of thing which directly exhibits the exact kind of anti-productivity incentives at scale that people use to argue against social programs warrants special consideration in its own right
- dahart 3y 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.
  - Dylan16807 3y ago
    > This isn’t saying the tax break is bad, it’s saying that deleting a film is what’s bad. That's a true statement, though. What's wrong with saying that? And if you change the tax breaks, you can get the desired behavior without imposing additional rules.
    - UncleMeat 3y ago
      That is not necessarily true. Studios can still decide that a movie is sufficiently bad that it is a brand risk and will still refuse to release it even if they cannot deduct some or all of the expense to create it.
      - Dylan16807 3y ago
        That would at least make this happen a lot less often.
    - dahart 3y ago
      I wasn’t suggesting above that anything is wrong with say deleting a film is bad, only pointing out that is what the article is claiming, contrary to the parent’s claim. That said, TBH, I don’t see a problem with deleting a film, if there are no tax breaks in question. I don’t agree with the author that governments should force anyone to sell or give away something they don’t want to sell or give away. I’m pretty sure the author’s suggestions and a bunch of the commentary here is completely naive and unrealistic about the ramifications of being forced to release a film against the studio’s will; there are many reasons studios don’t want to do that aside from money, including reputation, liability, copyrights, brand recognition, etc.. The author suggested trying to use moral rights to force the release, but the funny thing is that using moral rights to prevent the release is a much stronger argument, if the film is actually crappy, right? I don’t know exactly what the tax breaks in question are, but I don’t see a problem with not paying taxes on profits either. I do see a potential problem with doing both things at the same time - if the tax breaks were more than not having to pay a percent of the profits; that’s does start to sound like burning down your house for the insurance money. I’ve worked overtime on a project that was canned after being finished, and also worked at a studio that was closed on the heels of $1B in sales, with rumors the execs said the tax break was bigger than the remaining profits. These things suck hard and they’re destructive and it’s obvious that accountant-executives lack all imagination and can’t see potential. But should it be illegal? Probably not, forcing people to do business when they don’t want to would drive businesses into the ground and ruin people.
nerdponx 3y 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.
- s1artibartfast 3y 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?
  - nerdponx 3y ago
    I don't think it's about deducting expenses, otherwise this would be entirely moot because they'd deduct for expenses no matter whether it was a hit or a flop. I understood the article to be about deducting taxable income for a loss.
    - tome 3y ago
      But a loss is just when expenses are greater than revenue. Deducting taxable income for a loss is just the same as deducting the expenses that caused the loss to be a loss.
  - graeme 3y ago
    My guess is this is actually an accelerated capital loss. From a profit-loss perspective the net loss is the same whether they release or not. But the accounting net loss is smaller initially because the movie is on the books as having capital value. It might take decades to reduce that to zero. Destroying the film does so instantly so you get to book the full loss immediately. Never really understood why we use depreciation in the first place to be honest, rather than just making all expenses immediately deductible. Presumably there’s some explanation
    - Sebb767 3y ago
      > Never really understood why we use depreciation in the first place to be honest, rather than just making all expenses immediately deductible. Presumably there’s some explanation It's actually advantageous for most companies. If your company makes 20M in yearly profits and builds a new HQ for 100M and you deduct it immediately, you'd have one year with no taxes and a loss of 80M and 9 years with full taxes. If you write it off over 10 years instead (which reflects you actually using that house for this amount of time), you'll pay less taxes in all those years and save more overall.
fred_is_fred 3y 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 3y 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.
  - whartung 3y ago
    I’m not a tax attorney but companies have been destroying product for loss purposes for ages. Motorcycle companies crush inventory to take the losses. I’m sure any company with excess product does similar things. I’m guessing they do it because it gives them the best return. The IRS likely requires it to prevent the company from double dipping. With movies, I don’t even want to think what obligations trigger on “release”.
  - Sebb767 3y ago
    > If you release a turd movie that cost 100M to make and only nets you 5m in revenue after royalties, can't you still write off the 95m and have almost 5m more than you would otherwise? How would writing the entire 100m off ever be preferable? Releasing the movie is not free. You still need to finish the product, market it, find a distributor and manage sales channels, just to name a few. Also, a bad movie will reflect badly on your studio and everyone in it; if the movie is in a series, it might even impact the lore of your universe negatively. Movie studios are not stupid, 5M of revenue plus 95M of write-off would be more money than 100M of write-off. But you can easily end up with 5M of revenue and 110M of losses and some non-monetary damages extra, so writing off 100M is the best option.
deleted 3y ago
[deleted]
empath-nirvana 3y 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.

shadowgovt 3y 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.

advael 3y 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

loughnane 3y 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.
- advael 3y ago
  Again, eliminating a perverse tax incentive doesn't "force" anyone to do anything. Why is it self-evident that we should subsidize failure at the level of a corporation to prevent balance sheets going negative, especially when we are so against doing the same for an individual to prevent them from becoming homeless?
  - loughnane 3y ago
    Don’t think it’s self-evident. My point was only that if I were to accept OPs argument I’d have to accept them larger argument to abolish the existing subsidies, and the article didn’t persuade me that to do so is the best way to go. I’d like to read an argument against subsidizing development.
    - advael 3y ago
      One argument is that that particular kind of subsidy is incredibly easy to game, and so you tend to create more reward-hacking than actual benefit
      - joe_guy 3y ago
        They're turning $10 into $3 except at the scale of millions of dollars. What hack or gaming did they perform?
        advael 3y ago
        In this case, refusing offers to sell in favor of a strategy that simply wastes the time and effort of everyone involved in the production with no recourse. This should at the very least not allow them to write it off their taxes. Admittedly, a lot of the problems that enable this situation are more about how IP and ownership work as well as the consolidation of the entertainment industry (and every other industry for that matter), but I think the fact that there's a monetary incentive for this kind of thing which directly exhibits the exact kind of anti-productivity incentives at scale that people use to argue against social programs warrants special consideration in its own right
dahart 3y 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.
- Dylan16807 3y ago
  > This isn’t saying the tax break is bad, it’s saying that deleting a film is what’s bad. That's a true statement, though. What's wrong with saying that? And if you change the tax breaks, you can get the desired behavior without imposing additional rules.
  - UncleMeat 3y ago
    That is not necessarily true. Studios can still decide that a movie is sufficiently bad that it is a brand risk and will still refuse to release it even if they cannot deduct some or all of the expense to create it.
    - Dylan16807 3y ago
      That would at least make this happen a lot less often.
  - dahart 3y ago
    I wasn’t suggesting above that anything is wrong with say deleting a film is bad, only pointing out that is what the article is claiming, contrary to the parent’s claim. That said, TBH, I don’t see a problem with deleting a film, if there are no tax breaks in question. I don’t agree with the author that governments should force anyone to sell or give away something they don’t want to sell or give away. I’m pretty sure the author’s suggestions and a bunch of the commentary here is completely naive and unrealistic about the ramifications of being forced to release a film against the studio’s will; there are many reasons studios don’t want to do that aside from money, including reputation, liability, copyrights, brand recognition, etc.. The author suggested trying to use moral rights to force the release, but the funny thing is that using moral rights to prevent the release is a much stronger argument, if the film is actually crappy, right? I don’t know exactly what the tax breaks in question are, but I don’t see a problem with not paying taxes on profits either. I do see a potential problem with doing both things at the same time - if the tax breaks were more than not having to pay a percent of the profits; that’s does start to sound like burning down your house for the insurance money. I’ve worked overtime on a project that was canned after being finished, and also worked at a studio that was closed on the heels of $1B in sales, with rumors the execs said the tax break was bigger than the remaining profits. These things suck hard and they’re destructive and it’s obvious that accountant-executives lack all imagination and can’t see potential. But should it be illegal? Probably not, forcing people to do business when they don’t want to would drive businesses into the ground and ruin people.

nerdponx 3y 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.

s1artibartfast 3y 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?
- nerdponx 3y ago
  I don't think it's about deducting expenses, otherwise this would be entirely moot because they'd deduct for expenses no matter whether it was a hit or a flop. I understood the article to be about deducting taxable income for a loss.
  - tome 3y ago
    But a loss is just when expenses are greater than revenue. Deducting taxable income for a loss is just the same as deducting the expenses that caused the loss to be a loss.
- graeme 3y ago
  My guess is this is actually an accelerated capital loss. From a profit-loss perspective the net loss is the same whether they release or not. But the accounting net loss is smaller initially because the movie is on the books as having capital value. It might take decades to reduce that to zero. Destroying the film does so instantly so you get to book the full loss immediately. Never really understood why we use depreciation in the first place to be honest, rather than just making all expenses immediately deductible. Presumably there’s some explanation
  - Sebb767 3y ago
    > Never really understood why we use depreciation in the first place to be honest, rather than just making all expenses immediately deductible. Presumably there’s some explanation It's actually advantageous for most companies. If your company makes 20M in yearly profits and builds a new HQ for 100M and you deduct it immediately, you'd have one year with no taxes and a loss of 80M and 9 years with full taxes. If you write it off over 10 years instead (which reflects you actually using that house for this amount of time), you'll pay less taxes in all those years and save more overall.

fred_is_fred 3y 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 3y 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.
- whartung 3y ago
  I’m not a tax attorney but companies have been destroying product for loss purposes for ages. Motorcycle companies crush inventory to take the losses. I’m sure any company with excess product does similar things. I’m guessing they do it because it gives them the best return. The IRS likely requires it to prevent the company from double dipping. With movies, I don’t even want to think what obligations trigger on “release”.
- Sebb767 3y ago
  > If you release a turd movie that cost 100M to make and only nets you 5m in revenue after royalties, can't you still write off the 95m and have almost 5m more than you would otherwise? How would writing the entire 100m off ever be preferable? Releasing the movie is not free. You still need to finish the product, market it, find a distributor and manage sales channels, just to name a few. Also, a bad movie will reflect badly on your studio and everyone in it; if the movie is in a series, it might even impact the lore of your universe negatively. Movie studios are not stupid, 5M of revenue plus 95M of write-off would be more money than 100M of write-off. But you can easily end up with 5M of revenue and 110M of losses and some non-monetary damages extra, so writing off 100M is the best option.

deleted 3y ago

[deleted]

empath-nirvana 3y 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.