4 ms·

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

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?

prepend 3y ago
They don’t spent the $90M intending to write it off. This is a failure mitigation strategy where they failed and want to recoup as much value as possible. Studios still lose $60M when they write off $90M they are effectively only saving the $30M they would pay in taxes. It’s still not profitable and they want to avoid this as much as possible.
tpmoney 3y ago
No it doesn't work differently and the framing of all of this in the media is terrible. No one goes into making a movie planning on writing it off. They made a movie and decided that it was actually not going to be something worth releasing / unable to recoup the expenses, so they're not releasing it. This happens all the time with movies at all sorts of various stages of production. It just so happened this movie was "finished" before the decision was made. If they'd done this 6 months earlier than they did before it was "finished" no one would care.
- Dylan16807 3y ago
  It doesn't make any sense to claim that, starting now, the expenses to release are higher than the revenue they would get. Already-spent money doesn't matter because it's not coming back. If they cancelled many months ago, the expenses to release would have been a much bigger number. That's why it wouldn't have gotten the same complaints.
  - tpmoney 3y ago
    > It doesn't make any sense to claim that, starting now, the expenses to release are higher than the revenue they would get. Why not? Distribution isn't free. Contracts that specify payment on gross revenue aren't free. Just because the movie itself is manufactured doesn't mean there aren't still more expenses to be realized in release any more than just because your program compiles it means that your company can deploy it for no additional costs.
    - Dylan16807 3y ago
      Distribution isn't free but it's pretty cheap for getting to sell tickets in major theaters. And if it's that bad then why don't you sell to a streaming service for one million dollars? Then you only have to deliver a few files and nothing else. Contracts based on revenue are fine in this situation, aren't they? If you only get moderately low revenue, then you don't pay much into them.
      - tpmoney 3y ago
        >Distribution isn't free but it's pretty cheap for getting to sell tickets in major theaters. Last time I saw numbers on something like this, film advertising costs were generally assumed to be another 50-100% of the production costs. After all, those talk show appearances of all your stars don't come cheap. And your "major theaters" are going to insist on advertising. They're not going to block out precious screens and show times for a movie you're not going to advertise. And that's before we talk about actual physical media distribution, replacements for losses or damaged media, tracking and auditing your ticket sales and everything else that goes into getting eyeballs in front of screens turned into cash in your income bucket. > And if it's that bad then why don't you sell to a streaming service for one million dollars? Then you only have to deliver a few files and nothing else. On a multi-million dollar film, that's almost certainly less than the value of the tax write-off, and again may incur costs well and above any revenue. You'll need licensing contracts, lawyer time, accounting time, and again, all the various contractual obligations that kick in on release. >Contracts based on revenue are fine in this situation, aren't they? If you only get moderately low revenue, then you don't pay much into them. 1) They can still make it impossible to recover enough of the expense costs to make releasing the film worthwhile. As a simplified example, if you spend $50 million making a film, spend $10 million distributing it, earn $15 million in gross revenue, and pay $7 million in gross revenue contracts, you're in the hole an additional $2 million, not counting all the expenses incurred tracking and paying on those contracts. 2) You still need to expect to make your expenses back, regardless. Again in the above example, say instead your gross revenue contracts are only $2 million. Great, you've earned $13 million, on an expenses budget of $60 million. Not even close to beginning to pay for the expenses incurred.

prepend 3y ago

They don’t spent the $90M intending to write it off. This is a failure mitigation strategy where they failed and want to recoup as much value as possible. Studios still lose $60M when they write off $90M they are effectively only saving the $30M they would pay in taxes. It’s still not profitable and they want to avoid this as much as possible.

tpmoney 3y ago

No it doesn't work differently and the framing of all of this in the media is terrible. No one goes into making a movie planning on writing it off. They made a movie and decided that it was actually not going to be something worth releasing / unable to recoup the expenses, so they're not releasing it. This happens all the time with movies at all sorts of various stages of production. It just so happened this movie was "finished" before the decision was made. If they'd done this 6 months earlier than they did before it was "finished" no one would care.

Dylan16807 3y ago
It doesn't make any sense to claim that, starting now, the expenses to release are higher than the revenue they would get. Already-spent money doesn't matter because it's not coming back. If they cancelled many months ago, the expenses to release would have been a much bigger number. That's why it wouldn't have gotten the same complaints.
- tpmoney 3y ago
  > It doesn't make any sense to claim that, starting now, the expenses to release are higher than the revenue they would get. Why not? Distribution isn't free. Contracts that specify payment on gross revenue aren't free. Just because the movie itself is manufactured doesn't mean there aren't still more expenses to be realized in release any more than just because your program compiles it means that your company can deploy it for no additional costs.
  - Dylan16807 3y ago
    Distribution isn't free but it's pretty cheap for getting to sell tickets in major theaters. And if it's that bad then why don't you sell to a streaming service for one million dollars? Then you only have to deliver a few files and nothing else. Contracts based on revenue are fine in this situation, aren't they? If you only get moderately low revenue, then you don't pay much into them.
    - tpmoney 3y ago
      >Distribution isn't free but it's pretty cheap for getting to sell tickets in major theaters. Last time I saw numbers on something like this, film advertising costs were generally assumed to be another 50-100% of the production costs. After all, those talk show appearances of all your stars don't come cheap. And your "major theaters" are going to insist on advertising. They're not going to block out precious screens and show times for a movie you're not going to advertise. And that's before we talk about actual physical media distribution, replacements for losses or damaged media, tracking and auditing your ticket sales and everything else that goes into getting eyeballs in front of screens turned into cash in your income bucket. > And if it's that bad then why don't you sell to a streaming service for one million dollars? Then you only have to deliver a few files and nothing else. On a multi-million dollar film, that's almost certainly less than the value of the tax write-off, and again may incur costs well and above any revenue. You'll need licensing contracts, lawyer time, accounting time, and again, all the various contractual obligations that kick in on release. >Contracts based on revenue are fine in this situation, aren't they? If you only get moderately low revenue, then you don't pay much into them. 1) They can still make it impossible to recover enough of the expense costs to make releasing the film worthwhile. As a simplified example, if you spend $50 million making a film, spend $10 million distributing it, earn $15 million in gross revenue, and pay $7 million in gross revenue contracts, you're in the hole an additional $2 million, not counting all the expenses incurred tracking and paying on those contracts. 2) You still need to expect to make your expenses back, regardless. Again in the above example, say instead your gross revenue contracts are only $2 million. Great, you've earned $13 million, on an expenses budget of $60 million. Not even close to beginning to pay for the expenses incurred.