Really good explanation here. [1] TL;DR- the studio is able to make a convincing case (and the IRS have a very low standard for making this case) that they had

Really good explanation here. [1] TL;DR- the studio is able to make a convincing case (and the IRS have a very low standard for making this case) that they had a for-profit motive for making this movie, therefore the expense of making it was a "business expense". If they never had intended to make a profit on it, then it would constitute a "hobby loss", i.e. the same kind of "loss" you incur when you spend money on a hobby, and the studio would not be granted a write-off on such a hobby loss. This, plus (as another commenter mentioned) the fact that about half a movie's expenses come as a result of promotional / marketing activities (performed after the production expenses have already been incurred), mean the studio likely thought that releasing the movie would cost more than it would be worth. 1. https://abovethelaw.com/2023/11/was-the-coyote-vs-acme-movie-canceled-for-tax-purposes/ https://abovethelaw.com/2023/11/was-the-coyote-vs-acme-movie...