Over the past year, studios and publishers have been canceling projects that are far along in their production. One of the most high-profile cancelations, however, was Batgirl because the movie was at the end of its filming and editing phase, with only VFX left. While there were suggestions that the movie was canceled for tax reasons, like many others this year, new details suggest that the film was never going to work and needed to be shelved.
Writing off film projects
The most direct benefit to the company of canceling a project before it goes out to the world is the cost savings. The cost of production is only part of the costs for something like a theatrical release film. Often, the marketing budget for a movie is larger than the production budget. So, by canceling a film before marketing begins, the cost of marketing can be cut to near zero.
Another big reason to cancel a project before release is tax purposes. The cost of production can be written off as a business loss. This means that the company can nearly entirely recoup the cost of production without having to rely on the public to finance the project through streaming fees or ticket sales.
Of course, these savings can only be properly realized if the film is going to be a commercial failure, or is expected to be. If the film is headed for a production loss, it can become less of a loss if the company drops the film and never spends the money to market it. If a $90 million production investment is going to fail to return, then there is no reason to spend an additional $50 million to market it and lose even more money.
The cancelation of Batgirl by Warner Bros. Discovery and DC looked like it was a cynical attempt to save some money on future production. however, new information is showing that the movie may have never been a success. According to Peter Safran, co-head of DC Studios,
I saw the movie. There were a lot of incredibly talented people in front of and behind the camera on that film. But that film was not releasable. It happens sometimes. That film was not releasable.
I actually think that Zaslav and the team made a very bold and courageous decision to cancel it, because it would've hurt DC, it would've hurt those people involved. I think they really stood up to support DC, the characters, the story, the quality and all that.
So, Safran thought that the film was so bad that it was going to harm the careers of everyone involved and that David Zaslav, CEO of Warner Bros. Discovery, made the right decision.
Canceling Coyote vs. Acme
In the same way, Warner Bros. Discovery has also shelved Coyote vs. Acme, a film adaptation of the famous Warner Bros. cartoons. This film was also finished when it was canceled, creating more rumors about tax-based write-offs. However, Zaslav responded to these claims saying,
The accounting piece is really a misnomer. If we produce a show, a $100 million movie… We've spent the $100 million dollars and if we don't release it. It's gone. We don't have any real benefit from it.
The question is, should we take certain of these movies and open them in the theater and spend another $30 or $40 million to promote them? And Warner Bros' team and HBO made a number of decisions. They were hard. But when I look at the health of our company today, we needed to make those decisions. And it took real courage.
And while that's not entirely true, it's not entirely false. Sure, the company isn't going to get a check back for their investment, but the write-off will return much of it through taxes that will not be paid at the end of the year. But, the conversation about whether to spend more money on a loser is a solid one. Why pay to promote something that's going to cost more money than it will ever recoup just because it's done?