Deleting and destroying finished movies(rogerebert.com) |
Deleting and destroying finished movies(rogerebert.com) |
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when I tried to get hold of the DVD years later I learned that the heirs to the author Ken Campbell had withdrawn all rights.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.
https://www.newyorker.com/magazine/2012/01/30/private-inequi...A songwriter can stop anyone from making new covers of their song, but they can't order the destruction of your CDs.
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
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?
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.
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?
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).
In the streaming era, it's very easy for the revenue created by hosting an older piece of content to be dwarfed by residuals. Streaming services get customers largely by releasing popular new titles; it's entirely predictable that pushing for higher residuals would drive services to sunset series faster, and it's entirely reasonable for services to stop hosting titles that lose them money.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.
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.
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)
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?
> 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.
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
In all seriousness, why pay them to do that? What possible benefit is there of bribing the corporation to be so wasteful and irresponsible? If the thing is made, what possible justification can there be for this wanton entropy?
Why do that, ever? Signs (that the coyote holds up as the anvil's shadow covers him) indicate that lots of people would enjoy the work, that lots of other people have done. What possible excuse can there ever be for doing all that and then un-making it? It's nihilistic, madness.
That's a really sad viewpoint, believing that being paid to do a job is the only thing that matters, and that it compensates everything about what that job means and how it impacts the world. It's the same thinking justifying "if I don't do this terrible thing at work, someone else will do it for the same money", which is anything but decent.
There's such thing as pride in what one does; double so in artistic endeavours, where the only value is in being seen by spectators.
Not if someone managed to make a copy of the movie.
And I don't think you should be able to use copyright protection unless you register a copy with a central authority. Just like how patents work.
I don’t think that would have a positive effect as you imagine.
> 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
If it was really bottom line thinking, they'd accept the $70M, more than double what they'd get in tax benefits, and have another distributor release the film. Instead, they'd rather trash the film than risk looking like fools if they allowed another company to reap the benefits for releasing a hit.
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.
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”.
With an attitude like that you will get your lunch eaten so fast, by people who are suffering losses of various sorts in order to get to make their creation their way, the way it's supposed to be made.
That's universal. I don't care whether it's zombie movies or pop music or any sort of thing you think hollow and worthless.
I don't know what industry you're in (tech?) but in the glamour professions where people compete savagely to get to where they're not losing money at the game, those 'hired hands' may be scornful of the director, but it's because they've got their own script that's not being picked up, and their suggestions aren't being followed. And the actor refuses to see the final film because he will lose his mind watching every little fumble of a line, imagining how he should have done it. Surviving this is the inner game of these creative industries.
The times when a crew wears 'I'm just crew and don't care about anything' are sarcasm, protest against a fanatical director who is making them depart from their usual workmanlike habits that they think are how you make a great film that is perfectly fine. They're not advocating for bad so much as they're insisting that they're already the apex of good, that the director is insane and unreasonable. (which can be part of the job description, for advancing the state of the art…)
Nobody who is content to be a hired hand stays in such an industry. You can make more pumping gas, half the time.
If you think the PA hired to run errands gives a crap about the project, you are mistaken. Or the construction crew building the set feels the same way the director/producer does, or the set dressers, or the people working the payroll for the project, or any of the myriad of people that work on a project without ever seeing the set, you're just not very familiar with the process
I don't know what industry you're in, but you've seem to have a different opinion of what working a production is like than what actually happens.
However, for a really big project, there's a "salvage value" or "scrap value." It's not zero.
If you then destroy your original work or refuse to let other people use it on reasonable terms, you can't sue people for copyright infringement when they use it.
> 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?
I think you shouldn't be able to use patent protection unless you also make your design available on the market for a reasonable fee.
If all the prototypes were for the same patent, there's no issue.
For the draft comics, I think you could pretty well argue those are part of the same work. And I'd be okay excluding projects under a certain size from the rule.
Better analogy: you buy a big museum collection that contains some lost Rembrandt paintings, widely regarded as his worst, but still considered valuable because it's Rembrandt. You think you might have a hard time selling them, so you look up their original purchase price and find that it was $1 million, so you burn them instead and claim a $1 million writeoff, for a guaranteed $250k decrease in taxes for essentially 0 additional cost, resulting in $250k of extra profit.
It only works if you pay $1M now and then years later burn them to offset a different $1M in income. But that would still be stupid as you’re better off selling them for $1M than burning.
I don’t think you’re thinking the math through properly.
Studios aren’t writing these off because they are stupid or scheming. They are writing them off because they can’t sell them.
If you look at anthropology pre-modern humans were extremely family/tribe oriented. Resources were generally the property of the tribe as a whole. I don't think that the modern understanding of personal property would translate well to someone from such a culture, which makes me sceptical of the idea that personal property is an innate element of human nature.
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.
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.
I bought a stock share for $1000. I wanted to sell it for $2000, but no one was willing to pay more than $400, so I decided to tell the IRS that it was worth zero and take the full tax write off (which was tax fraud).
On top of that, refusing to release or sell the movie should have triggered a shareholder lawsuit.
Even if they didn't delete the movie, the fact that they claimed to have deleted the movie and used it as a tax credit basically makes the value $0, because in the unlikely event they have a copy around, they wouldn't be able to sell it without having all of the profits seized from them.
Why does it matter if they delete it or not? As long as they don’t sell it, they don’t make a profit on it, and don’t pay taxes on the profits. If they didn’t delete it and then actually sold it after enjoying their tax break, then they’d be committing actual tax fraud.
> refusing to release or sell the movie should have triggered a shareholder lawsuit
And yet it didn’t. So maybe shareholders are fine with it? Why should shareholders sue when a company doesn’t release a product? This literally happens all the time.
Can you try to spend 30 seconds countering whatever problems you came up with and only then propose non-trivial problems? I promise I gave the idea more than 30 seconds of thought and did think of the obvious problems, it is just tiring to exhaustively list out and pedantically enumerate a complete proposal instantiated for this specific domain. That is also why I explicitly said it solves the central 90% and would require tuning and mechanisms to reduce abuse since I do, in fact, know the proposal is incomplete, just that the problems I am aware of with this class of solution generally appear to be quite amenable to solutions that should be at least as robust as the status quo.
In this case someone made a cupcake. Instead of selling it to potential customers, they destroy the cupcake and claim it was a tax-deductible expense
> 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.
So why are so many bad movies released then?
But isn’t that thing actually common practice? If a bakery accidentaly ruins a batch of cupcakes they toss them to the bin. And of course the ingredients and labour involved in those cupcakes will count as an expense. They had costs (some flour, some eggs, some employee time) and they had zero income from those burnt cupcakes (or even worse, costs associated with cleanup and disposal!).
When you put it this way it sounds quite ordinary. Do you think I should take away some different message from your analogy?
A baker creates a batch of cupcakes. They're about to sell this batch to a customer, but then the tax accountant comes in and tells them to toss the batch because the customer might not like them. So the batch gets binned, despite neither the customer or the tax accountant having tasted any cupcakes.
Then they write that off as a business expense.
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.
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.
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.
I’d like to read an argument against subsidizing development.
We have laws to ban poisons from food, but we don't ban junk food altogether. We have laws to cap the speed limit, but not at 30mph on a highway - etc etc. We pick a spot on the spectrum.
Surely some laws are for exactly that? Like: murder, rape, theft, etc?
I'm taking your statement a bit out of context, and I don't have much involvement in this overall issue being discussed, but that statement on its own seems pretty off to me.
It's ultimately the same issue, no?
As far as I can see they are a good way to there, so yes? To the extent possible the powerfull is banning or attempting to ban everythjng they don’t like.
> the powerless banning everything they didn’t like
If the powerless bans everything they didn’t like then they are not powerless. That is the definition of power.
Yes, exactly. You're forgetting Hollywood accounting. Spending 1 dollars to somebody, 9 dollars to your other companies and saving 3 dollars later is netting you 2 dollars.
Plus you can only save taxes if you’re paying taxes in the first place. A company that only loses money isn’t going to get paid.
I’m not sure that scheme works work out another trick.
This is a bad assumption.
Those other companies are often either incorporated in tax havens, or they have a ton of companies with various forms of tax breaks/incentives.
So where I live, for example, they get transferrable Georgia tax credits during the making of the film. Doesn't matter if you lose money, go bankrupt, etc. It's based on expenses.
Because they are transferrable, they sell the tax credits (They sell for 80-90 cents on the dollar, so buying them lowers the cost of paying your taxes).
So to your middle point, they can in fact, pay no taxes but end up with plenty of tax credits to sell.
Before you ask, earning state tax credits is not federally taxable - it is treated as a reduction in your state tax liability, not as income to the companies that earn them.
(It's a bit more complex than that, but ...)
How do you know? At this scale tax avoidance schemes often completely prevent this.
Ultimately we write tax policy for the benefit of society, not for Warner Bros. In theory, we could write tax law so that it made financial sense for a factory to produce widgets and send them directly into an incinerator, because they could claim this as a "loss" and offset profits from other activities. But we shouldn't have a tax law that does that, because that's a huge waste of society's resources (materials for the widgets, fuel for the incinerator, people's time and labor). We could use those resources to do something more productive and tax laws should encourage companies to do productive things that improve the world, not spin their wheels for imaginary losses.
If you deliberately burn down your house and try to collect insurance on it, we call that insurance fraud. If you deliberately destroy your product and try to claim a tax loss on it, that should be fraud too.
Indeed we could, but unfortunately we already have cryptocurrency.
Agreed on every other aspect of your observation.
Maybe when it's 'an amazing and new Road Runner movie', the waste has a more appealing face?
That is exactly how it works. You already spent X on an asset. If you throw the asset away, then you just have deductible expenses.
Same for the widget factory. You can deduct the material and factory expense of making of making defective widgets. If you trash them, you write down the value of your assets.
>But we shouldn't have a tax law that does that, because that's a huge waste of society's resources (materials for the widgets, fuel for the incinerator, people's time and labor).
This is the crux of things. Those arent society's resources, and never were. They are resources of the warner Bros and the widget factory.
Tax law isnt and shouldn't be about forcing people to do what you want. If someone wants to waste their time and resources, that is their choice.
It seems like this whole thread is people angry that they dont own the property of others, and get to control them.
What's to stop the CEO from building a mansion with the company's resources and selling it to himself for $1? Then having the company write it off as a loss? Oops! It was just a bad business decision and the company lost money. Oh well! We can't stop them from wasting their resources if they want to!
It's literally there to serve infrastructure and rebalancing needs without which the individuals end up sitting in ruined playpens, drowning in their own filth and unable to do commerce with anybody else.
Never mind about when the 'individual' is a corporate entity that rightly or wrongly thinks itself obligated to chase the most ruinous short-term strategy it can find, as a matter of fiduciary duty. That just exaggerates what already happens with ambitious human individuals.
Tax law is only and solely about forcing people to do what you want, starting with the very concept that people will never want long term thinking or cooperation in any significant way. (in fact, people will want cooperation, but sociopaths, human or corporate, will tend to stomp all over the cooperation-wanting people, wreck their stuff, then want a tax write-off because the stuff they wrecked is now broken)
Have you ever had a car totaled? Just because the insurance company salvages your vehicle doesn’t mean you get to buy it for that value.
Then someone says "I want to pay 1.1 * X for that" and they say "it's worth more" - what are the tax implications?
The same applies when they claim that X = 0. They're doing a disservice to their shareholders if they won't sell something worthless for money.
There's a celebrity president facing the courts for a similar play, the same thing was worthless when having to pay taxes for it and priceless when using it as collateral for a loan =)
log(95)-log(30)=0.5006
That’s not true. How are you getting that number? That’s not how you calculate an order of magnitude.
I appreciate the irony of nitpicking about a concept that merely exist to allow for low precision napkin math.
It's no different from having a stock position in a company that's in limbo. You can't claim the tax loss and keep the position. You have to get the clearinghouse to take the position for $0 in order to claim the loss.
The studio's position is that they've already incurred the loss; now they're taking the action necessary to recognize the loss on their taxes.
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
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.
Politicians often grant accelerated depreciation rates as a tax incentive.
Also with inflation the sooner you can declare the loss the more it is worth. Especially if you have non capital expenses to offset.
The US govt has recently capitalized software expenses and this is seen as very bad for the industry and investment.
The movie is an asset, it has some value, the way to determine that value is to make a good faith effort to sell it (auction or broker of some sort) and if it sells for less than you have spent making it, then you can write off the difference as a loss.
Deliberately destroying the asset and then writing off the entire amount you spent on it is probably tax fraud.
Except you can't simply sell this movie. Releasing it might lead to reputational damage if the movie is not up to par (as many sister comments have pointed out) and selling it will be even worse, as whoever buys it is now entangled with your IP in addition to possibly tarnishing your reputation.
If you destroyed it, that was your choice, but you didn't thereby incur a loss of $30M. Any more than if you had dynamited your HQ building.
If you're running "Loot Boxes Unlimited" and your business is taking off like a rocket and you invest $300 million in a new HQ, and then just as your finishing up, congress passes a law making loot boxes illegal and you're no longer going to be able to afford moving into that new HQ, you get to write off those expenses just the same. You must offset them by any gains you get from any part of it you do sell off, but you're under no obligation to sell the building, you can just keep it on the books depreciating slowly. Most companies will try to sell what they can to recoup some of those losses, because recouping any of the loss tends to be a better financial option than the write off for that same amount. But selling a building doesn't have the same legal and contractual entanglements that selling a movie might have.
Additionally a building is still useful even if you can't use it for what it was originally intended for. But who is going to buy a movie they can't release? You'd need some company with enough money to buy a produced movie (even if at a discount) who also thinks they could release it and make enough money on it to cover their costs AND who will also be willing to take on all the contractual obligations like licensing and residuals. And chances are in addition to all of that, they also have to be willing to license the various properties that the movie studio already owns (or worse, re-negotiate the rights from the original holders that the studio had already previously negotiated).
It's also important to remember that those expenses would have been written off whether or not the movie was released. My understanding here is the only difference between releasing and not releasing the movie is whether that write off occurs over 3-5 years, or all in this year
When a developer buys a property, razes it, and builds a new building there, all those costs and actions are permitted.
I find it amusing that a studio, who is almost surely getting professional tax advice with full knowledge of the facts and circumstances, is having the legality of the proposed course of action not just questioned but outright confidently asserted as contrary to the law based on an article that’s light on details.
Where's the line between "dynamited your HQ building" and "investing money into FTX"? Both are intentional activities that leads to total loss of value, but I think most people would agree that the latter is tax deductible.
Whoever owns private property decides its disposition. Depending on what you mean by “you salvage the car”, either the car was never owned by the insurance (in which case they obviously can’t sell it for any price) or it is owned by them (in which case they still don’t have to sell their private property at all, nor to a $1 over-bidder, and not necessarily to the highest bidder).
i'm confused, is the article saying that its illegal, or is it saying that it ought to be illegal? i for one agree with that attitude, or at the very least believe that a studio shouldnt be able to get a tax writeoff for just sending a completed film to the void.
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.
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.
> that's almost certainly less than the value of the tax write-off
Please explain.
If the value drops to 1 million dollars, can't you write off the rest?
If you can't, then that is exactly the problem here, there's a flaw in tax law causing destruction.
> You'll need licensing contracts, lawyer time, accounting time, and again, all the various contractual obligations that kick in on release.
They already did 99% of the contracts they need.
> 1) They can still make it impossible to recover enough of the expense costs to make releasing the film worthwhile.
I already addressed this in the comment you replied to. Sell to a streaming service in that case. But I doubt it would make that little. Also that's a big percentage to not even be part of the distribution cost.
> 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.
No you don't "need to" do the impossible.
You already spent the $60 million, and deleting the film won't make the money reappear.
Do you want to be $60M in the hole, or do you want to be $47M in the hole?
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So summary: If they think a theatrical release requires so many dollars it's still a waste, that's one thing (though I reserve skepticism). If they won't sell it off to the highest bidder, for which they have to do almost nothing, that's a very different thing.
Destroying everything probably costs just as much as selling it off.
The founders of the US were very interested in deciding what are the responsibilities of the federal government vs what will be left up to the states to decide. They wrote entire essay series on the topic.
Imagine if it wasn't an isolated event but if you knew there's someone out to get you, and who continues to be a risk to your well-being. Say, domestic abuse. SA. Something like that.
Try saying there's nowhere to draw the line between that and "mere dislike".
No one should have to suffer that. That's why there are laws against things like rape and murder.
I meant to say that the question of where to draw the line is open to discussion, in both cases.
To be honest, I don't entirely understand your example, since in the first case you're talking about an accident, and we can't exactly pass a law saying "accidents are not allowed." But in the second case, you can pass a law against SA and such. So in my mind, the difference there is in realistic enforcement options, not on the merits themselves.
If we could somehow magically pass a meaningful law against accidents, then maybe we'd consider it. Accidents are things that just about everybody dislikes, after all. Of course, we can't meaningfully make that law, but only for mere technical reasons, not because it's undesirable.
In that imagined world, I could see people saying: "no one should have to suffer accidents" and using that as rationale for supporting the law. You may not agree with them, and I may not either. But that was my point — where to draw the line is up for discussion.
I was using it as an example of trauma, that's all. Traumatizing people is bad, right? Sure, you can't really make accidents against the law, but you can stop people from causing trauma intentionally.
They would rather delete the movie to claim the tax break than sell it to another studio offering more than the tax break.
If you think they actually lost that amount of money: https://en.wikipedia.org/wiki/Hollywood_accounting
Did they not incur such losses? Did they claim to delete the movie but actually kept a backup? Granted, the loss is self-inflicted, but that's not a relevant factor in the tax code.
What hack or gaming did they perform?
Those people were already paid for their work.
Which is fine, because 300 and 100 are the same order of magnitude ;).
> Still confused where you come up with 105 years as an order of magnitude from 30.
30 ≈ 10^1
105 ≈ 10^2
Here you go.
Investment decisions aren't as easy to diagnose because there's a chance of upside. If FTX didn't end up as a scam, you stand to gain a LOT of money. The same can't be said of putting your only copy of a movie on a crappy SD card.
In addition, you could make the argument that the chances of FTX being a scam were priced in. That is, you're buying stock that accounts for the scam chances.
Nobody is giving warner bros money. They arent getting a cash tax refund. They just spent more money and made less profit. If they wanted to make zero profit, and pay zero taxes, that is their choice!
If a commpany wants to sell houses at a loss, that is legal, and happens all the time. If they are self dealing, the shareholders could have an issue with it, or the IRS if the CEO doesn't report it.
Guess what, Companies DO give CEOs many millions of dollars of salary and stock. Every bit of that is tax deductible expense for the company.
>Oh well! We can't stop them from wasting their resources if they want to!
It is literally none of your business because they aren't your resources! It is like complaining your neighbors have fun on Sunday instead of working and paying more taxes.
Yes, the key word there is net profit, and the ways to calculate net profit for tax purposes are prescribed by law. Not every single penny a company spends is automatically a deductible business expense. Some things are, some things partially are, some have to be amortized over time, some are not deductible at all. There's thousands of pages of tax law delineating this and it is not in the slightest without precedent to declare a particular expense non-deductible.
From the moral perspective, it is clear that WB clearly had real expenses. They spent money, bought rights, and tons of workers were paid good money.
Now you pivot to the legal argument. The current law clearly supports what Warner Bros is doing, so that doesnt help you either.
like I said before. It seems like this entire thing boils down to a control issue. you dont like how WB is running their company and doing with their property.
It isnt you business, both figuratively and literally.
To avoid causing this damage they deleted the movie making sure it doesn't get out and wrote off the asset. The act of deleting the movie is not what made it worthless.
If executives had really deleted the movie in spite of believing that releasing or selling it would have a net positive value of $30m, then it could still be written off.
It's the same as employees stealing inventory or vandalising an office. The company could then fire and sue those employees, but that doesn't change the fact that the asset is now worth zero for accounting purposes.
If they want to completely toss out the movie then they can. But it's insane to think the government should pay them for doing so because they say it has no value.
If an employee is paid for a sick day, PTO, or parental leave, or to attend a team-building event: what have they created with that money? The government must not allow such giveaways from the tax coffers!
All kinds of individual activities are permitted in profit-seeking businesses and not all of them are subject to “in order to deduct this, you have to have omniscient judgment and every individual action must locally optimize your business”.
It's not a problem at all in my opinion.
> Since people like working on art projects, people will often line up to do so even when conditions and pay don't economically square with their effort.
The pay has only to be accepted to be fair. You're free to start your own production company that pays more "fairly" but you'll find yourself with fewer opportunities to give people this "awe" than the company that can finance more projects.
> To benefit from this vocational awe
Warner Bros. is losing money by scrapping the movie, how are they benefiting in this case?
Yes, when something is already done, the vast majority of the time you should throw enough good money at it for delivery.
Especially when you can make a contract to guarantee you get paid more than that. Upfront, even!
> So all this boils down to is whether or not you believe their accountants suddenly become wrong or liars about their expected expenses and returns the moment the “final” edit is committed to film.
It's not "suddenly". The necessary amount of "good money" to get the movie released drops precipitously as it approaches completion. At this point the "good money" is basically nothing. There are lots of companies that would happily pay for it.
There is no world in which “because tax write offs” make sense as an answer to this question if your claims of being able to turn around if not a profit than a smaller loss so easily are true.
For that reason: if the studio destroyed all known copies of the movie, write it off, and then an unknown copy gets leaked by someone who worked on it -- the studio will still sue for damages >$0 and claim in court that any piracy downloads are potential viewings, ergo stolen profit.
Yes, I have been asking the same question. None of these articles explain the actual accounting that's happening.
Something is more complicated here. But I don't think it's "it would cost too many millions of dollars just to sell"
Yes, they had expenses. You seem to have a very very rudimentary understanding of accounting and have conflated expenses with losses. An expense is not a loss. If you buy a factory for $1 million, you didn't lose $1 million dollars. You now have an asset, a factory, that is worth approximately $1 million. You don't get to go to the IRS and say "I lost $1 million dollars this year because I bought a factory". The IRS will tell you, no you didn't. You still have your $1 million, it's just now in the form of a factory instead of cash.
Likewise, WB spent money and created an asset, a film. That film has a market value. Maybe they don't like the film, but that doesn't change the reality that it's worth something. We know approximately how much it's worth because several other companies made offers to buy it.
Instead WB wants to lie and say it isn't worth anything. So, no I don't like how they are running their company when they want to lie and cheat to get out of paying the taxes they owe. You can't buy a factory for $1 million and then turn around and say "yeah, it's not worth anything anymore", and you shouldn't be able to say a movie isn't worth anything when it very clearly is. We do not gain anything by enabling companies or anyone to deny reality.
How is that a lie?
More importantly: money that is not in circulation doesn't affect you or me, it has the same weight on the economy as all the gold still not mined.
Why would a greedy company ever intentionally reduce the value to $0 via destruction instead of selling it for $10M?
10M sale plus a 80M deduction is far better than a $90M deduction.
That's how a company can lose more money on a $10 million sale then deleting it. If you have to include more than $10 worth of IP or obligations with the sale is a negative return. Alternatively, selling a movie could cost you more than $10 million in losses on a different movie.
These are all legitimate reasons to destroy instead of sell it. Avoiding costs are fundamentally different than increased Revenue for the purpose of taxes, even if they're monetary value is the same. Cost avoidance is not taxable value creation.
I can save $20 in laundry fees by not shitting in my bed, but I don't pay taxes on the value I saved. This is for two reasons. First, I'm no richer off after not shitting in my bed then I was before. Second, the alternative is I would have to pay taxes on every second of every day I chose not to shit in my bed.
I don't think that any retained rights are being valued at zero, besides the distribution rights to a a movie that doesn't exist.
If they keep the rights to develop a script, for example, that would have some tiny residual value.
You clearly have some kind of philosophical objection to taxes in general and a very confused notion that companies are allowed to just deduct anything they want without any restrictions and that is not how this works in the slightest.
This isn’t complicated. If you make a movie and release it and nobody goes to see, ok you lost money, write it off. If you make a movie and it’s not working out and you sell the rights to someone else to cut your losses, ok you lost money, write it off. If you make a movie and then you’re like “jk lol I just want tax deductionz plz.” No, screw you. You’re just playing games with the tax system instead of making movies, so fuck off.
Also moving money from your left hand to your right is not circulation. It should "trickle down". Wonder where I heard this.
That's fraud because the insurance policy specifically says it won't pay out if you intentionally set it on fire. If you actually did set it on fire, then claimed that you didn't then that's the deception.
>No, you are not entitled to claim it as a write-off.
Can you point to the relevant tax law that prevents this?
A fire if you willfully set it, or pay someone else to set it.
A car accident if your willful negligence or willful act caused it. The same is true if the willful act or willful negligence of someone acting for you caused the accident. Progressive deterioration (explained below). However, see Special Procedure for Damage From Corrosive Drywall, later.”
https://www.irs.gov/publications/p547#en_US_2023_publink1000...
It’s very different because insurance pays out to make whole. Taxes are just taxes.
It’s the equivalent of burning your house down and then writing off the depreciated value because it burned down. Totally legal. Because it’s worth less after burning it down. Assuming you burn it in a legal, controlled manner and not arson.
> Assuming you burn it in a legal, controlled manner and not arson.
Yes, well, that is a might big assumption. I doubt you could point me to a single instance of someone actually burning down their house in a "legal, controlled manner".
It ultimately boils down to details. If there really were a legitimate reason to destroy a film (or a house) rather than selling it to the highest bidder then you might have a case. But you'd be very hard-pressed to come up with a set of legitimate circumstances for either one.
It is closer to burning down your house to avoid property or sales tax.
1. claiming insurance on it. AFAIK this isn't applicable in the case of the movie
2. endangering other houses by doing it in a non-approved way
Other than that setting houses that you own on fire isn't illegal.
It just tells you when you have to pay and when you don't have to pay. If they didn't explicitly write in that you're not allowed to burn a movie, then burning a movie gets you a tax break. End of.
This is all above board, totally normal behavior. There are reasons to be against destroying these movies, but tax fraud really isn’t one of them. They actually did take the loss of whatever was the remaining value of that asset.
And how do we encourage them as much as possible to take that option?
True, there are multiple reasons why some expenses aren't deductible, but AFAIK no such exception exists for "intentionally destroying it".
>and that’s likely based on Hollywood’s unique accounting practices, which has a tendency to inflate the claimed expense amount.
See my other comment here: https://news.ycombinator.com/item?id=39339493
There's no way that you can save taxes by doing this.
No, of course not. There isn't an enumerated list of weird cases and if your weird case doesn't match you can get a tax advantage. There are rules about what is and isn't deductible and if you're unclear, you can ask the IRS for a clarification. If you don't get that clarification you better be prepared to adequately defend your tax theory when you get audited. What I suggested is what they're doing may not be in line with the rules about what is deductible. It seems like something should be evaluated.
> There's no way that you can save taxes by doing this.
You absolutely can save taxes by doing this. They're not only not paying any tax, they're offsetting tax they would otherwise pay on a profitable film. I think what you're saying is that they couldn't get enough tax deductions to offset the money they put into the film development. That's a claim I didn't make. I do think it's possible they could get back more money than they otherwise should. It's not like tax fraud is a rare occurrence. And that situation could make this maneuver more attractive. I think it's worth an audit.
> "fraud" doesn't mean "losing money in a manner I don't like", so I ask again: where's the deception here?
The overall point is I don’t think it’s rare to destroy an asset that you could sell, and to take a deduction for that. Comments were calling that fraud.
Actually if you read the sibling comment[1], such list of "things you can't deduct" does exist, albeit it's seemingly for personal taxes.
If you read the thread more carefully, you'll see I never made such a claim. The only claim I made is that it's not fraud. I thought this was pretty clear with my earlier comment:
> "fraud" doesn't mean "losing money in a manner I don't like", so I ask again: where's the deception here?
That's right. But when all the dust settles, writing off an asset that had market value when you intentionally destroyed it will not pass an audit.
nobody is entitled tax revenue. Laws generally support taxes on income/profit, and arent just a bill.
It isn't illegal to work less and pay less taxes.
It is absolutely legal to knock down your house so you dont have to pay property or sales tax on it.
Generally property taxes are on the land and its improvements (eg. houses), so burning down the house wouldn't relieve you of property tax obligations. Moreover, destroying the house would actually reduce your tax obligations, and AFAIK isn't illegal.
It would also allow you to avoid taxes on the sale of the house.
nobody is entitled tax revenue. Laws generally support taxes on income/profit, and arent just a bill.
It isn't illegal to work less and pay less taxes.
It is absolutely legal to knock down your house so you dont have to pay property or mortgage tax on it.
Yes, that's true. But that's not the same thing as claiming the resulting loss as a deduction on your income tax.
which you can also do. If you knock down your house, then sell it, you will have a pretty heafty capital loss, which you can then use as a income deduction for up to 8 years, or until it runs out.
>nobody is entitled tax revenue. Laws generally support taxes on income/profit, and arent just a bill.
>It isn't illegal to work less and pay less taxes.
>It is absolutely legal to knock down your house so you dont have to pay property or sales tax on it. You are making the same point.
Yes, but you have to sell it, at which point it's a capital loss. And you can sell the movie and take a loss that way as well (assuming you actually sell it at a loss).
What you cannot do is delete the movie and then claim it as a capital loss -- because you haven't sold it.