When films are canned as tax write-offs

 Massive corporate takeovers and mergers use films as collateral damage – and sadly, this is nothing new. We’ve been taking a look.

If Warner Bros was struggling to make friends in the industry off the back of its decision to send its 2021 slate of movies simultaneously to streaming (remember that? The move that cost the studio its relationship with Christopher Nolan?), then its 2022 has hardly fared better. Freshly merged with Discovery, the new look company – headed up by a man called David Zaslav– has been in the headlines again for simply writing off films.

Most prominently is – of course – the $80m production of Batgirl, a film that was all but finished save for some reshoots. Caught with having to find some $3bn in cost savings to pay off the debts of the newly-merged Warner Bros Discovery, Zaslav and his team demonstrated their collective love of the art of movies, and took the cash.

In exchange for permanently deleting Batgirl from the company’s servers, Warner Bros Discovery enjoyed a tax write off that attacked just a little its debt mountain. Don’t look around for Batgirl returning either: should the film leak out, then Warner Bros Discovery is almost certainly liable to repay its tax savings. It pressed shift on the keyboard at the same time it tapped that delete key.

However, Batgirl is just the tip of this particular metaphorical iceberg. An almost-completed sequel to Scoob! was canned at the same time, and a host of productions cancelled.

Now we learn that there’s more to come. A report over at IndieWire suggests that Warner Bros Discovery it’s written off – again, presumably against tax liabilities – ‘between $2bn and $2.5bn worth of content in the July-September quarter”. The eyes water just looking at that amount

We know the identify of some of the productions. In the US, six or seven films have been permanently removed from the company’s HBO Max streaming service, where they weren’t said to be performing too well. Relatively high profile films too, such as Superintelligence with Melissa McCarthy and An American Pickle with Seth Rogen. In this case the films still exist freely here in the UK, it’s just a bit more of a fight to find them in America.

We don’t know the identity of the other productions Warner Bros Discovery is lobbing onto the fire to pay its debt down though, but we’re warned that there’s likely to be more to come in the financial quarter ahead. That, and job cuts.

Sounds a lovely place to work at the moment.

Caught in the midst of all of this of course are the people making the films and TV shows that Warner Bros Discovery is binning. Sadly, though, what’s happening is nothing new. It’s something that Hollywood has experimented with for years, it’s just Warner Bros has given us by far the highest profile example of the tax write off film cancellation to date.

DreamWorks Animation had a good go though. A week or two back, we were chatting on this site about the very late in the day demise of the animated feature B.O.O.: Bureau Of Otherworldly Operations, that the studio canned in spite of spending some $100m+ on the film. Also at the same studio, Tim Minchin spent a lot of time trying to get a film called Larrikins made. He put three or four years of his time into the project, before the plug was pulled.

Minchin went on Richard Herring’s podcast back in early 2020 to talk of the experience, and it wasn’t a happy one. $45m had been spent on the film, and 110 people were working on it when Larrikins was shuttered.

Here’s a video that gives an idea of how the film was shaping up…

For those hoping such films stand any chance of resurrection, Minchin also explained that companies such as Netflix and Animal Logic wanted to buy it off Universal, the-then new owners of DreamWorks. But they were priced out.

Why? Well, Minchin said he was told by an executive that they wouldn’t sell it because of “schmuck insurance”. That the asking price to someone like Netflix would be the full cost of the production to date, plus the cost of leasing the DreamWorks software needed to complete the film, and then the cost of training animators. And on top of that? Universal would want 40% to 50% of any profits, the kind of deal that’d make no sense for a purchaser to agree to.

But Universal didn’t want anyone to buy the film, for the “schmuck insurance” reason. It feared another studio picking up the movie, making a huge success of it, and making the original executive who shut the film down to look like a schmuck. It may not be as high a profile an example as Batgirl therefore, but Larrikins was an earlier example of a film just written off as part of a corporate takeover: in this case Universal’s parent company, and its near $4bn purchase of DreamWorks.

And, of course, we saw something similar when Disney snapped up 21^st Century Fox for just north of $70bn, and in doing so acquired the 20^th Century Fox film studio and its assets. Within a year, over 100 productions in various stages had been shut down, including director Wes Ball’s The Mouse Guard adaptation, that was deep into pre-production.

Disney figured it was safer to take the money against the purchase price than make the film and a film that had been long in gestation was dead in pretty much no time (Ball has the consolation prize of directing the next Planet Of The Apes film for the studio at least).

With Warner Bros Discovery thus likely to be swinging the axe on a few more film and TV projects in the months ahead, let’s end on something a little happier. Because once every blue moon, a major corporate deal turns the eyes of executives to such a degree that a film can get through the system pretty much unchecked.

That turned out to be the case for 1999’s Being John Malkovich, the wildly offbeat and risky $13m movie from director Spike Jonze and writer Charlie Kaufman. Apparently rather helpful in getting the film through production and into cinemas was the fact that the firm behind it, USA Films, was being bought by Universal at the time. As such, it could squeeze through with very little interference, and a really rather special film made it out in tact.

The problem, of course, is that it’s very much the exception rather than the norm. But it’s an exception well worth clinging to, not least as Warner Bros Discovery gets ready to swing its axe all over again…

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