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‘Coyote vs. Acme’ now to be shelved forever as WB rejected offers from Netflix, Amazon, and Paramount
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- Title
- The Final Days of 'Coyote vs. Acme': Offers, Rejections and a Roadrunner Race Against Time | Exclusive
- Published
- Feb 9 2024
- Word count
- 136 words
Christ, this needs to stop. If we have a tax law that makes it more profitable to never release a film, those laws need to be struck from the books. This was ridiculous when they started doing it a year ago. Now it’s just insulting.
Tax law has nothing to do with it. They just see the costs of releasing the film to be higher than what they’d earn.
This is entirely about tax law. They stand to make more money from the tax write off than they do from releasing the movie.
They would be willing to sell it if they could get more value but no buyers are willing to pay enough, which is not really that surprising.
Detailed explanation of how it works here: https://abovethelaw.com/2023/11/was-the-coyote-vs-acme-movie-canceled-for-tax-purposes/
You don’t get more tax write off whether you release it or not. The only difference is that it’s a lump sum before you release it and amortized after. And the tax write off itself is simply because you made no money - taxes are on profit. It’s not some mystical tax loophole - it’s the fundamental way that taxes work.
Yeah, what Discovery is doing to WB is basically the Sears cycle. The projects are being canned to avoid distribution costs and having to pay residuals, and they're eating a loss so they can spin down as much of the business as possible while selling off or licensing evergreen assets to wring more cash out with little expenditure. (They have something like $30B in debt to pay back from the acquisition.)
They're not making money by scrapping projects, but they are raising liquidity by getting to write the loss off right now...and not having long term liabilities when the corpse of the company is up for sale again.
Even if that weren't likely going on, cutting one's losses when there's not a strong expectation of a positive ROI is simply good financial sense. Blindly digging a hole chasing income that doesn't pay expenses would doom any company.
Maybe they should focus more on keeping a billion dollar company alive than thinking about how to get it acquired by a trillion dollar company. Do we really need another Activision x Microsoft situation this decade?
I still don't see it. the movie is done, the $70m is spent. I get that streaming doesn't make as much money (even though no streaming service wants to admit this). I also get there's big marketing costs for a treatrical release. But I can't see as a conservative estimate how this makes less than $50m domestically.
For some referene, Dreamwork's "Ruby Gilman: Teenage Kraken" had pretty much every disadvantadge and very much was a flop. Bad release window (still coming out in the edge of the pandemic), no real IP/brand power, almost zero advertisement (I keep up with animation and didn't know until I saw a review that mentioned how much of a flop it already was), and it still made some $15m domestically, $45m worldwide.
This just feels like (once again) business being out of touch with the audience and disrespecting animation, despite this being a mixed media project that should mitigate some of that stigma
Residuals. Actors, writers, directors, etc. get paid a percentage of either gross or net sales (depending on how savvy they are on their contract). A movie sold 0 times has no expenses beyond the production cost. A movie actively being distributed must pay out those residuals.
If they don't expect the film to make back the production cost, it's sunk cost fallacy territory: do you take the $70M loss and stop there, or do you keep piling on more losses? $50M in gross box office sales doesn't come close to $50M against the production losses when you pay out those contractual obligations, advertising (tens of millions) and associated theatrical run costs.
While I think this specific film would have been a profitable theatrical release (easy 100M DOM/200M WW gross imo) this should have been what WB did with their 2023 DC slate. But instead went on and lost a ton of money on those films. So their caution makes sense even if I personally think it's unfounded in this situation.
If they were confident in their IP, in hiring people like John Cena to give residuals to, and recognized themselves as a worldwide powerhouse, I would take that "risk". They are more or less doing the same thing as they throw hundreds of millions into trying to reduce labor costs, after all (emphasis on "try". Whether or not it works, they are going to be spending more money on automation for the early years).
But I guess this was taken over by a head who didn't understand the brand power of HBO, so I shouldn't be too surprised at this point.
Yes, and that 50m example was from one of the biggest box office failures of a 30 year old studio. It's not even a conservative estimate so much as a worst case scenario
To be clear it was the HBO guys that didn’t want their brand associated with Discover reality shows.
That's fair, I didn't know that. But it does seem like an odd move given that Discovery+ still exists. I guess Zaslov they really wanted to leverage the (assumedly) larger subscriber base.
My biggest problem with the way he handled that transition is switching from the HBOMax tech to the Discovery+ tech which is significantly worse. It’s slower and choppier. It made no sense to change it either!
Yes, and you’d rather have the profit all things considered equal. It can’t get worse, after all. It’s like donating to charity - you’re never going to make money by donating $100 to save $24. That they still find it a net negative to release means they expect post production and management costs to still be higher than any potential profit.
So you're saying post production costs surpass whatever offers they received? That seems like WB is getting low-balled so hard that that should be the actual news here.
As far as I have understood this case, post production is already done? They have showed it successfully to test audiences so it must be pretty close to shipping.
Gotta say it's a fucking disgrace that these movies don't see the light of day if they're already finished. Maybe some hero will leak or maybe WB shelves it for a couple of years, let's hope that.
I'm genuinely confused how this type of thing works. So they're taking a $30M write-off on a $70M production. Wouldn't that mean they essentially spent $70M to save $30M on taxes? How is that better than selling it for a profit? Even if they sold it for $70M+$1 and couldn't take the write off, wouldn't they still be making more?
I looked at an article about this some time ago, and while I don't remember the particulars, part of the issue is residual payments under contract make it cheaper to not show the movie (and therefore not be obligated to pay those residuals).
I would guess nobody was willing to buy it for $70m
How can it cost them more money to sell it to Netflix or Amazon? Wouldn't any offer over 0 be better than nothing? Unless there is some weird tax write off they are speculating in. Which it sounds like from the article.
I wonder to the degree this is a long-term negotiation tactic. E.g. "You don't like our price? No problem. No one buys it then. Let's talk again with the next film."
Really weird that some people can spend crazy lots of money creating some shit, then destroying said shit, and then have the government pay them for it.
The government doesn't pay them for anything. The government just lets them deduct the cost of making the movie from their tax bill. They can do this for the exact same dollar figure if they release the movie, but it has to be amortized over several years. When their balance sheet looks bad right now, there's some appeal in an instant write-off.
This was the most infuriating part of the article to me. I've ranted about this a few times now, but I can't understand how any directors and showrunners can trust Zaslav and WBD at this point. They keep canceling movies at the literal final stage, canceling shows with the flimsiest reasoning. Maybe they think they're safe since their projects weren't greenlit by the previous executives, since those are the ones that keep getting struck down. Zaslav seems like he has a grudge against the previous leadership, it feels just as plausible a motivation as greed at this point.
This time is especially cruel because they seemed like they were going to walk it back, but now it's clear it was just them trying to lessen the backlash. They probably never intended to sell it. It just pisses me off so much. I hope this goes viral, I hope this creates even MORE backlash than when they first canceled it. I hope Hollywood itself revolts and denounces them... But I'm not too optimistic.
Dang. On top of the human issues this causes, I was looking forward to this one. Love me some Looney Tunes.
So sad. Makes me hope someone involved leaks just so the work of the numerous people involved can be enjoyed, and also to spite the bean counters responsible for the shelving.
Mirror, for those hit by the paywall:
https://archive.is/buZnp