If you ask any director, screenwriter, actor, stunt performer, gaffer, editor, cameraperson or other Hollywood worker, they’ll likely tell you a variation on the same story: “My dream, ever since I was a little kid making home movies, was to one day grant Warner Bros. a deduction for a loss sustained upon the abandonment of property (reported on Form 4797).” Yes, little is more exciting for an aspiring filmmaker than the idea that—with a lot of dedication and a pinch of luck—their years of driving Lyfts and waiting tables could pay off, resulting in a star-studded line item that will be shelved forever so that a major studio can claim a tax write-off. Ah, the magic of the movies!
This practice is back in the news because the powers that be at WB have gone back to their original decision regarding the hybrid live-action/animated Looney Tunes movie Coyote vs. Acme. Despite the film testing well and generating plenty of buyer interest, a team of execs who haven’t seen the finished movie look like they’re going to “unceremoniously delete it” for tax purposes. Sorry, filmmakers, but apparently it actually looks better to stockholders if WB doesn’t actually put movies out. “Hollywood accounting” has its reputation for a reason, but it’s never been so obviously broken.
It might seem like Warner Bros. Discovery CEO David Zaslav is a true innovator of idiocy, but the man behind the permanent shelving of movies like Batgirl and Scoob! Holiday Haunt is just ramping up a long tradition of burning art to save a quick buck.
After buying up DreamWorks, Universal decided to bury the musical-comedy Larrikins instead of selling it to Netflix. Universal president Jimmy Horowitz told Tim Minchin that “It’s schmuck insurance – if someone made a lot of money out of it, we’ll look like schmucks.” That mindset certainly applies here: Coyote vs. Acme is a creation from an earlier group of WB leaders, and would naturally be on the chopping block from a spiteful new C-suite who also happens to hate movies.
Even more relevant is a case from almost 100 years ago: Charlie Chaplin literally torched the film negatives of A Woman of the Sea back in 1933, in front of multiple witnesses, so that he could claim the movie as a loss for tax purposes.
The tax code may have changed since then, but the logic remains the same: Get rid of the movie so you can avoid all the final complications and lingering expenses associated with its “useful life.” If you cut that life short, pulling off an accounting assassination, you save a little immediate cash at the low, low cost of…art. It’s always been a crass practice, more often performed by resentful new regimes or moneygrubbers who’ve found themselves attracting the gaze of Sauron’s IRS. But now shelving movies, completed films that other companies want, is picking up steam as standard practice. Actually making things is such an outdated, small-time business model. It’s far more lucrative to remove things other people made.
For example, if Disney keeps all of its movies and TV shows on Disney+, it has to pay residuals to the people who made them. They’ve also spread out the costs of a movie like Crater (which was available to watch for a mere seven weeks during the summer of 2023) over the years that the movie will ostensibly be available to the public and, therefore, creating value for Disney. Remove these movies and shows from the streamer, or better yet, remove them permanently (like Disney did with Crater), and their value can be added to an impairment charge—basically, a claim to the tax man that something a company owns has become, suddenly, worthless.
Disney recorded a $1.5 billion impairment charge last year. As Julia Rock points out, this means that Disney is claiming something pretty odd: Both “that the assets were producing so little value that it’s cheaper to destroy them than to keep them and that the assets were worth $1.5 billion.” Huh. There’s no push for anyone to justify this contradiction. The IRS isn’t asking questions. It doesn’t matter if a movie is good, or bad, or somewhere in between. It doesn’t matter if it had the potential to one day be rediscovered as a cult classic. It certainly doesn’t matter that even the worst pieces of Z-grade trash are still worth preserving as cultural artifacts. As an aside, the HBO Original Fahrenheit 451 is still streaming on Max.
And sure, you can say that you didn’t want to watch those movies anyways. Kid movies! Superheroes! Cartoons, yuck. I get it, you’re tough and cool. But one day, this will happen to something that you were looking forward to. It will happen to something that would have moved you. Something you’d have remembered fondly, something that would’ve turned your day around. But even if you’re the most jaded, anti-art, movie-hating curmudgeon, you should remember that, released or not, you’re helping pay for this scheme anyways.
“When intertwined with public funding through state and federal tax incentives, the practice of movie and television write-downs represents a troubling exploitation of taxpayer funds,” writes tax attorney Andrew Leahey. “Coupled with rapidly expanding state tax incentives, it represents a multibillion-dollar Rube Goldberg machine that culminates in a nickel being pulled from your pocket, strapped to an Acme rocket, and fired directly into the bank accounts of movie studios.”
Every loophole taken by these studios doesn’t just rob us of art. It burns the work of countless artists. It steals from our quality of life by monkeying around with our broken tax system, allowing our most powerful corporations to skip out on their bills. It picks the remaining shreds of flesh off the bones of our culture, all to further fatten a few vultures at the top.
Politicians like Texas Representative Joaquin Castro are calling for the government to “review this conduct,” but the only people who seem to have the power here are those actually creating the movies. They can boycott the guilty studios, and we can support them, but there are so few left that aren’t exploiting this practice to its most predatory extremes. Cooking the books has always been a Hollywood practice. Burning them is new.
Jacob Oller is Movies Editor at Paste Magazine. You can follow him on Twitter at @jacoboller.
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