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Why did Warner Bros. kill a $90 million Batgirl film starring Michael Keaton as Bruce Wayne? An enormous tax write-off most likely isn’t the one cause

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On Tuesday, Warner Bros. introduced its plan to not transfer ahead with the discharge of Batgirl, a film that cost an estimated $90 million to provide, together with the cheaper movie Scoob! Vacation Hang-out, a property primarily based on the cartoon about crime-solving canine Scooby-Doo.

The choice got here as a shock to many, because the film had already completed manufacturing in March of this 12 months and featured an all-star forged together with actress Leslie Grace within the lead position, offering important Latinx illustration in a serious movement image.

Directed by Adil El Arbi and Bilall Fallah, the movie was additionally meant to function Michael Keaton as Bruce Wayne—a return of the Golden Globe–successful actor to a job he hadn’t performed in 30 years. Keaton was the primary big-screen Batman in two Tim Burton–directed motion pictures in 1989 and 1992 that ascended to cultural phenomenon standing and set the stage for the approaching a long time’ superhero blockbuster growth.

So why throw away tens of thousands and thousands in funding and the return of a legendary actor?

In line with Warner Bros., now beneath new management since a merger with Discovery was finalized, it minimize Batgirl as a result of the discharge not made sense throughout the firm’s broader enterprise technique.

“The choice to not launch Batgirl displays our management’s strategic shift because it pertains to the DC Universe and HBO Max,” the corporate wrote in an announcement first reported by Deadline. Warner Bros. didn’t reply to Fortune’s request for remark.

Individually, sources aware of the state of affairs told Variety that Warner Bros. will nearly positively take a major write-down on each Batgirl and Scoob! A tax lawyer walked Fortune by way of how that might actually look.

However paradoxically, there could also be another excuse why Batgirl needed to die: so Warner Bros.’ valuable comic-book IP may dwell.

Grappling with the streaming period

In April of this 12 months, Warner Bros. merged with Discovery in a $43 billion deal.

Previous to that, Warner Bros. executives Jason Kilar and Ann Sarnoff pioneered a COVID-era streaming-first model for the corporate. In 2021, it launched each film it had produced for the 12 months without delay on subsidiary HBO Max, a controversial decision that’s now credited with serving to the platform construct its paid subscriber base.

With Discovery CEO David Zaslav now on the helm, and Kilar and Sarnoff having departed the corporate within the merger, he’s turning the corporate again towards a theatrical launch construction, with a deal with particular person high-budget blockbusters as an alternative of simultaneous streaming releases of cheaper merchandise.

Throughout the leisure business, different firms have needed to make related changes. In April, Netflix reported a net loss of 200,000 subscribers in its first quarter and predicted better losses to observe amid a crowded enjoying discipline of comparable service suppliers.

Zaslav has made different important modifications to the corporate’s slate of merchandise since taking on, notably killing streaming service CNN+ over insufficient subscriber numbers. In current weeks, Warner Bros. has removed several films from streaming on HBO Max, together with The Witches, starring Anne Hathaway, and An American Pickle, that includes Seth Rogen. It has not given any rationalization for this—the elimination was first noticed by commenters on Reddit—however is in keeping with a non–streaming-centric mannequin. The Wall Street Journal reported in Might that Zaslav was appearing like a “new media mogul,” notably specializing in how he was “chopping pricey tasks.”

Killing costly tasks isn’t altogether uncommon at Warner Bros. past Zaslav’s management, both. Its HBO division famously pulled the plug on a star-studded adaptation of Jonathan Franzen’s The Corrections in 2012 and extra just lately, an costly Game of Thrones spinoff starring Naomi Watts.

Batgirl could be much more costly in a theatrical launch context, as the prices of distribution and advertising and marketing would add thousands and thousands to its price range, according to Variety. Canceling it altogether may give the corporate a wholesome write-off on this 12 months’s federal tax return, in line with David Blum, deputy chair of the tax observe group at legislation agency Akerman LLP.

“In the event that they had been to write down this off as a nugatory funding, they get a deduction,” says Blum. “It’s like a enterprise enterprise that fails.”

The significance of IP

One possibility for an organization to off-load a product is often to promote it—a prospect made tough for a legacy model with a number of stakeholders like Batman is for Warner Bros.

Writing the whole manufacturing off as a loss, and utilizing that loss to offset good points from profitable productions, Blum says, is probably going the simplest path ahead for the corporate to succeed in a financially sound conclusion for the movie.

When Warner Bros. recordsdata its taxes this 12 months, explains Blum, the corporate will mix the revenue from its worthwhile motion pictures with its losses to find out its taxable revenue. The loss from Batgirl would decrease that taxable revenue considerably.

Ordinarily, he mentioned, an organization may promote a loss-making funding like this. Though Blum didn’t wade into issues of mental property associated to comedian books, current precedent illustrates why that’s not a sensible possibility right here.

Comedian guide characters are value actually billions of {dollars}, as demonstrated by Disney’s buying Marvel Entertainment for $4 billion in 2009, then seeing Marvel’s steady of superheroes generate several movies with multibillion-dollar profits. So long as Disney holds on to the Marvel IP, it might probably hold printing cash (however the motion pictures ought to ideally be good, too).

Enter the case of Marvel v. Kirby, or <em>Kirby</em> v. Marvel, wherein the household of Jack Kirby, the artist who cocreated (at the least) most of the nice Marvel characters, petitioned the Supreme Court docket to terminate Marvel’s copyright. This case bought all the best way to a Supreme Court docket listening to earlier than Disney confidentially settled, presumably for a big sum, slightly than danger Marvel characters getting out of its grasp.

“Take into consideration how lengthy they’ve been doing Batman motion pictures,” says Blum. “Warner Bros. Studios, they’ve a whole Batman part of their studio tour. I believe a part of that is to keep up the model and take a tax write-off. I’m speculating that it’s for a twin function.”

In different phrases, promoting off any sort of Batman-related IP simply isn’t a sensible possibility for Warner Bros., and so its $90 million Batgirl needed to chew the mud to ensure that its IP to dwell one other day.

This story was initially featured on Fortune.com

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