To be perfectly clear, Batgirl being canceled by Warner Bros. Discovery is a bad thing. This doesn’t bode well for anyone into movies, streaming or otherwise, and it’s a blow to the talented artists who worked hard on every phase of the film’s production and to the diversity this particular character represents. .
As far as we are concerned, Kevin Smith put his finger on it pointing out that “it’s an incredibly bad look to cancel the Latina Batgirl movie,” even “if the movie was fucking shit,” which he doubts that’s the case anyway.
Since its cancellation, there has been a some suggested reasons and an apology made for what is, from a creative point of view, a very disappointing decision on the part of the Warner Bros. Newly merged Discovery. Prepare for some reckoning, as we’re going to look at the financial implications of dropping Batgirl and how they compare to a hypothetical release of the film.
All DC movies and series affected by the Warner Bros. merger. Discovery
Batgirl and the “tax tricks”
One reason that has been dismissed as a footnote in all reports of Batgirl’s cancellation is the tax incentive to report a loss. We’ve done our own taxes before, so if the IRS asks, we have a basic working knowledge of how it works. But just in case, we spoke to a handful of folks in the entertainment industry to help us with our napkin calculations, from senior executives to production accountants at various studios. There have been quite a few reports on this, and we should say that estimates of what Warner Bros. Discovery saves have actually been all over the place. It’s hard to say for sure, but here’s what we found.
Simply put, a loss can be deducted from a company’s taxable income, so by declaring the money they’ve already spent on Batgirl as a loss, some $90 million according to most reports, revenue from Warner Bros. Discovery for the year are reduced by the same amount. That’s $90 million that they won’t be taxed on.
Now, that doesn’t mean $90 million is coming back into WBD’s pocket. The federal corporate tax rate is 21%, which means their tax bill will be reduced by $18.9 million. On top of that, New York State, where Warner Bros. Discovery retains its headquarters, also gets a share of a company’s profits, and its corporate tax rate is 7.25%, or an additional $6.5 million. Basically, that means Warner Bros. Discovery will pay Uncle Sam $25 million less just by unplugging Batgirl.
This basically means WBD is losing $65 million instead of the entire $90 million production budget. But throwing out a nearly finished movie so you could lose $65 million begs another question…how could WBD have gotten the same $90 million loss on their Batgirl taxes if they’d instead decided to finish and release the film?
How to find an “L” of 90 million dollars
Well, he said, pushing his glasses up his nose, let’s talk about what might have happened if they had released the movie in theaters instead of just on HBO Max.
The first thing is that they should finish it. There are several reports that test screenings didn’t go well and the visual effects weren’t complete. That could mean reshoots, more editing, more effects work, and more delivery costs to get the movie to theaters. So, after speaking to the same studio sources, we feel safe assuming it could cost another $10 million to complete the film.
But once you have a finished film, you have to tell people about it; slapping Batgirl on buses, billboards, TV commercials and YouTube pre-roll doesn’t come cheap. Then we add another figure gleaned from our conversations with our friends at the studio – around $20 million to market the film.
Adding those numbers to the $90 million already spent brings Batgirl’s total cost to $120 million. So really, all Batgirl needs to bring in from theaters is $30 million to offset her finishing and branding costs.
Now, you might think $30 million is nothing at the box office, and you’re right. But it is not that simple. Movie theaters do not show movies for free. They take a share of ticket sales, which is usually around 50%. That means Batgirl actually needs to make $60 million at the box office to make $30 million for the studio.
In short, WBD would have to spend $30 million and split $60 million earned at the box office just to be able to drop $90 million on Batgirl to be in the same position as killing the movie now.
For context, this August bullet train grossed $65 million worldwide in its first four days. Meanwhile, 2022 also saw The Northman, a dense Viking epic from indie writer Robert Eggers, pull in 68 million people worldwide – and that film didn’t feature the Michael Keaton’s Bruce Wayne Returns.
But even if Batgirl really has been bad, it can’t be worse than Morbius, and this bunch managed to steal $160 million from the people of Earth by the time he finished his meme-fueled re-release. Surely Batgirl could have followed Morbin’ Time in a race to be the biggest tax deduction.
Now, if they’d released the movie exclusively on HBO Max, like they planned, at $15 a month (which they don’t have to share with movie chains), it would have taken 2 million new subscribers to hit that $30 million mark. Or maybe just a million people subscribe and forget to cancel before the second billing cycle. But, you know, good luck proving it was because of Batgirl. In truth, it’s more likely that even if someone signs up for Batgirl, they’re sticking around for the other programs they’re paying for…so streaming revenue gets extremely unclear very quickly.
And remember, this whole exercise is just to see what it would take for a movie to lose $90 million. Maybe the movie would have outperformed the estimates we’ve made here if given the chance in theaters. Maybe it makes 100 million instead of 60 at the box office, and you’re at 70 million instead of 90. It’s not out of the realm of possibility and in theory you’ll make $20 million then . So why not just release it?
This industry sucks
The industry has always been known to hide its profits. Wildly successful films may never bring in a dime according to their balance sheets thanks to the infamous “Hollywood accounting.” So if a loss is what WBD needed, there are age-old ways to go about it.
To choose an example, the balance sheet of Warners Harry Potter and the Order of the Phoenix Shows that the film lost some $160 million in 2007. By box office mojo, with a budget of $150 million, the film grossed nearly $1 billion worldwide. Then I do not know.
What this exercise seems to show, however, is that the cancellation of Batgirl cannot have been about the money. Frankly, based on those numbers, it looks like Batgirl might have accidentally recouped her budget and then some. The financial benefit of killing the film now is incidental to the decision, a silver lining for a CFO somewhere.
More than anything, however, what the cancellation of Batgirl seems to be is a new regime cleaning up the house and performing a hard reboot on the DCEU. CEO of Warner Bros. Discovery David Zaslav was recently quoted saying, “This idea of expensive movies going straight to streaming – we can’t find an economic justification for it, we can’t find any economic value to it, so we’re making a strategic shift.” In addition to this emphasis on theatrical release rather than streaming for their DC properties, while Zaslav felt the film was closer to an expensive TV episode than a big screen movie, it seems that there would be more will to kill him.
Those are sort of two different answers, but probably still only part of it. The other part is the depressing macroeconomics of 2022. If you haven’t read the news lately, this sounds like a economic recession is on the horizon, and Zaslav and company may be betting on a tightening of the belt in homes around the world where the first casualty could be streaming subscriptions. Meanwhile, the movie industry and theater chains have historically proven to be recession proof at a minimum, and recession proof if you’re willing to be generous.
DC Extended Universe: Every Upcoming Movie
The decision to cancel an entire movie so close to completion took everyone by surprise. It’s a drag to say the least. But while we search for some sort of logic behind it, we can all look away from finances. The “savings” they achieve by forgoing a $90 million investment is a drop in the ocean for a company that trades in the billions, and more than that there are very realistic scenarios where the movie could have made more of those savings. Whatever the reasoning, be it a strategic change or a lack of confidence in the product, it’s pretty safe to say that money was not a consideration. And respect for the artists who worked on Batgirl was also not a consideration.
Anyway, Leslie Grace and the directors Adil El Arbi and Bilall Fallah and the people in the craft department and the stunt people and the composer and a number of people who might have ended up in the credits – let it be said in by the way, the main ending credits you usually see in a superhero movie? These sleek animated sequences can cost upwards of $300,000, so add that to the math – they all deserved better.