Would you all explain to me how removing content we expect to have access to is a “cost savings” measure?
The following is from the Willow Wikipedia page, which led me to the linked URL:
The series was removed from Disney+ on May 26, 2023, amidst a Disney+ and Hulu content removal purge as part of a broader cost cutting initiative under Disney CEO Bob Iger.
I’ve been abroad for a month and earned some time off afterwards. One of my kids reminded me that we never finished Willow, so I said “let’s do it now!” The show wasn’t perfect for many reasons, but I wanted to finish it for nostalgia’s sake and my child legit found it interesting. Lo and behold, the series isn’t on Disney+ any more!
A quick search later, I see the above referenced quote linking to the article associated with this post… which only made things worse. The Mysterious Benedict Society was something my whole family could watch and enjoy without arguments! Turner and Hooch was dorky, but something my youngest loved and it was a super safe and easy pick for us bond over.
This post isn’t about whether the shows are good. And it isn’t about how nearly every show I like ends up cancelled. The point is that I paid for access, they were then quietly removed (for various platforms), and I have zero understanding as to how this saves these companies money.
Would someone explain?
P. S. Yes, I know this is old news. However, this is just how I am. I’m not up to date with anything in the entertainment world. I intentionally wait a few seasons for things because I loath when shows are cancelled after a season. (I’m looking at you, Firefly.) I’m the same way with books, often waiting to read a trilogy after its published because I don’t like the wait in between books. (Thanks, Rothfuss).
I just don’t take cancellation wells, especially when I was on top of everything including summer podcasts and such. (Now anything with the names Abrams, Lindelof, or Cuse makes my skin crawl.)
I know. I’m weird and stuff.
This thread isn’t touching on the biggest impact which is being able to write down or impair these assets that are taken off streaming or shows in production that are cancelled (for Warner’s an amount in excess of $3B) - the impaired asset value is then taken as a loss which reduces the company’s tax burden.
I won’t pretend to understand corporate accounting at all, but if a show is costing them more money than it’s supposedly bringing in, how does it actually have any value as an asset in the first place? Can they literally just deduct the cost of production?
I guess I’m trying to imagine an analogous physical example. If a business spends $10,000 on a widget machine, but after several years it deteriorates to the point of being functionally useless and worth only $100 for parts, if they then throw it out, can they write off the $100 it’s now valued at, or the $10,000 they originally paid? If it’s the $10,000, can that expense not be deducted at purchase, and they have to wait until the actual object is disposed of?
Physical equipment is depreciated at a specific schedule based on that asset’s useful life. If you have a widget machine that costs $10,100 and is expected to last 10 years before being scrapped for $100, you can use a straight line depreciation of $1,000 per year.
But 5 years in, if the widget machine is destroyed, and the remaining scraps are only worth $100, then you can write down the $5,000 loss against your income, taking that tax benefit now instead of over the next 5 years.
If it’s the $10,000, can that expense not be deducted at purchase, and they have to wait until the actual object is disposed of?
No, they can’t deduct the purchase price because it’s not actually a loss of income. If they bought something that doesn’t lose value over time (a chunk of gold, a famous painting, some foreign currency, or a parcel of land), the amount they paid isn’t a “loss,” because they have a valuable asset after the purchase, so they’re not any poorer after the transaction.
Well, I think there is a question too of the value that theses assets have when brought directly to streaming and the reason we’re seeing studios start to rethink this strategy and schedule more theatrical runs
However from what you described the scenario is similar and these situations also occur with more traditional assets, for instance a manufacturer who brings a product to market that significantly underperforms because of an unforeseen event, if the assets market value drops below what has been accounted for they write down that difference as a loss. This loss offsets other gains the company recognizes and therefore rescues their tax burden. Consumers are able to take advantage of this as well if they experience a loss in their investments (capital losses)
For businesses and consumers the ability to write down losses encourages additional investment, and the highly subjective nature of valuation allows companies like the studios to use creative strategies to offset other costs like Discovery’s acquisition of Warner Media
Yes, this is what I was thinking was the matter. And someone else in this thread posted at a guardian link saying something to the same effect. It’s still mind-boggling to me that to save money the answer is to remove everything completely. It feels like these big production companies are failing people and their use of the tax system is furthering that so they can save money. It just seems strange that they have to axe a show from existence to be able to prove it as a loss to the government.
