Why did Warner Bros. cancel $90 million Batgirl film for HBO Max?

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 supply, together with the cheaper movie Scoob! Vacation Hang-out, a property primarily based on the cartoon in regards to the 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 yr and featured an all-star solid together with actress Leslie Grace within the lead position, offering important Latinx illustration in a significant movement image. 

Directed by Adil El Arbi and Bilall Fallah, the movie was additionally meant to characteristic Michael Keaton as Bruce Wayne in a return to the Golden Globe-winning actor after an absence of 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 increase.

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

In keeping 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 inside 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 scenario told Variety that Warner Bros. will virtually undoubtedly take a major writedown on each Batgirl and Scoob! A tax lawyer walked Fortune by means 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 might reside.

Grappling with the streaming period

In April of this yr, 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 yr directly on subsidiary HBO Max, a controversial decision that’s now credited with serving to the platform construct its paid subscriber base.

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

Throughout the leisure business, different firms have needed to make comparable 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 taking part in subject of comparable service suppliers.

Zaslav has made different important adjustments 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 Anne Hathaway-starring “The Witches” and Seth Rogan-starring “An American Pickle.” It has not given any rationalization for this, and 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 Could that Zaslav was performing like a “new media mogul,” significantly specializing in how he was “reducing 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 not too long ago, an costly Game of Thrones spinoff starring Naomi Watts.

Batgirl can be much more costly in a theatrical launch context, as the prices of distribution and advertising and marketing would add hundreds of thousands onto its finances, according to Variety. Canceling it altogether as a substitute might give the corporate a wholesome write-off on this yr’s federal tax return, based on David Blum, deputy accomplice of the tax apply group on the legislation agency Akerman LLC. 

“In the event that they had been to jot 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 choice for a corporation to off-load a product is often to promote it—a prospect made difficult for a legacy model with a number of stakeholders like Batman for Warner Bros.

Writing your entire manufacturing off as a loss, and utilizing that loss to offset positive factors from different profitable productions, Blum says, is probably going the best path ahead for the corporate to succeed in a financially-sound conclusion for the movie. 

When Warner Bros. recordsdata its taxes this yr, 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 stated, an organization might promote a loss-making funding like this. Though Blum didn’t wade into the issues of mental property associated to comedian books, current precedent demonstrates why that’s not a sensible choice right here. 

Comedian-book characters are price actually billions of {dollars}, as seen by Disney buying Marvel Studios for $4 billion in 2009, then seeing Marvel’s steady of superheroes generate several movies with multibillion-dollar grosses. So long as Disney holds onto the Marvel IP, it might maintain printing cash (however the motion pictures ought to ideally be good, too).

Enter the case of Marvel vs. Kirby, or Kirby vs. Marvel, through which the household of Jack Kirby, the artist who co-created (at the very 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, moderately than threat Marvel characters getting out of its grasp. 

“Take into consideration how lengthy they’ve been doing Batman motion pictures,” says Blum. “Warner Brothers Studios, they’ve a whole Batman part of their studio tour. I feel 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 goal.”

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