🎥 Warner Bros. is Cancelling Two Completed Movies?
Warner Bros. is cancelling two fully made movies to save money. Here's why that strategy makes sense.
Pepsi v/s Coca-Cola
Ford v/s Ferrari
Powerpuff Girls v/s Mojo-Jojo
These are some of the most iconic rivalries of all time. And one of the most cut-throat rivalries out there?
Marvel v/s DC.
This rivalry has been going on for the better part of this century, with some people even choosing their friends and partners on the basis of their allegiance.
But now it seems like DC is withdrawing from the jung ka maidan (battlefield).
🧠Warner Bros' New StrategyÂ
First things first, let's get some context about the DC Universe.
DC is a subsidiary of Warner Bros. which was owned by AT&T. But Warner Bros. merged with Discovery last year, in a whopping $43 billion deal.Â
But this merger comes with a baggage of $55 billion in debt brought on by Warner Bros.Â
It has received this debt courtesy of AT&T, which went on a massive spending spree, acquiring Time Warner, DirecTV and many more such assets.
That's not all, Warner Bros. is also bringing to the table a history of losses. The company saw its income decline by 32.7% last year.
This is in stark contrast to Discovery, which saw a 13% increase in revenue last year.Â
So, the first order of things was to make sure the new entity went the Discovery way and not the Warner Bros. way.
To do that the company set a target of cutting losses by $3 billion.
One of the ways it is cutting these losses is by shelving films.Â
And not just films that were at the concept stage: it is cancelling films that were already half made!
Yes, both ‘Batgirl' and ‘Scoob: Holiday Haunt', on which the company had already spent $90 million and $40 million respectively and which were almost ready to launch, won't be seeing the light of day anymore.
Why, you ask? Were the movies that bad?
Probably not. But they were too expensive.
You see, both movies were set to air on HBO Max, Warner Bros' OTT platform.
This was part of the company's pandemic strategy which focused more on driving OTT subscriptions as theatres were shut down.
But now times have changed. And the new CEO in town, Zaslav, sees this as nothing but a wasteful expenditure.
You see, millions of dollars are spent on these movies but they bring little revenue (only in the form of subscriptions).Â
Zaslav thinks this strategy is a waste of money and "spending for spending's sake."
He believes that the content that HBO Max has right now is enough, and if they continued to make more content they would struggle to make profits.
Okay, so why not release the movie in theatres?Â
Because then the distributions and marketing would take at least $30-$40 million more: money which the company really doesn't want to spend right now.
Wait, ReadOn, won't the company also earn money by releasing these movies?
Yes, but Zaslav feels the money that could come in will be much less than the amount they have already spent.
Then why not just release on OTT and change strategy later? At least that way the company can earn some money back.
But Zaslav claims the movie is too big for OTT and won't really garner much profits from the platform as well.
So, they found another way to make money out of the movie: claiming it as a tax write-off. Huh?
Yes, the company will just claim that $130 million spent on these two movies as loss, which means it will have to pay less taxes next year.
Meanwhile, it will continue to market its existing content, which the company claims is already as impressive as Netflix's library.
Moreover, once the two companies launch their joint platform (coming in 2023), new Discovery content will already pour in.Â
So, the new entity feels it does not need to spend money right now to win the streaming wars.
Rather, it needs to stay focused on cutting losses to ensure its business remains sustainable.
This strategy is starkly different from that of its rival Marvel, which is fast spinning show after show to keep loyal fans engaged.
While this strategy is expensive, it ensures that Marvel fans don't wander elsewhere and stay engaged. Plus, with new shows launching, Marvel can keep making money out of new merch.Â
And Warner Bros' move could disappoint the loyal DC fans. And disappointing fans is the biggest sin a company like Warner Bros.' can commit.Â
So, will Marvel (Disney) win this new battle or will DC's (Warner Bros. Discovery) sensible spending make it the winner?Â
Only time will tell.Â
âš¡In a line: Warner Bros. thinks the best way it can use two of its movies, one of which belongs to the DCU, is as a tax write-off.
💡Quick question: Whose strategy do you think will work: DC or Marvel?
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