Why canceling ‘Batgirl’ doesn’t actually cost Warner Bros. Discovery $90M: The weird world of Hollywood finance

Some days, you can get rid of a bomb.

At least that’s the conclusion Warner Bros. Discovery came to this week, announcing the cancellation of “Batgirl” — a film that cost $90 million, had wrapped filming in March and was reportedly well on its way through postproduction.

When fans heard the news — and the price tag (on the lower end, but up there with budgets of other DC franchise films) — they were shocked. Then came the question: If the movie was already basically finished, why lose $90 million by not releasing it?

Welcome to the weird world of Hollywood finances, where not releasing a $90 million movie is actually a financial strategy.

Here’s how it works:

Warner Bros. isn’t actually $90 million in the red by not releasing “Batgirl.” Nor is it down the $40 million it cost to produce “Scoob!: Holiday Haunt,” which was also canceled this week despite being nearly finished. At least not in a way that really hurts their most prized currency: the views of their shareholders.

Figuring Hollywood’s bottom lines is a task fit for the Riddler

Yes, $90 million of real money was spent to make “Batgirl.” Like for any movie, that upfront expense is out the door, gone, during the film’s production. The money was used to pay cast and crew contracts, and for supplies and equipment — lights, cameras, action — needed to actually make the film.

This $90 million expense is paid by the studio but remains off the books until the film is officially released in theaters, or to streaming, or both (in the case of many DC films).

Only when a film is officially released does that initial expense — $90 million, in the case of “Batgirl” — go on the books. Bottom line: It’s only the on-the-books number that matters to movie studios because that’s what is reported to shareholders, figures into taxes and determines the valuation of the company.

In the case of “Batgirl,” this strange math sums up to zero. “Batgirl” may have made zero dollars, but by not being released, effectively, zero dollars were spent.

The studio’s recent merger is a “golden ticket”

While this financial formula is used to mitigate loss throughout the movie industry, there were some special circumstances that played to Warner Bros. favor with the timing of “Batgirl.”

“[Warner Bros.] have this kind of golden ticket right now, being in the midst of an acquisition,” said Paul Hardart, a clinical professor of marketing at New York University and film producer.

In April, AT&T’s WarnerMedia merged with Discovery to form Warner Bros. Discovery, headed by CEO David Zaslav. Because of this acquisition, Hardart said, “Batgirl” can be treated as an asset under the new company’s control.

So, this is one reason why Zaslav — who, in April, canceled the $300 million CNN+ just weeks after its debut — has been quietly removing titles such as “Moonshot,” “Superintelligence,” “The Witches,” “American Pickle” and “Locked Down” from HBO Max this summer. Their remaining amortized costs can reduce taxes on income generated by other projects.

And where this “golden ticket” shows up: “On the bottom line and in the profitability of the company,” Hardart said. “They can write off probably the whole $90 million, and that will reflect better on their overall economic performance.”

Who loses? The fans, the directors, the crew and the cast — which starred Leslie Grace as the first Afro-Latina Batgirl and included a supporting cast of Michael Keaton, J.K. Simmons and Brendan Fraser.

“Warner will likely honor any contracts but won’t incur any unnecessary additional costs,” Hardart said. This means that any budgeted postproduction work left on the table, and royalties that would have been generated, won’t be paid out to their respective parties — typically a film’s producers and copyright owners.

And quality is just a minor player in this numbers game

The “Batgirl” screen tests reportedly didn’t receive overwhelmingly positive reactions. But that hasn’t always stopped the studio from releasing — incurring additional marketing costs, Hardart said, of up to $50 million — a string of films with mediocre reviews.

On Thursday, after failing for years to compete with Marvel Studios, Warner Bros. announced a 10-year reset for its DC Extended Universe — a plan that will likely reshuffle and rewrite its cast of superheroes (which, currently, clunkily includes two Batmen: Michael Keaton and Ben Affleck).

Zaslav is a power-player, and that is likely another element to this decision. “He wants to send a message that there’s a new sheriff in town,” Hardart said. “That they’re going to be draconian in addressing costs. And Wall Street will probably like that. And that’s who they’re playing to — not the DC fans.”

And the chopping block might just be warming up. Zaslav needs Warner Bros. Discovery to make up the $3.4 billion it lost in its first quarter after the merger.

The question: Is that a task for a superhero — or a supervillain?

Thanks to Lillian Barkley for copy editing this article.