Why Warner Bros. Killed ‘Batgirl': Taxes, Cutting Losses and a Strategic Pivot

Warner Bros. Discovery didn’t just shelve “Batgirl,” a nearly completed film that cost roughly $90 million; the project is effectively dead and won’t go to theaters or to streaming. So what gives? While there’s a big strategic play here and interest in protecting the future of the DC brand, the shocking move also has to do with lowering the studio’s tax burden and cutting their losses to improve earnings this year.

A company insider told TheWrap that the studio expects that by not releasing the movie at all, they’ll benefit from a tax treatment by writing off the losses of both “Batgirl” and another movie originally planned for HBO Max, “Scoob! Holiday Haunt.” While these circumstances are rare, it’s not uncommon for companies to write off losses in general.

This opportunity though to write-down these losses in particular would expire in mid-August, and doing so now would allow the studio to not carry the losses from the films on its books ahead of Warner Bros. Discovery’s earnings on Thursday, in which they’re trying to trim debt across the board and when potential big changes are on the horizon for the company and HBO Max. To that end, one expert at a production and financing company said that this move is a sign of them working to elevate the DC brand, biting the bullet and doing what they can to distance themselves from the studio’s prior regime.

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“Batgirl” was developed by the team led by then WarnerMedia CEO Jason Kilar, who throughout 2021 remained committed to his “Project Popcorn” approach to releasing the studio’s entire slate theatrically but also on HBO Max the same day. The move helped boost subscribers for the streaming service but annoyed some talent in the process, even as Kilar and Warner Bros. kept their promise toward 2022’s theatrical slate with movies like “The Batman” enjoying a 45-day window of theatrical exclusivity, before CEO David Zaslav officially got in the door.

So why not just release “Batgirl” in theaters? Zaslav hasn’t been shy about his commitment to theatrical exhibition, telling the crowd at CinemaCon in April that opening a movie in theaters first provides “a whole stream of monetization” and that it helps to build a brand and perception that the film “has a higher quality that benefits the streaming service.” But a movie developed specifically for streaming doesn’t have the same weight or budget as other DC titles, like the upcoming “Aquaman” or “Shazam” sequels, and “Batgirl” was part of the previous regime’s attempt to craft smaller-scale DC films for streaming.

TheWrap learned on Tuesday that the new owners and management are committed to making DC titles big theatrical event films, and “Batgirl” isn’t that. But insiders added that studio brass loves the film’s directors and star and are actively planning to work with them soon.

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“The decision to not release ‘Batgirl’ reflects our leadership’s strategic shift as it relates to the DC universe and HBO Max. Leslie Grace is an incredibly talented actor and this decision is not a reflection of her performance. We are incredibly grateful to the filmmakers of Batgirl and Scoob! Holiday Haunt and their respective casts and we hope to collaborate with everyone again in the near future,” a Warner Bros. Picture spokesperson said in a statement Tuesday. A rep for Warner Bros. Discovery didn’t respond to a new request for comment on this story.

In that sense, one agent said that it’s understandable why the studio would kill off both “Batgirl” and “Scoob!,” believing that any kill fees associated with the films would be far less than the tens of millions it would cost the studio to execute a global theatrical rollout of the film and market it, not to mention any reshoots or additional photography for theaters.

But financials weren’t the only factor at play here. For one, insiders at the studio said that a test screening for “Batgirl” didn’t go well, and the studio determined that ultimately the movie simply didn’t work. The notion of putting out a subpar film would run counter to Zaslav’s plans to refine an approach to the DC brand.

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“‘Quality, not cost cutting,’ seems to be the official reason,” the agent told TheWrap. And the agent further cited a reported directive from Zaslav that HBO Max streaming films should have a budget below $35 million, something that led to DC’s “Wonder Twins” movie also shutting down early in development back in May.

It’s also true that had “Batgirl” simply been released, it would’ve expedited the studio’s ability to write off the film for a tax loss. In essence, releasing “Batgirl” as planned on HBO Max would’ve resulted in a faster tax write off, but also would’ve resulted in an additional cost for marketing and its quality could’ve waylaid Zaslav’s plans for the DC brand.

The expert said that had the movie been working really well, the studio likely would’ve found at least some way to release it. And in that sense, one entertainment lawyer doubted the studio’s real motivations by attempting to write it off their taxes.

“To not release it is absurd, and by not releasing it at all, there is a significant risk that you can’t deduct it at all until you do something with it like transfer it to somebody,” Sky Moore, a partner with Greenberg and Glusker told TheWrap. “It is a stretch to believe they can take a deduction.”

Umberto Gonzalez contributed to this report.

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