Who Killed ‘Batgirl?’ Probably The Accountants

Earlier this week, we got the disappointing and frankly astonishing news that Warner Discovery had pulled the plug on a handful of feature films and series that were essentially complete and ready for release, most notably Batgirl. Why, wondered fans and pundits around the world, would Warner Bros strangle its baby in the crib, announcing not only would the movie be pulled from its slated theatrical release, but not released at all in any form, or sold to another studio, after an investment of $90 million?

The decision was especially mystifying and outrageous since Batgirl represents an extension of DC’s bluest blue-chip IP, the Batman family, and was a showcase platform for under-represented groups in front of and behind the camera, including star Leslie Grace and directors Adil El Arbi and Bilall Fallah.

Most speculation focused on studio politics, concerns about the quality of the film, Discovery’s antipathy to anything smacking of the old regimegeneral disdain for DC as a business unit and bias against a high profile project helmed by people of color, but the truth is likely much more prosaic.

Warner Bros, along with all of its subsidiary companies like HBO and DC, just underwent a change of ownership from AT&T
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to Discovery. Typically when that happens, a dollar amount is set aside as part of the deal to cover transitional expenses: severance packages for redundant employees, disposal of disused real estate, rationalization of internal systems, and termination of certain projects and initiatives that don’t fit the new strategy going forward. This is an accepted and expected part of any M&A activity.

The merged company has a limited time to identify and itemize these specific merger-related costs that fall under the set-aside. Anything that goes into this corporate “burn bag” gets taken as a write off or sunk cost. Anything that doesn’t become part of operating profit and loss going forward.

This window provides a “get out of jail free” card for the company to get any project that carries any risk of not being profitable off the books, at a unique moment when its termination becomes just another cost of the merger rather than a specific operational failure. Is the project not a sure money-maker? Or are there even slight concerns about the quality of the finished product? Pull the plug. Is it even a little bit out of alignment with the new leadership’s strategy? Kill it now while the killing is easy and cheap, rather than wait until it becomes a literal liability. Worried about blowback? Taking money from the purchase accounting set-aside allows the company to be more generous paying off talent and taking liabilities off the books than would be the case at any other time.

Observers have pointed out that Batgirl, with a $75 million budget that ballooned to $90 million due to COVID-related overages, falls into a no-man’s land where it’s not too expensive to go straight to streaming and not quite expensive enough to land as a box office blockbuster. Rather than spend the $150 million or so necessary to shine it up, or take a loss by putting it directly on the HBO MAX service that, according to other reports, is heading for its own rocky shoals, executives probably figured that snuffing it out under the purchase accounting allowance was the least bad option. After all, the market has already priced in the M&A expense, but it hasn’t priced in a high-profile project taking a belly flop. Even if executives saw some upside to releasing a film like Batgirl to please fans or send a message to the market, why roll the dice when you have a one-time opportunity to avoid the risk entirely?

Unfortunately, projects killed in this way can’t be sold out the back door. This is why reporting that Batgirl, despite being complete and ready to go, will never see the light of day is so definitive and insistent. This isn’t a “Snyder Cut” scenario, where fan pressure could effect a reversal, and it’s almost certainly not a marketing ploy to gin up fan support. Releasing Batgirl in any way, shape or form would undo the benefit of writing it off as a one-time expense and expose Warner Bros. Discovery to the same risk it is seeking to avoid, for much lower reward or chance of success. Anyone who did that could be, and probably should be, fired, even if they turned out to be right.

The accounting logic behind the decision doesn’t mean that the speculation about studio politics or other motives is wrong. After all, someone had to decide to throw Batgirl in the burn bag, and the reasons for that decision might be as narrow and short-sighted as many have suggested. But in this case, the financial incentives made that a much easier call than it might appear.

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