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How does delisting a game make/save money?
(delistedgames.com)
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this post was submitted on 09 Mar 2024
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I see "taxes" a lot but I have never seen someone explain the mechanism by which this is supposed to work.
The only thing I can come up with in my head is that they have capitalized the development costs and are currently depreciating the resulting asset. And that by cancelling/delisting the games it may allow them to immediately depreciate the rest of it, thereby recognizing a large expense for the current tax year, reducing profit, and therefore taxes.
Is that how this is supposed to work?
Pretty much. The delist is presented as a big operating "loss" to tax authorities. An asset that they will no longer have and will no longer make them revenue. The only thing they are retaining is the copyright. This was their 2022 strategy.
But it is also about cost vs. revenue in the mid term. If it cost X amount to keep a property in a streaming service (servers, programmers, bandwidth, etc.) But it brings in less than X in revenue, that revenue still has to pay a lot of passives (residuals, licensing, fees) and taxes. Then that property is a net loss for the company and other products have to pick up the slack to pay the full X costs. By delisting the whole company runs a financially healthier profit. They over spent and the most recent merger was left holding the bag of debts.
I have absolutely no fucking idea how taxes work. But this sounds to me like I have insurance on my hand and I sit down one evening with a knife and cut off my hand and then go to my insurance company, showing them my bloody stump: "gib money!"
wtf.
Not exactly. You don't pay taxes on your hand. And if you intentionally harm an insured good you void the insurance.
It's more like, suppose that you get married. You and your partner each own a house. Since you're joining into a single household, you now technically belong to the next tax bracket as your net worth is both houses combined, so you pay more taxes. Your expenses are also the sum of the maintenance of both.
You think, since you're only going to live in the one house to rent the other. But as it turns out, almost nobody wants to rent your house, the price people are willing to pay doesn't cover maintenance and property taxes, plus you also have to pay income taxes on the rent. The whole ordeal isn't profitable.
So instead you sell one of the houses. Overall you paid less on administrative and sell taxes. From now on you don't have to pay maintenance or property taxes anymore. And your net worth in properties falls back to the previous tax bracket so you pay less taxes overall. Additionally, for this tax season only, you get to write part of the value of the house as a net loss, arguing you sold the house under value. So the cash you get in hand is not revenue and isn't taxed and your final tax is further reduced by the loss of net worth.
Now you have a cushy lump of money to sit on, and in the future you and your partner are no longer burdened with the costs of the second property.
NPR did a piece on it. https://www.npr.org/2022/12/17/1143901911/popular-titles-are-vanishing-from-hbo-max-after-merger
when you do a merger there are weird special tax laws that apply temporarily