It's slightly more complicated than that due to accruals/amortization. Suppose you started making a movie in January and released in in January the next year. The movie cost $1M to make. For accounting reasons you can't claim that in the first year you took a loss of $1M. Sure, that's what your bank statement says, but at the same time you're spending the money, you're also building up a movie, which has value. So your balance sheet would show you losing money from all the expenses in making a movie, but also gaining value from the movie being produced. If you expect the movie be worth more than $1M, your balance sheet might even show you turning a profit in year 1. If in year 2 you decide to shred it, you're technically not deducting the expenses paid into the movie, you're deducting the value of the movie on the balance sheet, built up from the previous year.

By this logic isn't it still better to make whatever profit they can by releasing it? Yes they would increase their net income (and thus tax burden), but they should still end up ahead (it's not like they're paying >100% marginal tax rate on those dollars). It must be more complicated somehow, right?

Could they not do the same if they donated it to the Library of Congress? They did intend to make a profit, but they are now destroying the value of the copyright by donating to the public domain due to updated market information.

I’d have expected you would need to demonstrate an attempt to generate income from an asset before the government would effectively give you a write off of the whole value. Anyway, thanks, hadn’t thought of it that way.