Shonda Rhimes, other creators unhappy with Netflix’s new mid-video ads

Shonda Rhimes attends the 2018 Vanity Fair Oscar Party on March 4, 2018 in Beverly Hills, CA.

Presley Ann | Patrick McMullan | Getty Images

Shonda Rhimes, an executive producer behind “Bridgerton” and “Inventing Anna,” is among a number of showrunners, creators and writers who have expressed displeasure with NetflixThe decision to include mid-video ads in its content, according to people familiar with the matter.

Trevor Macy and Mike Flanagan of Rhimes and Intrepid Pictures are among a group of creators who have told Netflix executives they feel the ads are interrupting their storytelling, said the people, who asked not to be named because the discussions are private. Netflix has told creators it won’t share any ad revenue with them.

Netflix isn’t the first streamer to have an ad-supported tier. However, she used her previous aversion to advertising as a marketing tool to help with deals with creators. Rhimes signed a multi-year deal with Netflix in 2021 to exclusively create content for the streaming service. When it signed the deal, Netflix had a firm policy of not including advertising in its programming, a longstanding policy of co-founder and CEO Reed Hastings. Both Rhimes and Netflix declined to comment.

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Netflix released the ad-supported service at a lower price in the US and other countries this week. Netflix decided to offer an ad-supported tier as revenue and subscriber growth coincided with the end of the global coronavirus pandemic. Netflix has around 223 million global subscribers.

Netflix executives told the creators that they deliberately placed the ad in the middle of the video at intervals that made sense with the plot of each episode, according to people familiar with the matter. They also told creators they don’t expect as many people to sign up for the basic ad tier compared to subscribers who won’t pay for any ads, the people said.

“We’re using our internal content tagging teams to basically find those natural breakpoints so we can deliver the ad at the least intrusive point,” Netflix chief operating officer Greg Peters said in October.

Still, several creators weren’t happy with the explanations. Intrepid Pictures produces horror films and series for Netflix. These are particularly unsuitable for embedding ads, as they destroy the build-up of tension. One 50-minute episode of Intrepid’s “The Haunting of Hill House” consists of five long takes in one take.

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The episode, the sixth in the series (“Two Storms”), is now interspersed with three one-minute commercial breaks, each consisting of three $6.99 commercials. One of the main reasons Intrepid signed an exclusive overall deal with Netflix in 2019 was because the streamer avoided advertising altogether, according to people familiar with the company’s thinking. An Intrepid spokesman declined to comment.

No income sharing

Not all creators are upset with Netflix. Ryan Murphy, who signed with Netflix for $300 million in 2018, creates episodes of his series in three acts, which makes for easy ad placement, according to a person familiar with his work. Scott Frank, co-creator of “The Queen’s Gambit,” also wasn’t complaining, according to a person familiar with his thinking.

The Directors Guild of America and the Writers Guild of America declined to comment for this story.

Splitting ad revenue, especially ads that interrupt the flow of the narrative, could be a way to appease irritated creators who feel like Netflix has changed the rules midgame. But Netflix won’t do that, according to people familiar with the matter. Netflix owns its original programming and can insert ads where and when it wants, giving creators little leverage beyond voicing complaints.

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However, other media and entertainment companies have avoided the problem of interruptive ads or, in some cases, agreed to revenue sharing. Warner Bros. DiscoveryHBO Max decided not to include mid-video advertising in HBO programs to avoid the problem of interruptions of prestigious programs. When HBO sold shows to linear cable networks in syndication, such as when “The Sopranos” aired on A&E, the creators could participate in revenue sharing, according to a person familiar with the matter. A spokesman for HBO declined to comment.

Some creators who have created content exclusively for Disney+ also have the right to participate in ad revenue sharing, depending on the contract language, according to a person familiar with the matter. Disneythe rules. Unlike Netflix, however, Disney owns linear cable networks that could eventually air Disney+ programming with commercials. A Disney spokesman declined to comment.

– CNBC Sarah Whitten contributed to this article.

WATCH: Netflix launches ad-based subscription plan

Netflix launches ad-based subscription plan

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