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, the high-powered producer behind “Brigerton” and “Inventing Anna,” is among a number of executives, creators and writers who have expressed displeasure with Netflix‘s decision to include mid-video ads in their 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 believe ads interrupt 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, the people said.

Netflix isn’t the first streamer to have an ad-supported tier. But it has used its previous aversion to advertising as a marketing tool to help land 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 strong policy of not including advertising in its programming, a longstanding principle of co-founder and co-CEO Reed Hastings. Both Rhimes and Netflix declined to comment.

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Netflix launched a lower-priced ad-supported service in the US and other countries this week. Netflix made the decision to offer an ad-supported tier as revenue and subscriber growth have slowed to coincide with the end of the global coronavirus pandemic. Netflix has around 223 million global subscribers.

Netflix executives have told creators to place commercials between movies at intervals that make sense with the story of each episode, according to people familiar with the matter. They’ve also told creators they don’t expect many people to sign up for the basic level of ads relative to subscribers who won’t pay for any ads, the people said.

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

However, some creators were not satisfied with the explanations. Intrepid Pictures makes horror movies and series for Netflix. These are particularly bad adaptations for ad inserts because they kill the building tension. A 50-minute episode of Intrepid’s The Haunting of Hill House consists of five long, single shots.

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That episode, the sixth in the series (“Two Storms”), is now interrupted by three one-minute commercial breaks, consisting of three commercials each, at the $6.99 level. A key reason why Intrepid signed a blanket exclusive deal with Netflix in 2019 was the broadcaster’s total avoidance of advertising, according to people familiar with the company’s thinking. A spokesman for Intrepid declined to comment.

There is no income sharing

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

Sharing revenue from ads, especially ads that interrupt the flow of the story, could be a way to mollify frustrated creators who feel Netflix has changed the rules mid-game. 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 other than voicing complaints.

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However, other media and entertainment companies have avoided the issue of interruptive advertising or agreed to share revenue in some cases. Warner Bros. Discovery‘HBO Max’ decided not to include commercials in HBO programs to avoid the issue of interruption of prestigious programs. When HBO has sold shows to linear cable networks in syndication, such as when “The Sopranos” aired on A&E, the creators have been able to share in the revenue sharing, according to a person familiar with the matter. An HBO spokesman declined to comment.

Some creators who have created content exclusively for Disney+ also have rights to participate in ad revenue sharing, depending on the contractual language, according to a person familiar with the matter. Disneyhis policies. But unlike Netflix, Disney owns linear cable networks that could eventually air Disney+ programming with ads. 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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