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

Rhimes and Heartless Pictures’ Trevor Macy and Mike Flanagan are among a group of creators who have told Netflix executives they believe the ads interfere with storytelling, said the people, who asked not to be named because the discussions are confidential. Netflix has told creators it won’t share any revenue from the ads, the people said.

Netflix isn’t the first broadcaster to have an ad-supported platform. But it used its previous opposition to advertising as a marketing tool to help the world confront creators. Rhimes signed a multi-year deal with Netflix through 2021 to create content for the streaming service. When he wrote the deal, Netflix had a strict policy of not including advertising in its programming, a longtime claim of founder and CEO Reed Hastings. Both Rhimes and Netflix declined to comment.

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Netflix rolled out the low-cost streaming service in the US and other countries this week. Netflix made the decision to offer an ad-supported level as revenue and subscriber growth increased in line with the end of the global coronavirus pandemic. Netflix has approximately 223 million global subscribers.

Netflix executives told creators to place midroll ads by thinking about meaningful moments and stories for each episode, according to people familiar with the matter. They told creators they didn’t expect many people to sign up for the basic advertising level relative to subscribers who won’t pay for advertising, the people said.

“We use our internal content tagging teams to basically find those natural breaks so we can deliver the ad in the smallest possible space,” Netflix CEO Greg Peters said in October.

However, many creators were not happy with the explanations. Brave Pictures makes horror films and series for Netflix. Those are the worst types of advertising because they kill the tension of the structure. One 50-minute episode of Intrepid’s “The Haunting of Hill House” consisted of five long, one-shot sequences.

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That episode, series six (“Two Storms”), is now interrupted by three one-minute long commercial breaks, made up of three commercials each, in the 6.99 tier. The main reason for not being sure to sign an exclusive contract with Netflix in 2019 was the complete avoidance of advertising, according to people familiar with the company’s thinking. An Intrepid spokesman declined to comment.

No profit sharing

Not all creators are upset with Netflix. Ryan Murphy, who signed a 300 million dollar deal with Netflix in 2018, makes episodes of his series in three acts, which lead to easy advertising, according to a person familiar with his work. Scott Frank, the producer of “Queen’s Gambit,” also didn’t complain, according to a person familiar with his thinking.

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

Splitting the revenue from ads, especially ads that interrupt the flow of stories, can be a way to alleviate angry creators who feel that Netflix has changed the rules in the middle of the 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 less power without voicing complaints.

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Still, some media and entertainment companies have avoided the issue of disruptive advertising or agreed to share revenue in some cases. The acquisition of Warner BrosHBO Max decided not to include midroll advertising in the HBO program to avoid the issue of interrupting the popular program. When HBO sold shows to affiliate cable networks, such as when “The Sopranos” aired on A&E, creators were able to participate in revenue sharing, according to a person familiar with the matter. An HBO spokeswoman declined to comment.

Some creators who have created content for Disney+ only have rights to participate in revenue-sharing advertising, depending on the language of the contract, according to the person familiar with the matter. Disneypolicies. But unlike Netflix, Disney owns cable networks that can ultimately distribute Disney+ programming through commercials. A Disney spokesman declined to comment.

– CNBC’s Sarah Whitten contributed to this article.

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