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.

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Shonda Rhimes, the high-powered producer behind “Bridgerton” and “Inventing Anna,” is one of a number of creators, creators and writers to express displeasure. NetflixThe decision to include mid-video ads in its content, according to people familiar with the matter.

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

Netflix isn’t the first streamer to have an ad-supported tier. But it has used emotions previously for commercials as a marketing tool to help land deals with creators. Rhimes signed a multiyear deal with Netflix in 2021 to exclusively create content for the streaming service. When he cut the deal, Netflix had a firm policy of not including advertising in its programming, a long-standing principle of founder and co-CEO Reed Hastings. Both Rhimes and Netflix declined to comment.

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Netflix released its lower-priced ad-supported service in the US and other countries this week. Netflix made the decision to offer ad-supported tiers because revenue and subscriber growth has increased to coincide with the end of the global coronavirus pandemic. Netflix has around 223 million global subscribers.

Netflix executives have told creators they have placed midroll ads at intervals that make sense with the storyline 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 basic ad rates relative to non-commercial paying subscribers, the people said.

“We’re using our internal content tagging team basically to find natural breakpoints so we can deliver ads at the most inconspicuous points,” Netflix chief operating officer Greg Peters said in October.

Still, some creators don’t like the explanation. Intrepid Pictures makes horror movies and series for Netflix. It is very suitable for advertising insertions because it kills the tension of the building. A 50-minute episode of Intrepid’s “The Haunting of Hill House” consists of five long, single-shot takes.

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That episode, the sixth of the series (“Two Storms”), is now interrupted by three one-minute long commercial breaks, consisting of three commercials each, at a rate of $6.99. One of the main reasons Intrepid signed an exclusive deal with Netflix in 2019 was to avoid advertising, according to people familiar with the company’s thinking. A spokeswoman for Intrepid declined to comment.

No profit sharing

Not all creators are upset with Netflix. Ryan Murphy, who signed a $300 million deal with Netflix in 2018, made an episode 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,” isn’t complaining either, according to people familiar with his thinking.

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

Sharing revenue from advertising, especially commercials that disrupt the flow of a story, could be a way to weed out irate creators who feel 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 wherever and whenever, giving creators little leverage other than voicing complaints.

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Still, other media and entertainment companies avoided the issue of interruptive advertising or agreed to share revenue in some cases. Warner’s discovery roseHBO Max decided not to include midroll ads in HBO programs to eliminate the problem of interrupting prestige programs. When HBO has sold a show to a linear cable network in syndication, such as when “The Sopranos” aired on A&E, the creators may participate in revenue sharing, according to a person familiar with the matter. An HBO spokeswoman declined to comment.

Some creators who make content exclusively for Disney+ also have the right to participate in ad revenue sharing, depending on the contractual language, according to a person familiar with the matter. Disneyour policy. But unlike Netflix, Disney has a linear cable network that will eventually be able to distribute Disney+ programming and advertising. A Disney spokeswoman declined to comment.

– CNBC’s Sarah Whitten contributed to this article.

WATCH: Netflix launches ad-based subscription plan

Netflix launches ad-based subscription plan

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