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 behind “Bridgerton” and “Inventing Anna,” is one of the showrunners, producers and writers who didn’t like it. NetflixThe idea is to integrate video ads into content, according to people familiar with the matter.

Trevor Macy and Mike Flanagan of Rhimes and Fragile Pictures are among the producers who have told Netflix executives they believe the ad is interfering with their stories, said the people, who asked not to be named because the discussions are private. Netflix has told producers it won’t share any ad revenue, the people said.

Netflix isn’t the first startup to have an ad-supported feature. But it used its initial antipathy to commercialism as a marketing tool to help deal with manufacturers. Rhimes signed a multi-year deal with Netflix in 2021 to exclusively produce content for her own use. When they signed up for the deal, Netflix had a strict policy not to include advertising in its programming, a long-standing policy of co-founder and CEO Reed Hastings. Both Rhimes and Netflix declined to comment.

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Netflix rolled out a cheaper streaming service in the US and other countries this week. Netflix made the decision to offer an ad-supported segment because revenue and subscriber growth have peaked at the end of the global coronavirus pandemic. Netflix has approximately 223 million subscribers worldwide.

Netflix executives have told producers to place more frequent mid-air commercials in a short period of time that make sense with the story of each episode, according to people familiar with the matter. They also told developers that they don’t expect many people to sign up for the basic ad segment for subscribers who don’t pay without ads, the people said.

“We’re using smaller, smaller, smaller teams to get the product out of the tougher environments,” Netflix CEO Greg Peters said in October.

However, several manufacturers were not happy with the specifications. Strong Pictures creates horror movies and series for Netflix. This is a big problem for the ad placement because it kills the build complexity. One 50-minute episode of Intrepid’s “The Haunting of Hill House” is five minutes long, filmed in one take.

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

There is no investment component

Not all creators are upset with Netflix. Ryan Murphy, who signed a $300 million deal with Netflix in 2018, makes his episodes in three parts, which makes it easier to advertise, according to a person familiar with his work. Scott Frank, co-creator of “The Queen’s Gambit,” also had no complaints, according to a person familiar with the situation.

The Directors Guild of America and the Writers Guild of America declined to comment on the matter.

Dividing revenue from advertising, especially advertising that disrupts the flow of content, could be a way to appease angry creators who feel that Netflix has changed the rules midgame. But Netflix doesn’t do that, according to people familiar with the matter. Netflix owns its original programming and can place ads where it wants, giving creators little power other than to complain.

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However, some media and entertainment companies have avoided the issue of disruptive advertising or have agreed to share revenue in some cases. Warner BrosHBO Max chose not to include commercials in the middle of HBO programming in order to eliminate the problem of interrupting premium programming. When HBO sells shows to network networks, such as “The Sopranos” aired on A&E, producers could participate in the revenue sharing, according to a person familiar with the matter. A spokeswoman for HBO declined to comment.

Other creators who have created content exclusively for Disney+ also have the right to participate in advertising, depending on the language of the agreement, according to a person familiar with the matter. Disneypolicies of. But unlike Netflix, Disney has a linear network that can broadcast Disney+ programming and commercials. A Disney spokesman declined to comment.

– CNBC images Sarah Whitten contributed to the story.

WATCH: Netflix is ​​launching an ad subscription system

Netflix has launched an ad subscription system

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