Shonda Rhimes attends 2018 Vanity Fair Oscar Party on March 4, 2018 in Beverly Hills, CA.
Presley Ann | Patrick McMullan | Getty Images
Shonda Rhimes, the powerful producer behind “Bridgerton” and “Inventing Anna”, is one of a number of showrunners, creators and writers who have expressed their dismay at 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 the ads interrupt their story, the people said, who asked not to be named because the discussions are private. Netflix has told its creators it will not share ad revenue with them, the people said.
Netflix isn’t the first streamer to have an ad-supported tier. But it has used its past distaste for commercials as a marketing tool to make deals with creators. Rhimes signed a multi-year deal with Netflix in 2021 to create exclusive content for the streaming service. When she signed the deal, Netflix had a firm policy of not including ads in its programming, a longstanding teaching of co-founder and co-CEO Reed Hastings. Both Rhimes and Netflix declined to comment.
Netflix released a cheaper ad-supported service this week in the US and other countries. Netflix has made the decision to offer an ad-supported tier as its revenue and subscriber growth has coincided with the end of the global coronavirus pandemic. Netflix has approximately 223 million subscribers worldwide.
Netflix executives have told the creators they have carefully placed mid-roll ads at intervals that make sense with each episode’s storyline, according to people familiar with the matter. They also told the creators that they don’t expect many people to sign up for the basic ad tier compared to subscribers who pay for no commercials, the people said.
“We essentially use our in-house content tagging teams to find those natural breakpoints so we can deliver the ad at the least intrusive point,” Netflix chief Greg Peters said in October.
However, several makers are not happy with the explanation. Intrepid Pictures makes horror movies and series for Netflix. Those are particularly bad for inserting ads, as they kill the construction stress. A 50-minute episode of Intrepid’s “The Haunting of Hill House” consists of five long, single-shot takes.
That episode, the sixth in the series (“Two Storms”), is now punctuated by three one-minute commercial breaks, each consisting of three ads, at the $6.99 tier. One of the main reasons why Intrepid signed an exclusive blanket deal with Netflix in 2019 was the streamer’s total avoidance of advertising, according to people familiar with the company’s thinking. An Intrepid spokesperson declined to comment.
No revenue share
Not all creators are mad at Netflix. Ryan Murphy, who signed a $300 million contract with Netflix in 2018, is making his series’ episodes 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,” hasn’t complained either, according to a person familiar with his thinking.
The Directors Guild of America and the Writers Guild of America declined to comment on this story.
Splitting revenue from ad, especially commercials that interrupt the flow of stories, can be a way to calm annoyed creators who feel Netflix has changed the rules mid-game. But Netflix will not do that, according to acquaintances. Netflix owns the original programming and can insert ads wherever and whenever it wants, leaving creators with little influence other than voicing complaints.
Still, other media and entertainment companies have avoided the problem of interrupting ads or in some cases agreed to share revenue. Warner Bros. Discovery‘s HBO Max decided not to include mid-roll ads in HBO programs to get around the problem of interrupting prestige programming. When HBO sold shows to linear cable networks in syndication, 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 spokesperson declined to comment.
Some creators who have created content exclusively for Disney+ also have rights to participate in ad revenue sharing, depending on the contract language, according to a person familiar with Disney‘s policy. But unlike Netflix, Disney owns linear cable networks that could eventually air Disney+ programs with commercials. A Disney spokesperson declined to comment.
–CNBCs Sarah Whitten contributed to this article.
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