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 among the many showrunners, creators and writers who have expressed their displeasure. NetflixAccording to people familiar with the matter, the decision to include video ads in the middle of their content.

Rhimes and Intrepid Pictures’ Trevor Massey and Mike Flanagan are among a group of creators who have told Netflix executives they believe the ads interfere with their storytelling, the people said, speaking on condition of anonymity. Said for because discussions are private. Netflix has told the makers that it will not share any revenue from advertising with them, the people said.

Netflix isn’t the first streamer to have an ad-supported tier. But it has used its previous distaste for commercials as a marketing tool to help land deals with manufacturers. Rhimes signed a multi-year deal with Netflix in 2021 to exclusively create content for the streaming service. When he signed the deal, Netflix had a strong policy of not including advertising in its programming, a longstanding tradition of co-founder and co-CEO Red Hastings. Both Rhimes and Netflix declined to comment.

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Netflix this week launched a low-cost ad-supported service in the US and other countries. Netflix made the decision to offer ad-supported levels as revenue and subscriber growth coincided with the end of the global coronavirus pandemic. Netflix has about 223 million global subscribers.

Netflix executives have told creators they’ve placed interstitial ads that fit with the story of each episode, according to people familiar with the matter. They have also told creators that they don’t expect many people to sign up for the basic ad tier to get subscribers who pay for no commercials, the people said.

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

Still, many creators are not satisfied with the explanation. Intrepid Pictures produces horror films and series for Netflix. They are especially bad for insert ads because they kill the building tension. A 50-minute episode of Intrepid’s “The Haunting of Hill House” consists of five long, single-shot takes.

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The episode, the sixth of the series (“Two Storms”), is now interspersed with three one-minute long commercial breaks, each containing three ads in the $6.99 tier. One of the main reasons Intrepid signed an exclusive aggregate deal with Netflix in 2019 is the streamer’s complete avoidance of advertising, according to people familiar with the company’s thinking. A spokeswoman for Intrepid declined to comment.

No income share

Not all creators are upset with Netflix. Ryan Murphy, who signed a $300 million deal with Netflix in 2018, has ordered episodes of his series into three acts for easier ad placement, according to a person familiar with his work. Scott Frank, co-creator of “The Queen’s Gambit,” isn’t complaining, 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 advertising, especially commercials that interrupt the flow of storytelling, could be a way to appease angry creators who feel Netflix has bent the rules. 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 benefit other than to voice complaints.

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Still, other media and entertainment companies have avoided the issue of intrusive advertising or in some cases have agreed to share revenue. Warner Bros. DiscoveryHBO Max decided not to include midroll ads in HBO programming to eliminate the problem of interference with prestige programming. When HBO has sold shows to linear cable networks in syndication, such as when “The Sopranos” aired on A&E, creators have been 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 exclusively for Disney+ are also entitled to a share of advertising revenue, depending on the language of the contract, according to a person Disneypolicies of But unlike Netflix, Disney owns a linear cable network that could eventually combine Disney+ programming with commercials. A Disney spokeswoman declined to comment.

– CNBC Sara Wheaton Contributed to this article.

WATCH: Netflix launches ad-based subscription plan

Netflix launches ad-supported subscription plan

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