Netflix Signs 'Scandal' Creator Shonda Rhimes Away from ABC, as Battle for Talent Escalates

By Joe Flint Features Dow Jones Newswires

Netflix Inc. has recruited prolific television producer Shonda Rhimes, the creator of ABC hits such as "Scandal" and "Grey's Anatomy," the clearest sign yet of an arms race for talent between new and old entertainment industry giants.

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Under the terms of the multiyear exclusive agreement, Netflix said Ms. Rhimes, whose credits also include "How to Get Away with Murder," would develop new shows for the streaming service. She will move her production company ShondaLand from its current base at Walt Disney Co.'s ABC Studios to Netflix, though she will continue to be involved in her ABC shows currently on the air or in development.

Ms. Rhimes's signing is part of Netflix's effort to create and own more of its content and become less reliant on Hollywood studios and production companies to supply programming. It also is the latest twist in a battle between Disney and Netflix for entertainment-industry supremacy: Just last week, Disney announced it wasn't renewing a deal that provided many of its movies to Netflix to stream after their theatrical run, and was launching its own streaming service.

Netflix also faces increased competition from the likes of Amazon.com Inc., which on Friday announced a development pact with Robert Kirkman, the creator of the massive AMC Network hit "The Walking Dead."

Signing up a superstar "showrunner" like Ms. Rhimes -- whose work for ABC has generated over $2 billion in revenue from advertising, rerun sales and international licensing, according to people familiar with the matter -- underscores that Netflix intends to poach the best talent from traditional studios, whether in front of or behind the camera.

In the past week alone, Netflix announced signing movie directors Joel and Ethan Coen to make a Western series and lured former late-night star David Letterman out of retirement to make new shows. It also acquired the comic book publisher Millarworld and intends to use its characters to create new franchises.

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"We have continued to move up the food chain in terms of getting into the creation of content earlier," Netflix Chief Content Officer Ted Sarandos said in an interview.

When Netflix first entered the original programming arena, it relied mostly on outside suppliers for shows such as "House of Cards" and "Orange is the New Black." More recent shows including last year's surprise success "Stranger Things" have been wholly owned by Netflix.

In an interview, Ms. Rhimes said she is going to Netflix to get "new fresh creative energy." Unlike broadcast television, where networks want shows to run at least five years and require anywhere from 18 to 24 episodes per season, there is more flexibility for creators at platforms such as Netflix or even Time Warner Inc.'s HBO to do fewer episodes.

"I'm thrilled by the idea of a world where I'm not caught in the necessary grind of network television," Ms. Rhimes said. In addition, since Netflix doesn't have advertising, Ms. Rhimes doesn't need to worry about language and nudity. Netflix, she said, provides "larger creative freedom."

Other producers echo Ms. Rhimes's desire to be free of the demands of broadcast television. David E. Kelley, whose broadcast resume includes the hits "The Practice" and "Ally McBeal," has more recently produced for HBO and Amazon Prime and said he has no desire to go back to a broadcast or basic cable network.

"At this point in my career, I love the limited series format. I have no interest in doing 100 episodes of anything," Mr. Kelley said.

"We want to give creators a place to stretch out their muscles and have the environment do the best work of their lives," Mr. Sarandos said.

Ms. Rhimes's departure is a significant loss for Disney and ABC, which she has called home for 15 years. Her pact with ABC Studios had almost a year left on it, but the company agreed to release her early.

Ms. Rhimes will continue to be involved in the shows still running on ABC, as well as "For The People," a new legal drama debuting this upcoming season, and a "Grey's Anatomy" spinoff in the works. But Netflix will have the rights to new programs she creates.

In a statement, ABC Entertainment President Channing Dungey said, "I'm proud to have given a home to what have become some of the most celebrated and talked about shows on television." ABC Studios President Patrick Moran added, "The ShondaLand imprint will always be an important part of ABC Studios."

Terms of Ms. Rhimes's deal with Netflix weren't disclosed, but the streaming service has a reputation for deep pockets. Her production deal with ABC is worth more than $10 million a year to produce shows, people familiar with the pact said. On top of that, she is a profit participant in her shows, meaning she gets a cut of rerun and international sales.

Ms. Rhimes's longtime producing partner Betsy Beers will also go to Netflix, along with approximately 30 ShondaLand employees. The writers on her ABC shows, however, remain under contract with ABC Studios.

Netflix's heavy spending continues to raise eyebrows in Hollywood. It often doubles salaries to lure talent away from traditional players. The company's spending on new and acquired programs is expected to be more than $6 billion this year, compared with $5 billion a year ago. That is more than twice what HBO spends and five times as much as 21st Century Fox's FX or CBS Corp.'s Showtime.

Mr. Sarandos, the Netflix content chief, and Ms. Rhimes have known each for some time, and reruns of her shows have been hugely successful on Netflix. The pair grew closer when Netflix moved its Los Angeles offices from Beverly Hills to Hollywood, near where Ms. Rhimes makes her shows.

They began to bump into each other quite frequently and Mr. Sarandos said he would even solicit Ms. Rhimes's opinion on shows in development at the streaming service.

Once, he personally dropped a DVD off at her house.

"That is persistence," Ms. Rhimes said.

Write to Joe Flint at joe.flint@wsj.com

(END) Dow Jones Newswires

August 14, 2017 00:15 ET (04:15 GMT)