They’d be doing this change on their TVs, in principle this would be no different from displaying the settings menu that comes up when you press the * button, no tampering of the HDMI signal required. HDMI inputs are their own “channels” in the UI so it’s pretty trivial to put ads on the screen periodically when one such channel is open.

My number one criticism of Netflix was that it was too accessible so this is a welcome change, I really think the higher bar will increase the quality of views.