The Complaints Board was of the view that the content of the video did not reach the threshold to be considered to cause serious or widespread offence.
The video was found to "not contain sufficient context to signal to viewers the nature of the content prior to it playing and more could have been done to target the content to an appropriate audience", however, as the video had been removed the Complaints Board ruled the complaint was settled.
According to the ASA decision, TVNZ also argued the video was not an ad but rather 'programme content' and therefore fell outside the jurisdiction of the Advertising Standards Authority Complaints Board.
TVNZ said the video was part of the 'TVNZ Stubbies' series which was designed to create diverse content and showcase young directors.
The content had not been cut down to act as advertising or promotion for the series, it said. "There was no element of promotion of other episodes in the series in the Trueview screening as it was a single programme. Notwithstanding that the programme was delivered to viewers by YouTube Trueview."
It was presented on YouTube with 'Ad' and 'Skip ad' displayed on screen despite the entire short film playing.
TVNZ said, in the decision, that the material complained about was not advertorial.
The ASA said "distributing the content through YouTube Trueview was experimental and noted YouTube Trueview is traditionally an ad placement platform that plays before people start watching another video which they had chosen to view."
TVNZ digital commissioner Amie Mills said New Blood was the state-owned television network's way of reaching viewers who "might not be engaging with our content like they used to".
In a statement to the Herald TVNZ said it accepted it had a "special responsibility" to take care around screening content that deals with adult themes.
"[Girl Interrupted] has a story to tell, not something to sell, and we accept the content was unsuited to play automatically in an ad setting without any context," a spokeswoman said.
"The ASA gave us some useful guidance on how we could have best approached this – and we're taking that on board."
The video was removed from the YouTube Trueview platform on September 13.