Choosing the right monetization model is vital for an OTT provider. In the video-streaming industry, there are three common terms referring to revenue generation: AVOD (advertising-based video-on-demand), SVOD (subscription-based video-on-demand), and TVOD (transactional-based video-on-demand).
Each of them has its pros and cons for a customer and a content provider. But they all show how people will access your on-demand videos on the platform.
Let’s delve deeper into these three OTT monetization pricing models and explore their positives and negatives.
SVOD – Subscription-based Video-on-Demand
SVOD stands for a subscription-based video-on-demand. These services charge a monthly or yearly fee from viewers in exchange for access to premium content. It is widespread in the video streaming industry. Many content providers start content monetization with SVOD.
Researchers state that the number of SVOD subscribers is growing and predict its further growth in the future. People tend not to limit themselves to one subscription. Instead, they purchase several fees for different platforms, expanding their choice of content.
Furthermore, a subscription is easy to cancel as viewers are not tied to a long-term contract. For this reason, content providers need to work on retaining customers on their platforms.
To conclude, SVOD is a great way to generate recurring revenue. It helps you build an online community around your brand by providing exclusive content to viewers.
AVOD – Advertising-based Video-on-Demand
AVOD stands for OTT advertising based video-on-demand. In this case, users watch content for free. Instead of paying for access to content, they view advertisements during video playback.
This monetization model is a win-win for all parties involved. Viewers watch free content, content providers generate revenue, and advertisers reach their target audience.
Targeting is usually more accurate on online streaming platforms, allowing providers to show commercials of products or services they might be actually interested in. It is possible to segment your audience and save resources by not showing all ads to all viewers.
Now, the AVOD monetization model is booming since viewers realize that they have too many subscriptions. For this reason, they don’t mind watching a short ad during a video instead of purchasing another fee.
TVOD – Transactional-based Video-on-Demand
TVOD refers to transactional-based video-on-demand and is also known as a pay-per-view. Unlike a subscription that gives access to all videos on the service at one purchase, a pay-per-view model requires payment for every video on the platform. For example, iTunes and Google Play are leveraging the TVOD monetization model.
Customers prefer TVOD-based platforms when they don’t want to get involved in a monthly subscription that gives access to a huge library of content. They want to watch one particular video or series of videos and are ready to purchase.
TVOD platforms can allow viewers to download videos for unlimited playback even in offline mode. However, they also can limit access to several days.
Content providers running TVOD platforms often offer recent releases or premieres, which brings more revenue to them since they provide access to Premium content to viewers.
Many TVOD service providers focus on sports events. However, others also stream webinars, live events, concerts, and other content.
TVOD platforms can easily generate revenue as they deliver unique content where each video has its own fixed price. It is suitable for customers looking for particular videos.
Utilizing a Hybrid Approach
The great thing about the revenue-generating models described above is that they can be combined with each other. This gives an opportunity to create choices for viewers. You can reach more people by opting for several different monetization models.
For example, you can combine SVOD and TVOD by dividing your content into two groups: videos available on a subscription basis and videos that require additional fees. Another embodiment of this combination is allowing viewers to choose whether to purchase a monthly subscription or pay for each video on the platform separately.
Video streaming services like to combine AVOD and SVOD, utilizing them both at the same time. However, there is another approach here: allowing viewers to remove advertisements by paying for a subscription.
Choose any model that suits your business needs and audience budget capabilities.
Final Thoughts
Choosing a monetization model is a critical decision to make when you launch a video streaming service. Explore their advantages and disadvantages meticulously to understand fully which model will help you reach your goals. Another solution is to obtain an OTT solution with the support of all models to be able to switch when you want.