OTT television is developing by leaps and bounds as more and more users prefer watching video on demand instead of linear TV. The possibility to watch whatever you want, whenever you want, on any device you want, with only an Internet connection required has changed viewing habits significantly. It’s also affected the way marketers and content creators profit from video content – with new formats and new technologies, new monetization models have also appeared. Three of these models have come to the forefront of video monetization – SVOD, TVOD, and AVOD. What are they and how do they differ? Let’s find out!
Types of video monetization models
What is SVOD, TVOD, AVOD? The meaning hidden behind these acronyms will help explain how particular monetization methods work, the type of content they are used for, and what benefits they bring as a result. Let’s examine the nuances of every model in more detail.
SVOD stands for ‘subscription video on demand’. This is a pretty straightforward system- viewers pay a fixed fee and receive access to videos for a certain period of time. As a result, the SVOD meaning pretty much encapsulates how it works: users buy a subscription to a service, and pay for it weekly, monthly, or annually, depending on the service. Amazon Prime Video, Hulu, Netflix, and HBO are examples of an SVOD service, so if you already use one of those, then you already know how it works.
You are likely to gain subscribers with SVOD monetization models if the content you share is exclusive and cannot be accessed anywhere else. Additionally, viewer retention rates will most likely be high, as viewers will continue using the service as long as new content is published regularly, and on a consistent schedule. This turns ordinary users into loyal viewers. In other words, SVOD is good for any ongoing content.
Offering videos on the SVOD platform implies using different pricing models:
- Free trial: you can allow limited-time access for viewers to try the service for free and then decide whether they want to pay to continue using it. Of course, not every user will prolong their subscriptions, but services that offer free trials are more likely to generate loyal customers and greater revenue than those that forgo them.
- Freemium: this type of SVOD implies free access for as long as the viewer wants, with the possibility of switching to a premium, paid version of the service. You simply offer some content free of charge, and some for a fee, allowing viewers to decide if they want to access more someday. However, if you go with this option and want to increase your revenue, you’ll need to engage users to buy premium content. You’ll have to invest heavily in promoting the ‘premium’ version of your service.
This is the type of service that is usually free of charge. It stands for advertising-based video on demand, so users may watch whatever they want at no cost, but they will have to watch ads as well. It is something like commercials on linear TV, though typically OTT services allow viewers to skip the ad after some time. YouTube monetization works this way – videos are available for free but are interrupted by advertisements. Other popular AVOD examples include Youtube, Hulu, Pluto TV, and Tubi.
As one can understand from AVOD meaning, ads can bring revenue to publishers, but this model works best if your audience is large and the displayed ads are relevant. Once we define AVOD, we understand that the point is you need to generate a huge number of views to make a good income. In case you’re aiming at an existing community, and you’re sure your ad strategy will work for your target audience, you may launch a streaming platform with your own advertising system and AVOD advertising rights to earn higher CPM and have more control over your monetization. In the case of large and established communities, the AVOD model can provide even more revenue than SVOD and TVOD.
TVOD is a VOD service as well so when viewers buy videos on a pay-per-view basis, it is called transactional video on demand. In TVOD, users aren’t buying access to a full library of videos (much of which they won’t even watch). Instead, they’re only buying access to the content they do want to watch. The best examples of TVOD services are iTunes, Amazon Store, and Google Play. There are two terms you may hear when talking about this model.
- EST (electronic sell-through): Used when viewers purchase a piece of content and have lifetime access to it, not unlike purchasing a physical DVD or Blu-ray
- DTR (download to rent): Used when users pay a certain fee to get access to content, but this access is limited in time. Often used for sports programs, such as professional wrestling.
Which model to choose?
All three methods can bring you good revenue, but on one condition – if they are used properly. This means tailoring your monetization model to fit your particular case. For example, content freely available on YouTube will inevitably fail to accumulate SVOD subscriber numbers or TVOD purchases. What should you consider when choosing the right model for your OTT content?
1. Type of content
If your content is published on a regular basis and you’re trying to build a loyal viewer base, then you’d better use a subscription-based model. Online courses and classes are some examples of content that are suited to AVOD monetization. However, in case your content is just entertaining and is a “one-time thing”, a transaction-based model will work better, as it comes out of TVOD meaning. Apart from that, you should take into account the age and preferences of your audience – while adults can follow a schedule, kids access content less systematically and will less frequently use all the benefits of a subscription.
Evaluate how many people follow you and their consumer behavior. For instance, you may have fewer followers with an SVOD model, but they will be more loyal while using OTT AVOD service implies involving a wider audience as the success of monetization depends on ad views.
While SVOD and TVOD may seem like more lucrative options, customers who are unfamiliar with your content are less likely to pay for it. Generally, it is better to start with the AVOD model to look at interest, viewing patterns, and retention rates, and then move on to paid options. However, content owners who already have an established and ready-to-pay audience can begin with TVOD or SVOD, which will benefit them more.
When it comes to monetization models, there is no one universal choice that will fit all situations. The choice depends on the exact type of content, its exclusivity, viewer numbers, and customers’ viewing patterns.
Content owners with a substantial user base will greatly benefit from the AVOD model, since it not only retains viewers by being free but also guarantees the highest CPM and penetration rates. While it still works with smaller audiences, other options may suit the owner better.
SVOD is perfect for high-quality content that is not easily accessible elsewhere. The more intriguing and enthralling the series, the more users will opt to keep their subscriptions. However, the SVOD model serves almost no purpose if the content is available on free platforms like YouTube.
Finally, TVOD is perfect for big chunks of content like full-length movies or access to once-in-a-lifetime broadcasts of events like sports games or concerts. Customers are less likely to like the TVOD model for regularly updated content like series.
Correctly analyzing your content and selecting the most appropriate model can be one of the most important decisions you make and mean the difference between profit and loss. So, carefully researching your options is a way to benefit your VOD business to the maximum and secure your place in the CTV industry.