What is Video on Demand (VOD) and How Does It Work?

Industry InsightsWhat is Video on Demand (VOD) and how does it work?
Table of contents

    VOD is the king of digital media these days. Video on demand is going to be your best bet for getting it in front of an audience. Let’s take a look at what VOD means and the formats in which it is used, how it’s related to connected TV and why its era is on the rise.

    What is video on demand (VOD)?

    The definition of VOD is video on demand. It refers to video that can be streamed whenever the viewer chooses (or ‘demands’) to do so. This can be done either through direct streaming from an online source, or with the viewer downloading the video to their device to watch later. This is opposed to traditional broadcasting, where the viewer can only watch their video at a scheduled time and only on a device with a cable or satellite connection. 

    Video on demand started out with pay-per-view broadcasts of live events and movies over cable and satellite connections.  However, it has since moved to the digital realm with the proliferation of fast internet and mobile devices. We are now able to watch high-quality on-demand video wherever we have fast internet, both mobile and at home.

    How does video on demand work?

    VOD works  by sending packets of data from servers hosting video content to your video player. VOD providers usually make money from their video on demand content with four models: advertising-based video on demand (AVOD), subscription video on demand (SVOD), transactional video on demand (TVOD), and a hybrid model. Let’s take a look at the advantages and disadvantages offered by each model, as well as some examples of the VOD services which use each one.


    AVOD allows viewers to watch their VOD content for free in exchange for showing them advertisements. When you watch on-demand videos on platforms like YouTube, DailyMotion, Pluto TV, Xumo, and Crackle, you are using AVOD. The amount of money you can earn from a given advertisement depends on a number of factors, including the duration of the ad, whether it is skippable, what kind of interactive features are in the ad, whether users click through the ad and go through a conversion action, and how attractive your content is to advertisers. AVOD is ideal for audiences which don’t want to pay money for access to your content. On the other hand, the money you earn from ad placements can be highly variable, and is highly dependent on the algorithms used by the streaming platform at any given time.


    SVOD is the model used by distributors like Netflix, Amazon Prime, Hulu, Disney+, and HBO Max. With this form of VOD, users sign up for paid subscriptions that allow them to access a large library of VOD content whenever and as many times as they want, and they don’t receive 3rd-party ads during their viewing experience. Some platforms are AVOD in their free version, and also offer an SVOD premium version without advertisements, like Youtube Premium. These are called hybrid VOD platforms. Television broadcast networks like NBC, CBS, and the BBC also offer something called Broadcast VOD, in which content that is first broadcast on linear TV is then uploaded online for on-demand streaming. Earnings from selling to a SVOD business can be much more predictable, but your content is much more at the mercy of the decisions of the streaming platform.


    Instead of subscribing or watching ads to enjoy the content, customers are able to purchase direct access to it. The TVOD model operates by either renting out or selling content to  viewers. It is often done on a pay-per-view basis, but some platforms only require you to purchase the content once to enjoy it for as long as the service is operational.

    This model is not very well suited for regularly updated media like series and shows; it is hard to make customers pay separately for each new episode. TVOD works best when it comes to full-length movies, recent releases, and live event streams like musical performances, sports events, or even comic stand-up shows. Since most big events happen only once, the model can utilize the exclusivity of the content to attract viewers.

    TVOD can be broken into two main types:

    • Download To Rent, or DTR, provides access only for a limited time, sometimes only for one viewing. This category relies on lower prices and the popularity of the product to remain profitable.
    • Electronic Sell-Through, or EST, that allows customers to make a one-time purchase to watch the content any number of times. The price is a bit higher, but it is better for content with high rewatchability.

    While it can work independently in theory, TVOD is rarely used as the main model by content owners or platforms themselves. It is best employed as an additional option for those customers who want to enjoy the content ad-free in the case of AVOD or retain it even after their subscription ends in the case of SVOD. However, some platforms, like Sky Box Office or iTunes, successfully use the TVOD model as the main vehicle. 


    Alternatively, streaming services can decide against just one model and combine different monetization techniques like AVOD, SVOD, TVOD, product placement, native advertising, and sponsorship. Coincidentally, the largest streaming platforms all use the hybrid model in one way or another. For example, Amazon Prime requires a subscription but also offers to rent out movies or watch ad-supported content. Disney+ is similar, providing their traditional subscription-based service along with ad-supported plans. Netflix is somewhat in the same boat, as their content cannot be watched freely but the subscription price can be lowered if the customer opts for an ad-supported plan.

    While this model can seem like the perfect choice, it still has its own problems. Managing several monetization plans at once can be time-consuming and very demanding. While the hybrid model preserves all the pros of AVOD, SVOD, and TVOD, it also keeps all their cons, making it even more complex to manage. Still, it can be seen as the most optimal choice for producers with large varied libraries of content.

    How is VOD streaming different from live streaming?

    Now that we understand the meaning of VOD, it’s worth explaining how it differs from its cousin, live streaming. Both live and VOD streaming are OTT (over-the-top) ways of delivering content, meaning that they are delivered through an internet connection, rather than by cable or satellite. Live streaming, as its name suggests, is used for broadcasting video over the internet in real time. As a result, a live stream can’t be consumed on-demand, as it only occurs at an appointed time. It is used for things like news shows, press conferences, product launches, and especially live sports. 

    Live streaming is somewhat more technologically complicated than what is used by video on demand services, since it requires data to be sent to the viewer’s video player in many more and smaller packets in order to minimize the delay between the transmission and the reception of the streaming data. Video players don’t have the ability to cache large amounts of content, so live streams use things like adaptive bitrate streaming to ensure smooth delivery and minimize buffering on the receiving end.

    Live streaming also poses a different monetization challenge. Viewers will generally not put up with their live stream being interrupted by advertisements, since nobody wants to be watching an ad when the game-winning goal is scored or an important piece of news breaks. Instead, live streams often require payment in order to secure access, play ads during limited designated advertising breaks, or get sponsorships for the broadcasts.

    What are VOD apps, and how do I develop one?

    VOD apps are the primary way for content creators to enter the CTV industry and start publishing their content. These apps, which are typically aggregated on large platforms such as Apple TV, or Amazon Fire TV, allow for direct engagement with viewers and keep them up to date on new releases.

    As individual creations, VOD apps provide a great deal of freedom of choice. Before moving on to creating an app, the content owner can choose the appropriate monetization model, as well as specific features, design, and platforms they are interested in. Unlike users of content aggregators, app owners can fine-tune every detail to ensure their audience is satisfied.

    There are three ways to create an app. If you have sufficient programming knowledge, you can code it yourself. Alternatively,  content producers can use the tools provided by CTV platforms, like Direct Publisher, but in this case you’ll be limited in options and should be ready to invest in your app’s maintenance.

    Finally, CTV channel development companies like VlogBox can assist in creating the app. This way provides as many customization opportunities as individual development, but also solves a number of issues connected with it. Namely, the VlogBox team can take it upon themselves to analyze your audience and help you choose the best UI, publishing platform, and branding solutions. VlogBox carefully tests and certifies each app produced before releasing it and keeps supporting and maintaining it after it comes out. It can also assist in choosing the most beneficial monetization model and promotion of your channel.

    Pros and Cons of Video On Demand

    Compared to cable or satellite TV, VOD has far more advantages. After all, people switching over to streaming services is one of the main reasons for the decreasing popularity of traditional television. However, this system is not without its flaws. Let’s delve deeper into VOD’s strongest and weakest points.

    Advantages of Video on Demand

    1. High-quality content

    While the content is pre-produced just like on traditional TV, there are several upsides to the VOD system. Lacking fixed publishing schedules, it helps you produce content on your own terms, allowing you to put more thought and effort into the show and ensuring its quality. Creators, being their own bosses, also have room for mistakes and mishaps; their content only gets better over time as they learn.

    As for viewers, platforms themselves serve as an additional layer of protection, carefully managing the feed and checking whether the new series are appropriate and up to standard. 

    2. Accessibility

    Nowadays, VOD platforms rarely limit themselves to just one medium. Their apps are available not only through CTVs but also on desktop computers, smartphones, tablets, and gaming consoles. Viewers have complete control over how they watch their favorite shows, whether on a cozy sofa, in the comfort of their bed, on a plane, or even during a picnic in the park.

    Apart from that, VOD services are also accessible in terms of who can use them. Apps can provide such services as on-screen descriptions of audio, screen readers, audio descriptions of the show, and other helpful options. This makes VOD especially attractive to people with visual or auditory impairments.

    3. Convenience

    What makes VOD even more tempting is the almost complete lack of any preparatory steps. If the app is already installed on the device, all users need to do is tap the icon, click several times, and start enjoying the content. The streaming aspect makes it so viewers do not have to download big chunks of data or suffer long load times. Additionally, most of the VOD apps allow streaming on several screens at once, allowing the viewer to enjoy the series with friends or family – all on a single account.

    VOD technology minimizes user friction as much as possible to get higher engagement and revenue. As a consequence, it has become a win-win situation where users enjoy an optimal experience while platforms enjoy higher viewer numbers.

    4. Content Variety

    Variety is king, and VOD services know that better than anyone. Amazon features more than 25,000 shows and movies, and Netflix had over 17,000 titles as of October 2022. Users do not usually stop their subscriptions when their favorite show ends or goes on hiatus. They  can scroll the feed to find another intriguing series, or ask around for recommendations, trying to take advantage of these massive media libraries.

    This also means that there is always a niche for every creator, as platforms boast a substantial range of genres to satisfy any taste. Compared to cable or satellite TVs, viewers have a choice of what is shown on screen – and this choice is massive.

    5. Viewership Metrics

    When it comes to streaming apps, in-depth analytics may be one of the most valuable tools for content producers. Knowing not only how many people watched the content but also where they stopped, how they found it, what device they were using, and what they may have enjoyed. It is an irreplaceable tool for marketing professionals as well, allowing them to carefully craft promotional campaigns and advertisements and to reach out to their viewers.

    Content producers may go one step further and target a specific demographic that would be most interested in their content. The built-in tools in apps enable them to determine the precise age, gender, and location of their users.

    Disadvantages of Video on Demand

    1. Large competitor numbers

    The  previously mentioned content variety is only one side of the coin, as it is the result of a large number of studios and independent creators trying to come out on top. Entering the VOD ecosystem may be a tough task, especially without prior experience in marketing or remarkable content.

    To make yourself visible in the industry, you should not only produce high-quality content but also fine-tune your marketing campaigns and constantly monitor the viewership and engagement.

    2. Limited live content

    With a large part of Video on Demand streaming being pre-recorded, it can be hard to find live broadcasts. With the exception of some TVOD services, VOD platforms rarely offer live content. If the user is focused on events like soccer games or live streams, VOD may not suit them very well. The same goes for creators that specialize in that type of content.

    3. Content Fatigue

    With platforms carrying tens of thousands of different titles, users may feel lost and confused when they first use the app. With every creator trying to lure in viewers with vibrant ads and colorful visuals, viewers start to hate the discovery process. Some platforms, like Netflix, try to mitigate that issue with an onboarding process and personalized recommendations, but it can still pose a problem.

    What can I expect from the future of VOD?

    Valuates Reports predicts that the market for VOD will grow by over 150% between 2019 and 2025, achieving a compound annual growth rate of 16.02%. The proliferation of affordable high-powered mobile devices and fast internet means that more and more users are being brought into the fold of VOD audiences around the world. As a result, there is tremendous room for new growth, and enough market space for players both new and old in the VOD domain. 

    At the same time, traditional television broadcasting is expected to contract at a compounded annual rate of 1.5% between 2020 and 2026, meaning that if you want to get into video content creation, VOD is absolutely the way to go.