Why should video content creators and publishers consider over-the-top (OTT) and know the difference between various video streaming models? It’s impossible to deny that platforms like Netflix and YouTube have completely changed the way people view movies, television shows, and other videos. That is because streaming subscriptions are offering better services than traditional TV nowadays, but it’s not easy to pick a model for your business.
As Allied Market Research shows, the over-the-top market was worth $121.61 billion in 2019 and is expected to grow to $1.039 trillion by 2027. More and more businesses are experimenting with video streaming models to generate higher revenues. These models include SVOD, TVOD, and AVOD. This post will cover all three options, as well as looking at the differences between them. Let’s start with the question, “What is SVOD?”
What Does SVOD Stand for?
This abbreviation means subscription video-on-demand. Some people ask, “Are OTT and SVOD different?” OTT means over-the-top. It stands for delivering movies and other types of television content via the web. OTT does not require consumers to subscribe to a traditional cable or satellite television provider.
Subscription Video on Demand is one of the revenue generation models for over-the-top platforms. According to this video streaming model, consumers can only access content after subscribing to the service. Some popular examples of SVOD include Disney+ and Hulu. Netflix is perhaps the most popular rep of this category today. After paying a subscription fee every month or for another period of time, users can watch any piece of content.
A monthly fee is the most common type of subscription. The contracts can be flexible and it is possible to cancel a subscription whenever a user wants.
To understand SVOD’s meaning, check out the reasons to pick this model below.
Why Do Marketers and Advertisers Choose the SVOD Model?
The number of SVOD subs is growing at an amazing speed. Television Business International predicts that this number will reach 1.5 bln in 2026. This stat alone makes SVOD the most common model of video streaming. As Business Insider admits, a staggering 55 percent of the US population subscribed to Netflix, making it the most popular SVOD platform as of today. More than 1 bln hours of content is consumed weekly via this channel. As for Amazon Prime Video, 52% of Americans are using it.
SVOD is also the most lucrative VOD service model. It benefits users who obtain unlimited access to any video content, as well as businesses who get a direct income line to their customers.
And it’s not only industry giants that pick SVOD: startups and small businesses can make lucrative profits from subscription models too. For example, sports market players can win by attracting customers with an online fitness subscription platform.
- High user retention rate
- Better predictability
- Simple new content trial
- Best for large video portfolio
- Risky with low customer base
- Tricky revenue distribution agreements
- Challenging visibility for large content
What Is TVOD?
Why don’t we consider TVOD’s meaning? This abbreviation stands for transactional video on demand. Consumers do not need to pay anything to access a TVOD channel. However, viewers have to pay for the specific pieces of content. In other words, the model is about buying video content on a pay-per-view basis.
TVOD has a couple of categories, electronic sell-through (EST) or download to rent (DTR). The former is the digital sale of videos for unlimited viewing in exchange for a fee. As for the second option, it stands for the digital rental of a movie that is accessible for a restricted period of time. The main difference between EST and DTR is the fee a user pays and access they get.
The main advantage of the TVOD model is access to the most recent releases and rare videos. That could be a film, show, educational materials, etc. Watchers can either “rent” or “purchase” their selected content. In their turn, video creators and publishers receive higher revenues for their content. This way, both sides win. TVOD usually retains watchers by suggesting attractive price incentives. The most popular examples of TVOD services include Sky Box Office, Google Play, and Amazon.
When Should You Choose the TVOD Model?
So, the primary difference between SVOD and TVOD is the absence of recurring payment. TVOD is behind when it comes to market volume. According to Statista, its revenue is predicted to go up at an annual growth rate of 7.79%; by 2026, the projected market volume will achieve $13,538m.
TVOD works best for highly differentiated and convincing content as consumers are ready to pay a premium if videos offer unique value. This model is almost perfect when a business has a small audience willing to pay more just to access unique content, but they should know the upper and lower limits of what the audience is ready to pay. It depends on how much they need that particular content.
Video tutorials that explain how to do something are in higher demand than entertainment content. For instance, to succeed, the marketing part of an educational TVOD platform must be focused on how this service makes it possible to achieve learning objectives. A franchise fan can invest an incredible amount of money while the average person would find the price insane.
- Simple revenue distribution model
- Decreased risk
- Accurate estimation of operational costs
- Good option for those who are new to business
- Better revenue opportunities
- Problematic customer retention
- Restricted trial opportunities
- Limited size
What Is AVOD?
AVOD stands for advertising-based video-on-demand, and these services earn profits by selling advertisements on their videos. Such businesses don’t charge any views to watchers to access their videos.
AVOD may remind you of more traditional TV, where commercials are dispersed amongst other content. The main thing that makes AVOD different from other VOD models is that its services are fully internet-based. You cannot access them offline.
AVOD platforms are gaining more popularity in recent years. The most successful examples include the YouTube social media platform, Dailymotion, Tubi, Roku, and Pluto TV. Interestingly, YouTube has started to move from subscription-based content to an advertisement-based model.
The owners of exclusive content rarely use an ad-based video-on-demand model because it generates lower revenues than other models.
When Is the AVOD Model Right for Your Business?
Most of the videos suggested by AVOD platforms are outdated. To be specific, almost 80% of catalogs are more than five years old. However, it’s not necessarily a bad thing as AVOD services offer some benefits.
First of all, the monetization of videos through online ads generates more revenue. Ad revenue for such content will keep on increasing by more than $50 bln.
Secondly, AVOD platforms reach every device. The majority of users prefer watching videos via their mobile devices. 239 bln hours were spent using video streaming applications on mobile phones worldwide in Q4 2020. Advertising-based VOD will assist with reaching more people as the younger generation is less likely to pay for their content.
Finally, all people can have a try as ad-based video-on-demand is a free service. The more views you receive on advertisements, the more revenue you can generate.
- Simple user acquisition
- Easy revenue distribution & delivery
- Personalized ad recommendations for businesses
- Great availability of models (Pre-roll, Midroll, In-video, and Text overlay advertising)
- Lengthy wait for profitability
- Challenging ad personalization
- Available only on large scale
Is It Possible to Mix VOD Models?
Despite the differences, it is possible to work with several models to mix their advantages. Sky, Europe’s leading media and entertainment company with 23 million users across six countries, is one of the companies that does so. Its users pay a monthly fixed fee to access a video library. However, if they want to watch the latest films and shows, they have to pay an extra fee.
Because over-the-top (OTT) content is soaring in popularity, chances are high that business models will change along with tech advancements and changing consumer behaviors. In fact, it’s possible to create your own video-on-demand delivery system with the help of various enterprise video platforms.
Earning money in the video industry is often tough. However, by learning and understanding the basic principles along with the different types of video streaming models, you will get a huge leg up. As you dig deeper into this field, SVOD, AVOD, TVOD, and the knowledge of hybrid models can become second nature.
Years in the video industry allow us to share valuable knowledge. No matter if you are a startup searching for different growth opportunities or an existing enterprise looking for a reliable tech partner, BidMind is here to lend a helping hand.