According to statistics, an average household in the US has 3-4 subscriptions to streaming services (ranging from large international services as Netflix to niche services such as albanian tv app NimiTV). For them, streaming is the norm. Furthermore, the number of people cutting the cord increases as they find watching videos online more comfortable.
This tendency shows that the demand for OTT video content is growing, and businesses can benefit from OTT platform monetization. They can leverage any of the following revenue-generating models: subscriptions (SVOD), advertisements (AVOD), pay-per-view (TVOD), and hybrid. Let’s observe all the models in detail.
SVOD – Subscription-based Video-On-Demand
Subscription-based VOD streaming services are more popular than any other because they remove commercials, which attracted viewers in the first place. It is pretty convenient to purchase access to a library of videos once in a limited period of time. Moreover, the price of a streaming service is not as high as the cost of traditional television.
The important issue referring to subscription-supported streaming services is subscription fatigue. Users cannot purchase all the services in the market. For this reason, they look for services streaming free content.
AVOD – Advertising-based Video-On-Demand
Advertising-based VOD allows viewers to access their favorite content without payment, while providers make money by advertising. Commercials are provided by third-party businesses that want to “buy” your audience’s attention. This is why it is better to have an OTT advertising strategy.
Since there are too many subscription-supported services, viewers are switching to ad-based platforms for free content. They cannot afford to pay for all services, and therefore, they search for free content. People even don’t mind watching commercials in exchange for chargeless videos.
TVOD – Transactional-based Video-On-Demand
Transactional-based VOD is also referred to as a pay-per-view streaming service. While a subscription gives access to all content on the service, TVOD allows people to purchase one video at a time.
Streaming Services Go Hybrid
Content-producing companies want to generate revenue, and viewers want videos at affordable prices. Advertising is a compromise here since a business receives money, and viewers watch videos without payment. However, income from commercials is not enough to cover all expenses spent on content creation. And revenue from subscriptions is also changeable.
This is why streaming services are introducing a hybrid monetization model – AVOD/SVOD. Recently, Netflix has launched a lower-cost ad-supported subscription-based plan in addition to ad-free subscriptions. Amazon adopted all three monetization models, and Hulu offers many subscription options and bundles, so as Disney+.
Since large streaming services opt for a hybrid approach, we can expect the same from smaller streaming businesses. Brands take different measures to increase customer retention on their platforms. With AVOD/SVOD hybrid models, it is a win-win-win for all. Viewers watch free videos, providers generate revenue, and advertisers can reach people with their products and services.
The introduction of the SVOD/AVOD model reflects a change in customer consumption. Seeking greater content at a lower price, viewers are ready to tolerate commercials, their number, length, and other things. However, this tendency can also evolve with time.
For streaming services, it is crucial to take into account viewers’ expectations and adapt to new market demands. This will help them retain viewers and be in a more winning position compared to competitors.
Final Thoughts
Some experts predict that streaming services using one monetization model will continue operating in the market, attracting audiences. Others say that a hybrid revenue-generating approach is the future since people stop paying for subscriptions and switch to ad-based services.
Anyway, the market and viewers’ preferences change, and playing by outdated rules can come at a cost. Business evolution might be an answer here. You can consider introducing additional pricing models or other features to boost user engagement. Respond to new demands in the market.
