Even though it has been years since OTTs revolutionized the entertainment market and started a race against traditional television, there are still doubts about what exactly an OTT platform is and how to monetize them.
The truth is that Over-the-Top platforms (OTTs) have been in our lives longer than we think. In fact, if we tell you that platforms such as Netflix, Disney+ or Amazon Prime Video are actually OTTs, it may be easier for you to understand their meaning once and for all.
What is an OTT?
An OTT is an evolution of the IPTV service that is used for streaming multimedia content over the Internet without having to rely on an Internet provider. Moreover, unlike traditional television services, which require an antenna cable to work, OTTs allow you to stream multimedia content on virtually any device that can be connected to the Internet.
And here’s where the term VOD (Video on Demand) comes into play to define all business models offering any (video) content on user’s demand.
Having said this, we are now going to introduce the different monetization models compatible with each of these platforms. Let’s get to it:
Monetization models for OTT platforms.
Choosing one model over another will greatly depend on your need to recoup the money you invested in your content, in your technical platform or in marketing.
Therefore, the monetization model that may be right for a young, growing, innovative and dynamic company will not be the same as that needed by a company with a greater audience and more experience in the industry.
Nonetheless, there is also the possibility of combining different models as your business grows. Whatever your business model, below you will find the main characteristics of each of these monetization systems:
AVOD: What does it mean?
Advertising Video on Demand. This model offers users free content in exchange for viewing different advertisements before or while the video is being streamed.
This OTT platform monetization model is the one that most closely resembles traditional television. The most popular example of this model is YouTube, since all its content is available for free, but, in return, the user will be shown a couple of ads on each video.
This model has proven to be more profitable for bigger audiences, since it can reach more users due to the fact that all its content is available for free. Therefore, the bigger the audience, the greater the advertising value.
What does SVOD stand for?
Subscription Video on Demand. The distinctive feature of this model, as its name clearly indicates, is that it allows users to access content in exchange for a monthly or annual fee. Therefore, the customer can watch the content on the platform free of ads. This is currently the most relevant monetization model and the one used by the biggest companies in this industry (Netflix, Amazon Prime Video, HBO Max, or Disney+).
This has become the main monetization model and the one that generates more profits due to several of the benefits it offers. In addition to this, the possibility of cancelling your subscription at any given time is key to building customer trust.
Nevertheless, in some cases the strong competition, as well as the monthly cost incurred by users if they are paying for more than one platform, has forced many people to start prioritizing some platforms over others.
Because of this, SVOD platforms need to stand out by offering a high-quality and exclusive catalogue. Besides, this model usually needs a broad and solid customer base in order to maintain a stable and steady profit level.
What does TVOD stand for?
The TVOD (Transactional Video on Demand) model entails paying for specific content without having to subscribe to a monthly or annual plan.
The possibility of paying for having access to content for a short period of time, like renting a video, or the option to permanently purchase content are becoming increasingly popular. The most popular examples of this model are platforms such as Amazon Prime Video or Rakuten TV.
With this model, users are given the option to watch films that are not available on a platform they are subscribed to, or to purchase one of their favourite films so they can watch it whenever they want.
The PVOD model: The future of OTT platform monetization?
We have talked about the three main monetization models, but there is a fourth one. The PVOD (Premium Video on Demand) model gained prominence during the recent COVID-19 pandemic, when some companies introduced an additional payment, in addition to the usual subscription.
This allowed users to watch certain content long before being available to the average public, like an exclusive premiere, taking advantage of the temporary closing of theatres, cinemas, etc.
The most obvious example of this model was the release of Mulan on Disney+, available for 30 dollars to users who were already subscribed to one of the plans offered by the platform.
Of course, there are also hybrid models, or you also have the possibility of adapting your business as you grow and hopping from one model to another according to your needs.
Now that we have introduced you to the different monetization models you are probably asking yourself…
What is the best monetization model for my OTT platform?
In order to answer this question, you must take several factors into consideration. There are many factors that should be taken into account when deciding how you are going to make a profit. You should pick the model that best suits your reality, depending on the maturity of your business, on the content you offer, or on the preferences of your current and future audience.
It goes without saying that choosing your ads wisely and knowing when and where to show them to your audience will also be key to your business. In this article, Amazon perfectly explains which factors should be taken into consideration when choosing streaming TV ads.
Now that you know the basics of OTT platform monetization, what are you waiting for to get started? At Yuvod we will advise you and assist you throughout the process, so you can create your own OTT platform and start making profits on the content or on the rights you own.