The rapidly growing OTT (Over-The-Top) industry presents a significant opportunity for content providers to not only reach audiences globally but also to generate substantial revenue. As streaming companies continue to expand, there’s also the potential to establish a brand identity around specific types of content.
With video consumption projected to reach 3.5 billion users by 2027 and revenues forecasted to hit $476.6 billion, according to Statista, now is the ideal time to position your OTT platform for success in the video streaming business. A critical decision in this process is selecting the right OTT platform monetization strategy. Here’s a closer look at your options.
Monetizing On-Demand Content
When considering how to monetize your OTT platform, several revenue approaches stand out, including AVOD, SVOD, TVOD, and a hybrid revenue model. Each model offers distinct benefits, so understanding these options is key to optimizing your revenue.
AVOD – Advertising-Based Video-on-Demand
Advertising-based Video-on-Demand (AVOD) is a popular monetization model where users gain free access to content in exchange for watching ads. This model appeals to both viewers and OTT operators; viewers appreciate free content, while operators generate revenue by selling ad placements to advertisers.
With AVOD, the content is funded by advertisers, who use the platform to reach potential customers. This model works particularly well for platforms targeting large, diverse audiences where free content can drive high viewer numbers, which in turn attracts advertisers.
SVOD – Subscription-Based Video-on-Demand
Subscription-based Video-on-Demand (SVOD) is another widely used revenue model. It involves charging viewers a recurring fee, typically monthly or annually, to access all content on the platform. This model is favored by larger streaming services as it provides a steady, predictable revenue stream.
However, maintaining a strong content strategy is crucial for SVOD platforms. To prevent subscriber churn and combat subscription fatigue, which can occur when users feel overwhelmed by too many subscription services, it’s essential to offer consistently high-quality content that keeps viewers engaged.
TVOD – Transactional-Based Video-on-Demand
Transactional-based Video-on-Demand (TVOD) allows viewers to pay a one-time fee to access specific content. This model appeals to users who prefer to pay only for the content they want to watch, rather than committing to a subscription.
In a TVOD model, access to purchased content may be time-limited or unlimited, depending on the terms set by the OTT operator. This approach can work well for platforms offering exclusive or premium content that viewers are willing to pay for on a per-view basis.
HVOD – Hybrid Video-on-Demand
OTT platforms don’t have to limit themselves to a single monetization model.
The Hybrid Video-on-Demand (HVOD) approach combines elements of AVOD, SVOD, and TVOD to maximize revenue, reduce user churn, and boost engagement.
A common hybrid strategy involves offering both a free, ad-supported tier and a paid, ad-free subscription option. This model allows you to attract a broader audience by providing flexibility—viewers can either watch content for free with ads or pay for an uninterrupted experience. This dual approach can help you increase your user base while generating revenue through both subscriptions and advertising.
Final Thoughts
Monetizing on-demand content is essential for building a successful OTT platform. Each monetization model—AVOD, SVOD, TVOD, and HVOD—comes with its own set of advantages and challenges. Carefully analyzing these options and selecting the model, or combination of models, that best aligns with your content and audience will be key to optimizing revenue and ensuring long-term growth for your streaming business.