If you want to achieve success in the video-on-demand (VOD) industry, you need to establish your content strategy right up front. Your content strategy will largely determine your revenue model, which is what your business will use to make money.
Netflix and YouTube both stream videos but they use different VOD revenue models. That is, YouTube streams free content while Netflix uses a subscription-based model. But the audiences for these two services are about the same size.
In 2015, Netflix users streamed around 10 billion hours per month, and that year, Netflix raked in $6.78 billion. Similarly, YouTube brings in revenue of $6 to $9 billion annually by streaming 4 billion entertaining videos per day that they offer to their viewers for free.
The content you specialize helps to determine what streaming revenue model your VOD business will use. You should also consider your audience’s preferences to determine if you should choose an over-the-top, or OTT, business revenue strategy.
When your business uses the right revenue model, your business will be more likely to achieve success in the video streaming industry. In other words, the revenue model is an essential tool to shape your business in order to outpace your competition.
Let’s explore some commonly used VOD revenue models.
SVOD (Subscription Video on Demand)
Many online video streaming services these days provide an SVOD service as their revenue mode. Basically, this means they offer video on demand to their subscribers. Hulu Plus and Netflix are good examples of this VOD business model. These two streaming services require users to pay a fixed subscription fee per month, and users can watch video content the platform offers.
Subscribers to these two services can instantly browse and play any of their preferred videos wherever and whenever they are. They can also record, stop, rewind, fast forward, play, and pause the program at their convenience.
Users can pay quarterly, monthly, or annual subscription fees. They can renew and cancel their subscriptions anytime they want. In line with that, this feature gives viewers convenient opt-out and opt-in options.
Subscription models are ideal for platforms that offer a wide variety of entertaining video content, including drama series, movies, paid television programming, and more. Naturally, programming is intended to encourage viewers to maintain a long-term subscription.
AVOD (Advertisement-Supported Video on Demand)
Another form of making money from streaming videos is through advertising. With this VOD business model, business owners create content that users can view for free. Videos that receive an abundance of viewers make money with this model. Content owners can also choose to insert advertisements, allowing them to earn income from the advertisers.
Advertisements can be powerful. Therefore, advertisers are willing to pay content owners to allow them to stream their advertisements. What’s more, content owners set the amount and type of advertising they want to show with their video content. Paid advertisements such as these help to make AVOD platforms a popular with content owners.
One good example of the advertisement-supported video on demand model is YouTube. In fact, within the VOD OTT industry, the ad-supported video is an option that many content owners commonly use.
Advertising on videos or movies that are available in the ad-supported VOD revenue model are classified into pre-roll, mid-roll, and post-roll advertisements. The pre-roll is a type of advertisement that plays at the start of the video. The mid-roll advertisements play in the middle of the video. And the post-roll advertising is played after the video is finished.
Generally, these advertisements can be either non-skippable or skippable. This depends both on how the ad network and the advertiser choose to run them.
TVOD (Transactional Video on Demand) or PPV (Pay Per View)
Many people have experienced visiting physical kiosks or rental stores and renting or purchasing movies. Transactional video on demand is a model that works similarly to those physical rental stores. The only difference is that users rent or buy videos or movies online. This transaction is similar to requiring viewers to pay for every movie or video they watch from your online store.
When someone buys a movie or video they can download your content and save it either on their devices or on your platform. Conversely, renting allows them to watch specific content within a given timeframe.
For instance, if you rent the movie or series Money Heist for seven days, then you can watch the series within that week only. When your rental period is finished, the platform will restrict you from accessing that movie again.
Hybrid VOD Revenue Models
A combination of any of the VOD revenue strategies we mention here is ideal if your platform stores a large number of videos and movies. By using a hybrid model, you give yourself a greater chance of monetizing your content maximally.
For instance, you could consider combining the subscription VOD model along with inserting ads. Or you might combine a pay-per-view model with the transactional model.
If your audience members are based in a variety of locations or you are looking for a new monetization technique to satisfy their requirements and better monetize your business, then a hybrid VOD revenue model could work well for you.
In this way, some members of your audience could choose a monthly subscription while others might prefer to buy specific video content you offer.
Pay-per-view could also be a good additional VOD revenue model for your business. Or you might choose to use an ad-based revenue model for subscribers who enjoy watching your videos for free but don’t mind the advertisements you feature along with and in between the videos.
Get Help Determining Which VOD Revenue Model Is Right for You
Selecting the proper revenue model for your VOD business can be challenging. However, you can take advantage of a readily available panel of professionals who will consult with you about your particular business requirements, however varied they may be. They can help you choose the VOD revenue model that will work best for your business.
The experienced professionals at Setplex can provide you with free consultations in which they will give you ideas about the right VOD revenue model and help you establish a good business model overall.