AVOD, SVOD, TVOD, and PVOD are different monetization models in the Video On Demand (VOD) ecosystem and represent different ways of engaging and monetizing users on the platform. The abbreviations stand for –
- AVOD – Advertising VOD
- SVOD – Subscription VOD
- TVOD – Transactional VOD
- PVOD – Premium VOD
In this article, we take a look at the above four monetization models and examine the advantages and pitfalls of each of these techniques.
AVOD or Advertising Video On Demand
AVOD stands for “Advertising Video On Demand,” – a business model for delivering video content where the viewer can access and watch video content for free while watching ads during the viewing experience.
The AVOD model allows content providers to generate revenue from advertising rather than charging a subscription fee to watch the content. AVOD is commonly used by streaming platforms and services that offer free content in exchange for showing ads.
Where to use AVOD?
In AVOD, the publisher (or content provider) gets paid a small amount for every 1000 ad impressions (CPM or Cost Per Mille). This means a large audience or video plays is needed to make a reasonable amount of money to run the business.
AVOD is typically suited for high-traffic websites such as news and UGC sites such as YouTube and Hulu, where the primary source of income is from advertising driven by large audiences.
How Can AVOD Go Wrong?
Have you ever watched a video on YouTube with 40 ads inserted into it? Remember the frustration you felt waiting for the “Skip Ads” button to appear?
As you might have guessed, “frustration” is a massive problem with AVOD. Too many ads can kill the golden goose (your audience). But, too few ads and you won’t make any money to pay your bills at the end of the month. So, it’s a balancing act between making money, not frustrating your users, and showing the correct number of relevant ads.
SVOD – Subscription Video On Demand
SVOD is a type of VOD monetization where users are required to pay a certain amount of money or a subscription fee upfront to access the content providers’ library. This is usually a recurring fee and is usually either monthly or yearly. Netflix, Hotstar, Hulu, HBO, and Amazon Prime Video are all examples of SVOD.
Typically, the users are not shown any ads because they have paid a certain fee already (which means the publisher has already made money from the user).
How can SVOD go Wrong?
The most common way to mess up an SVOD subscription is by setting a very high subscription fee but not having an extensive enough or relevant content library to back it up. If you charge your users $15 a month when your nearest competitor is charging $7/month, you need to justify the $8 gap by providing better content, fresh content, and a great customer experience.
TVOD – Transaction-Based Video On Demand
TVOD or Transactional Video On Demand refers to a rental-based monetization where the user rents or has access to the service for a short period by paying a fee.
This is also referred to as “pay-per-view.”
A simple example is MMA (Mixed Martial Arts) or Boxing matches. You can pay to see a fight online, and your access to the service is complete. You’ll have to pay another fee if you want to access or use any other content.
Apart from one-off events, TVOD also refers to rental services offered by content providers such as YouTube and Amazon Prime Video. You can rent a movie for a couple of days in either of these services and then your access to the content is stopped.
What can go wrong with TVOD?
Price: if you price the event too high, you will lose your viewership and make less money. Also, since the customer is not “locked in,” sustained marketing and promotions must be maintained to ensure that the customer makes repeat purchases.
PVOD – Premium Video On Demand
Premium Video on Demand is a TVOD or SVOD where the end-user can pay to access content sooner than other SVOD or TVOD customers would! Think of PVOD as a form of an online movie theater. You can pay a “premium” price to watch a movie before it hits the general SVOD subscriber pool.
Disney’s Mulan is an excellent example of PVOD. You needed a subscription to Disney+, and then you had to pay an additional $25 (or so) to watch Mulan first-day-first-show! But you retain access to the movie until it because available to the rest of the Disney+ subscribers.
Hybrid VOD Monetization – Freemium!
To be clear, VOD monetization does not stop at AVOD, SVOD, TVOD, and PVOD. Many popular services offer a combination of the above monetization models to appeal to different segments of users.
There are hybrid models, such as the “Freemium Model,” that merge AVOD and SVOD. Freemium is a popular tactic to attract users with free content, get them hooked, and convert them into paid customers.
The image below shows an example from Disney + Hotstar in India, where they offer two plans – Super and Premium. In the Premium plan, you can watch movies without Ads, but in the Super plan, you will be served advertisements.
In one version of the freemium VOD monetization model, a user can usually watch content for free but will have to contend with the occasional advertisement interrupting his video session. But if that user chooses to upgrade to a paid subscription, the ads go away!
Another variation of the freemium VOD monetization model is providing a small section of your content library for free and charging a subscription fee to watch the more premium content. And, in some sports streaming cases, you can even watch a game for free – though it will be delayed by 5 mins or so. But if you want to watch it live, you must pay for it!
All the monetization models (AVOD, SVOD, TVOD, PVOD, and Freemium) have advantages and disadvantages. The idea is to get your strategy, marketing, and focus right depending on your content, target audience, and traffic.
So, what do you use to monetize your content library?
Krishna Rao Vijayanagar
I’m Dr. Krishna Rao Vijayanagar, founder of OTTVerse. I have a Ph.D. in Video Compression from the Illinois Institute of Technology, and I have worked on Video Compression (AVC, HEVC, MultiView Plus Depth), ABR streaming, and Video Analytics (QoE, Content & Audience, and Ad) for several years.
I hope to use my experience and love for video streaming to bring you information and insights into the OTT universe.
It was a very insightful article and clearly explains the SVOD, AVOD, & TVOD monetization model. Thank you
Agreed with Meryem. The landscape is truly very confusing and your article is one of the better ones out there!
This is significantly informative and gives good understanding on various VOD approaches.