Advertising VOD, Subscription VOD, Transactional VOD, Premium VOD are different monetization models in the Video On Demand (VOD) ecosystem and represent different ways of engaging and monetizing users on the platform.
Let’s take a look at the use cases for all four in this article and help you decide the best monetization modelf for your business.
What is Video On Demand (VOD)?
When I asked people in the streaming industry, what Video On Demand or VOD meant to them, this is what I got (averaging across responses).
Video On Demand is a video delivery mechanism that allows users to watch a video whenever they want to and wherever they want to.
Of course, this statement comes with caveats. VOD access can be restricted based on age, geography, monetization strategy, device, and so many other means.
In this article, we take a look at some of the common ways by which content providers can monetize their VOD content library. We also take a look at the advantages and pitfalls of each of these methods.
AVOD – Advertising-Based Video On Demand?
AVOD or Advertising-Based Video On Demand is a monetization strategy in which advertisements are inserted into the video to monetize it and (in almost all cases), the content can be consumed for free without paying or subscribing to the service.
Where does AVOD Work?
AVOD is a monetization technique that is predicated on a large number of people consuming the content in order to make it financially viable. The publisher typically gets paid a couple of dollars (or more) for every 1000 ad impressions and this means, that a lot of people need to watch the video for the publisher to make a resonable amount of money.
AVOD is typically suited for news websites, and UGC sites such as YouTube, Hulu, where the primary source of income is from advertising driven by large audiences. AVOD a very popular form of video monetization and ad insertion is not going to go away anytime soon!
How Can AVOD Go Wrong?
Well, that’s not hard to answer! 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?
Well, “user frustration” is a huge problem with AVOD.
Too many ads can literally 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. What’s the correct number of ads? Well, you need a specialized analytics service to track and report on this.
SVOD – Subscription Video On Demand
SVOD is a type of VOD monetization where users are required to pay a certain amount of money or subscription fee upfront to get access to the content providers’ library. This is usually a recurring fee and is usually either monthly or yearly.
Typically, the users are not shown any ads because they have paid a certain fee already (which means, the publisher has already made money off of the user).
SVOD is a very common monetization strategy that is quite beneficial to the end-user when the plan doesn’t have any lock-in periods. People may choose to purchase a monthly plan and cancel the following month.
As you can see, this sort of flexibility is a double-edged sword. It
Netflix, Hotstar, Hulu, HBO, Amazon Prime Video are all examples of SVOD.
How can SVOD go Wrong?
SVOD can go wrong in many ways and the primary way is by setting a very high subscription fee, but, not having a large 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, then you need to justify the $8 gap.
Do you have better movies? Latest releases? A bigger library? More genres? Better quality of experience?
TVOD – Transaction-Based Video On Demand
TVOD or Transactional Video On Demand basically refers to a rental based monetization where the user rents or has access to the service for a short period of time by paying a fee.
This is also referred to as “pay per view”.
A simple example is that of MMA (Mixed Martial Arts) or Boxing matches. You can pay to see a fight online and then your access to the service is complete. If you want to access or use any other content, you’ll have to pay another fee.
Apart from one-off events, TVOD also refers to rental services offered by content providers such as YouTube and Amazon Prime Video. In either of these services, you can rent a movie for a couple of days and then your access to the content is stopped.
What can go wrong with TVOD?
In TVOD, if one does not get the price right, then the number of live viewers will be less and people might prefer to watch it for free later on using catch-up services. The same goes for video rentals – people might choose to rent it from a different provider at a lower cost.
Also, since the customer is not “locked-in”, there needs to be sustained marketing and promotions to ensure that the customer makes repeat purchases. It is a tough monetization choice, but one that can provide handsome returns!
PVOD – Premium Video On Demand
Premium Video on Demand is a form of TVOD or SVOD where the end-user can pay to get access to content sooner than other SVOD or TVOD customers would! Think of PVOD as a form of online-movie-theaters. You can go see the latest movie at the theaters or wait three or four months to see them on an SVOD service, right?
Well, that’s exactly the monetization model for PVOD. You can pay a “premium” price to watch a movie before it hits the general SVOD subscriber pool.
Disney’s Mulan is a good 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 retained access to the movie until it because available to the rest of the Disney+ subscribers.
With the COVID-19 pandemic forcing cinemas shut, I feel we are going to see more of PVOD in the coming months!
Hybrid Revenue/Monetization Models
Just to be clear, VOD monetization does not stop at AVOD, SVOD, TVOD, and PVOD.
In fact, 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 merges AVOD and SVOD. In the freemium model, a user can consume 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 model is providing a small section of your content library for free and charging a subscription fee to watch the more premium content.
Freemium is a popular tactic that is used to attract users with free content, get them hooked, and hopefully convert them into paid customers.
There you have it – different monetization models for VOD (AVOD, SVOD, TVOD, PVOD, and other Hybrid Models). All of these have their own advantages and disadvantages. The idea is to get your strategy, marketing, and focus right. And then, everything will fall into place.
So, what do you use to monetize your content library?