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What is The Best Revenue Model For OTT Platforms?

Modern-day entertainment has been swept by the OTT wave which revolutionized the online media industry. The sudden boom in OTT or Over the Top streaming solutions can be attributed to a seismic shift in content consumption patterns that have evolved from being one-dimensional to radical and coming-of-age, especially over the last decade.

Riding this change, OTT platforms have emerged as an interesting concoction of the powerful audio-visual experience of Television and the fast and robust character of the Digital space.

Hailed as a suitable alternative to cable or satellite-based subscription models, OTT aids access to a wide range of binge-worthy films or series, videos, music, and podcasts that gauge a large audience at a nominal subscription rate and across multiple devices.

It is no wonder that the burgeoning OTT-business globally has opened the floodgates for handsome revenues.

According to a study by Allied Market Research, “the global OTT market size was valued at $121.61 billion in 2019 and is projected to reach $1,039.03 billion by 2027, growing at a CAGR of 29.4%” starting 2020.

This explains that with the right monetization strategy, it is possible to maximize figures and dominate the market.

However, it is important to understand some of the key revenue models opted by big and small OTT players and weigh their benefits and drawbacks before investing in one.

  1. Advertising Video on Demand (AVOD)

It generates revenues through adverts. Using this service, consumers can watch videos and access the library free of cost while advertisers pay for the commercial ad breaks in the content to boost reach. The Ads in the form of videos, sponsor screens, and sponsored content can be run at the beginning, in the middle of the video, or at the end.

Pros

  • For the lack of barrier to entry, an AVOD business can instantly hook new viewers.
  • It allows content creators to gain a steady customer base with professional quality videos at a low cost and grow their channels faster.
  • Mostly the advertisers cover the production and hosting charges which enable them to reach targeted demographic sections for a higher impact.

Cons

  • As compared to other models, and AVOD business makes much less money per viewer. The pricing may vary based on the popularity of the platform, content marketing, user base, as well as views, and engagement.
  • Depending on user settings, the ads can be fully or partially non-skippable which can test the patience of some viewers and involves the risk of driving them away.
  1. SVOD (Subscription Video on Demand)

In an SVOD model, a quarterly, monthly, or annually recurring fee is charged in return for full-length video access and unlimited streaming. OTTs such as Amazon Prime and Netflix follow this model.

Pros

  • This model is user-friendly and enterprising as it entices customers to avail the streaming service at an affordable fee and in return draws a steady income from them.
  • Pricing Incentives are a welcome pitch for new users.
  • It is far more convenient than satellite-based providers as consumers can watch the content of their choice on any device and from anywhere.

 Cons

  • Customers can change their minds anytime and opt-out of the streaming service if the pricing or the style of content is no longer viable for them.
  • SVOD streaming solution has quite a bandwidth for a wide variety of movies, TV shows, originals. However, this means that it is in direct competition with other sites and poses challenges for the monetization of the business. In other words, the benchmark for content quality needs to be set high in this model to reap profits.
  1. Transactional video on demand (TVOD)

TVOD platforms operate on a pay-as-you view or pay-per-download system in which the users can buy or rent videos they wish to access, one at a time. Google Movies, YouTube movies, and iTunes are some of the popular TVOD streaming platforms.

Pros

  • TVOD is a straightforward model offering immediate streaming solutions, at times even sooner than the general release of the content.
  • It is completely free of sponsored advertisements
  • It is a good platform for film debuts, instructional videos, or one-time sporting events

Cons

  • It is not a consistent revenue model such as SVOD and AVODs and lacks versatility or scope for innovation which puts it off the competitive radar.
  • Having to pay for every single watch may not go well with users which can inadvertently affect sales.
  • Accessibility is a major issue with the TVOD model as the user cannot get hold of the entire library of video content but only the portion he/she has paid for. The channels also do not readily stream on smart televisions or other multimedia devices.
  1. Hybrid Video On-Demand

It combines the best of two or more businesses to enhance user experience and engagement which drives up the revenue. This careful intersection of content merits a solution-based approach used by the companies to cater to a diverse audience with specific requirements.

Finding the ideal monetization strategy is essential for the right setup and growth of OTT. It entails striking a healthy balance between delivering quality content and expanding revenue portfolio.

Hire the best OTT platform provider to create existing models or have one custom-made to benefit your business in the best way possible.

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Dwarak Babu
Dwarakesh is Video Monetization & OTT Expert at CONTUS VPlayed. Interested in digging deep into video/audio streaming media tools and Love to blog, discuss and share views on the latest technologies tips, and tricks. He's also passionate about photography loves to capture the pure essence of life.

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