26 May, 2020

OTT Monetization: Choosing The Best OTT Revenue Models in 2020

Introduction

There are scores of video content types under the sun– and nearly every one of them is being streamed with a passion by millions across the world.

Whether it’s sporting events, Q&As, friendly catch-ups or product launches, the effects of COVID-19 and social distancing regulations have had people seek comfort and continuity on the internet. As a result, video streaming will account for 82% of the world’s internet traffic, and video is steadily gaining momentum over crowd favourites such as blogs and articles.

What is OTT and What Are the Benefits of Shifting to OTT Platforms? 

Over the top (OTT) content platforms stream videos through the internet and onto smart TVs, phones and other streaming devices. OTT platforms account for a large slice of the pie, both in viewership and market share.

One of the major benefits of OTT video platform is the multiple monetization models available to content marketers and video publishers across industries. OTT services make it much easier to segment audiences using viewership demographics and have a massive volume of people using their services.

Majority of the world is on at least one OTT platform, be it Netflix, Amazon Prime or Hulu. Both content marketers and advertisers are now beginning to understand the untapped potential of these audiences, and are leveraging them to market their content online and develop more than one streaming platform revenue options.

Which OTT Monetization Model Works Best for Your Business?

There are a plethora of OTT revenue models to choose from– so much so that first-time dabblers are often left very confused. There are three factors to consider when selecting the right monetization model:

Content Offered

The type of content you offer to your viewers will have a bearing on the revenue model that works best. Subscription models work well for regular content, while pay-per-view models serve one-off or exclusive video content. Businesses must identify their overarching content genre and topic before narrowing in on a revenue model.

Target Group

Your target audience will also demand what model you choose. Regular watchers might be tapped into through subscription models while shifting target audiences can be roped in through pay-per-view systems.

Business Strategy

Finally, your business strategy and aims will define which revenue model you choose. For some, a regular sustained revenue for subscriptions works better; yet others prefer to offer pay-per-view models to engage those most likely to invest in their service or product.

What are the Popular OTT Revenue Models?

1. AVOD

What is AVOD? It means Ad-based Video On Demand. In this service type, the video content is free to consumers in exchange for strategically placed advertisements. Ad revenue is used to account for production and distribution costs.

Examples: YouTube and Hulu

The benefits of video on demand that is ad-based are:
  • User Acquisition

Since video content is free, AVOD models are more likely to garner a large viewership. The logic is that watching a few minutes’ worth of advertisements is a small price to pay for unlimited free content.

  • Easy Revenue Distribution

There are a variety of OTT video monetization options available to AVOD enthusiasts. Pre-roll ads play before the selected video content is paid, while midroll ads pause the video at strategic points to display ads. In-video ads pop up on the screen during the video and can be closed by the viewer.

Setbacks: advertising rates have dropped by half since the COVID-19 pandemic, directly hurting creators across the board.

2. TVOD

TVOD, or Transactional Video on Demand, allows users to buy content on a pay-per-view basis. Users are charged per video, rather than gaining access to an entire catalog.

Examples: iTunes, Google Play

The benefits of TVOD are:
  • Generates Higher Income

Regardless of the length of the video, income is generated because users pay for each video rather than an entire catalog or series.

  • Creates a Niche Range of Videos

TVOD models allow distributors to connect with their audience and offer then video content that they can directly engage with. This creates both a niche range of video and a well-segmented audience.

  • Profitable as a Platform

If there is soaring demand for a particular video category, TVOD models might well be the most profitable of platform designs.

Setbacks: If a user wants to watch multiple films, having to pay each time might prove very expensive.

3. SVOD

Subscription Video on Demand models currently churn out the highest revenues, making it the best monetization model for OTT by far. It builds recurring revenue off something that was only built or shot once, by charging periodical subscription feel. The benefits for users is that a small fee gives them access to an entire catalog of films they can watch as many times as they want.

Examples: Netflix, Amazon Prime

The benefits of SVOD are:
  • High Retention

Since users can access premium content at any time simply by paying a monthly fee, they’re more likely to stick around and use the platform often. 

  • Recurring Charging Models

Subscriptions are deducted automatically once the charging model is set up, so users don’t have to insert their card details each times and businesses don’t have to follow up. 

  • Revenues Can be Diversified

Alongside SVOD, businesses can also offer pay-per-view or ad-based videos on demand. This diversifies the monetization for streaming services and broadens the potential market, allowing all kinds of people to access premium content through an option that suits them.

What are Some Revenue Generating Best Practices That Businesses Need to Know?

  • Payment Security

No matter how tempting your ways to OTT monetization options are to the users, they won’t pay if payment portals aren’t secured. With cases of increasingly sophisticated hackers on the rise, users will want to pay on a secure platform that doesn’t store confidential information or leak it to wrong parties. 

  • Secure Video Delivery

In times like these where Zoombombers and video hackers are almost a daily affair, users want the guarantee that the OTT platform they choose is safe to use and watch videos on. 

  • Server-side Ad Integrations (SSAI)

To avoid laggy content and interrupting viewers with ads, server-side integrations stitch transcoded advertisements into regular video streams, such that the experience of watching remains the same. SSAI enable cross-platform monetization and disguise appropriate ads from ad blockers. 

Conclusion

Not all monetization models fit all businesses or content types. In today’s day and age, businesses must have the freedom to choose the best OTT monetization model for their needs and business goals. 

Vplayed is an enabler of any type of monetization you see fit for your business, regardless of which OTT platform you choose. Set up flexible subscription plans, increase viewership with pay-per-view models or woo viewers with strategically placed ads– you can do it all with Vplayed.

OTT Monetization Models
Nimisha Karnam

Nimisha is a content marketing strategist who is an avid reader and incorporates tech trends in the most effective way to the audience. In leisure time you can spot her watching Netflix or exploring new adventures.

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