- Understand the difference between AVOD, SVOD and TVOD to better connect with your audience and scale a profitable business.
- The three main business models — AVOD, SVOD and TVOD — provide flexibility for publishers to better address the needs of their viewers.
- OTT service JW Player advises streamers to give their audience options instead of an ultimatum when it comes to services and subscriptions.
With the launch of Netflix’s new, cheaper advertising-supported service, everyone is talking about AVOD. But that doesn’t mean AVOD or free ad-supported TV (FAST) now rules the streaming roost. Far from it, as choosing the right video-on-demand monetization model could make or break your business.
Select the right one, and you can scale a profitable business. Choose wrong, and you might leave money on the table.
The following article is a back-to-basics explainer, courtesy of OTT service JW Player.
AVOD (advertising video-on-demand) uses advertising-based video-on-demand to provide free content for viewers. Instead of paying with their wallet, consumers pay with their time by watching adverts before and during the video content. This business model is used on popular video platforms like YouTube and Facebook Watch.
Many premium streaming services offer an AVOD option as an entry-level tier to their SVOD subscriptions and use ad revenue to offset lower prices. For example, Hulu’s cheapest streaming option contains ads, and Netflix Basic plan with ads launches in November.
SVOD (subscription video-on-demand) is the most popular VOD model, and it’s also the most competitive. Users pay a fixed monthly subscription fee to access a library of streamable content — whether that’s television series, movies, or sports.
While SVOD provides recurring income, winning over subscribers isn’t easy. With so many different options, consumers have had to become pickier with which services they purchase. While you can earn big payouts on a single piece of TVOD content, you’ll have to regularly publish the best-of-the-best videos to keep consumers subscribed to your SVOD service.
TVOD (transactional video-on-demand) lets consumers buy content on a pay-per-view basis rather than a subscription model. Viewers can purchase permanent access to a video product or rent it for a limited time (or limited views) for a fraction of the cost.
TVOD models use exclusivity and recent releases to maximize income. Once the initial stream of new viewers declines, TVOD services can release the content into their library of SVOD or AVOD to repurpose its value. You can find examples of TVOD content on Disney+ new releases, Prime Video, and hotel televisions.
A TVOD model offers more options when it comes to marketing your products. Every time you have a release, you can expand your market by advertising the new content (rather than an entire library) to anyone that’d be interested — and first-time buyers have a good chance of coming back if they have a good experience.
Meet Your Viewers Where They Are
These are the three main business models used in streaming, giving publishers the flexibility to match their content with viewers’ needs. For example, your audience might not want to pay to watch your content, but they don’t mind watching a few advertisements to get access.
In this case, an AVOD model would help you monetize your videos without alienating your audience. Other viewers might not want to punch in their credit cards to watch a single video, but they have no problem doing it monthly to get ad-free access to thousands of videos.
JW Player advises streamers to give their audience options instead of an ultimatum. Allow them to watch content with ads for a discount or provide them with an opportunity to rent (and binge) a television series rather than purchase a subscription. Since 41% of consumers will pay to avoid ads, give them a premium viewing option.
If you were operating with a TVOD model, you might let viewers buy a series on a per-episode or per-season basis with different discount prices. Or you might let viewers watch the first episode of every season for free to give them a taste of the content before they make a purchase.
“You might want to eventually create an SVOD platform, but starting with a TVOD model might be better for drawing in initial customers while you build awareness and your content library,” JW Player recommends.
In sum, more options expand your target market and increase your earning potential. You might not be able to lock as many users into a subscription contract, but you’ll improve the user experience and boost viewer retention.
Currently one of the fastest-growing channels in advertising, Connected TV apps such as Roku, Amazon Fire Stick and Apple TV offer a highly effective way for brands to reach their target audience. Learn the basics and stay on top of the biggest trends in CTV with fresh insights hand-picked from the NAB Amplify archives:
- Connected TV Takes Over the World
- Connected TV Is the New TV, and That’s Where We Are
- FAST TV and SVOD Are “Channeling” the Cable Business Model
- More Consumers Are Headed Into the FAST Lane
- SVOD vs. AVOD Today, All Connected TV Tomorrow
- Ways Pay TV Operators Can Win the SVOD Game