Netflix and Amazon are prime examples of companies at the heart of a fast growing video on demand (VOD) industry. By going over the top (OTT) with web streaming technologies, VOD service providers are expanding reach worldwide, delivering movies, TV shows, documentaries and more, to all our screens.
As the VOD industry has grown, different business models have emerged, offering a variety of options for providers to monetize their content. These include:
AVOD (Advertising VOD)
YouTube and Tubi are examples of AVOD services. Advertising is incorporated when content is played back. The viewer benefits from no subscription fee. With no cost-barrier to entry, viewer adoption rates dramatically increase.
BVOD (Broadcaster VOD)
Often a subset of AVOD, broadcaster VOD provides on-demand or catch-up services in addition to the linear programming offered by the broadcaster. The majority of these services are advertising supported. An exception is UK-based BBC iPlayer, which is funded by the license fee.
SVOD (Subscription VOD)
The most well known examples of SVOD services are Disney+, Netflix or Amazon’s Prime Video, and they deliver access to content in return for a monthly or annual subscription fee.
PVOD (Premium VOD)
Although similar to TVOD (see below), PVOD augments an SVOD service, providing additional paid-access to content over and above the usual program offering. The subtlety here is that you need the SVOD subscription before you can access the PVOD offering. A recent example of this model in action was when Disney+ launched its new blockbuster Mulan as a PVOD purchase.
TVOD (Transaction VOD)
The TVOD category represents the virtual ‘buy’, ‘rent’, or ‘pay-per-view’ in the OTT world, where a viewer pays for access to an individual item of content, often movies, but also major sporting events. Examples of TVOD include iTunes, Google Play and Amazon Prime, as well as pay-per-view services such as Sky Sports Box Office (for example featuring live Premier League or Boxing events). Industry terms which also roll-up within this category are ‘Download to Own’ DTO or ‘Electronic Sell-through’ EST.
Hybrid VOD models
In practice, many providers combine VOD monetization models in their service offering. For example, YouTube subscriptions enable ad-free and even Live TV viewing; Amazon offers additional channel subscriptions and TVOD content from within its Prime Video service; and Hulu offers a basic ad-subsidized subscription package, as well as ad-free options.
As revenues from VOD are expected to increase substantially, the complete OTT content distribution chain is looking to capitalize. Advertisers are adjusting accordingly, transitioning budgets towards what they recognize as a more targeted and effective medium.
Read more about OTT VOD services in our complete guide.