OTT Monetization Choosing the Best OTT Revenue Models

Over-the-top (OTT) content has grown exponentially in the past few years with more and more people streaming content over the Internet across multiple devices such as smartphones, TVs, laptops, and others. The increasing adoption of OTT content has been due to numerous factors including availability of original content, wider variety of content, increasing use of smartphones and lowering of mobile data prices. Another factor that has contributed to the rise in OTT content consumption is the availability of multiple monetization models which drive consumers to opt for at least one OTT platform and sometimes, more. These models are developed keeping three factors in mind – content offered, target group, and business strategy. Besides this, businesses should keep in mind certain security practices that will lead to higher revenues – payment security, secure video delivery and Server-side Ad Integrations (SSAI). 

Now, let’s take a look at a few of the most popular OTT Revenue Models. 

Ad-based Video On Demand (AVOD) 

In this monetization model, ads are the major source of revenue and they account for production and distribution costs. The video content is free for all consumers. The benefits of this model are easy user acquisition and easy revenue distribution. The main disadvantage of this model is the fluctuation in advertising rates. 

Example: YouTube, Hulu 

Transactional Video On Demand (TVOD) 

In this model, users purchase content on a pay-per-view basis, i.e., viewers are charged per video. The key benefits of this model are that it generates higher income, it allows the creation of a niche range of videos and that is has the potential to be the most profitable of all platform designs. The primary disadvantage of this model is from the user’s point-of-view – watching multiple movies or tv shows becomes expensive for the user. 

Example: Google Play, iTunes 

Subscription Video On Demand (SVOD) 

SVOD is currently the most popular model and has the highest revenue stream. In this model, users pay a periodic subscription fee (monthly or yearly, for example) and get access to the entire catalogue of movies and shows that the platform offers, and they can watch the same any number of times they want. The benefits of this model include high retention rates, recurring charging models and diversified revenue options. 

Example: Netflix, Amazon Prime