Gone are the times when television was the most watched video platform across the globe. Advancement in technology has shifted to the hype to Video on demand (VOD) systems. In a video on demand system, users can choose and watch video content like movies and TV shows whenever they want to. Did you know that Netflix generated total annual revenue of over 4.5 billion U.S. dollars, up from 3.7 billion in the corresponding quarter of 2018 by streaming over billions of hours a month. Conversely, in 2020, YouTube’s net advertising revenues in the United States are projected to reach 5.47 billion U.S. dollars, up from 3.88 billion U.S. dollars in 2017 by just streaming free content and hosting ads. However, there isn’t much difference in the type of users that subscribes to both these video streaming services.
So how to choose the right business model for your online streaming business? By understanding the different types of revenue models, you can pick the right one for you. But, what are the popular business models leveraged by market leaders? Read on to explore the choices.
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Types of revenue models adopted by Video streaming businesses
The revenue models of both YouTube and Netflix are completely different. The Netflix business strategy is based on a subscription-based model, whereas YouTube stream free content and hosts ads. The biggest secret of any popular video streaming business strategy is the revenue model they adopt. The revenue model of a video on demand business is nothing but the strategies they adopt to make money. When selecting a business model, conduct a detailed research model followed by your rivals to decide the best-suited option for your own business.
Here are different revenue generation models for video on demand service providers that are thriving tremendously.
Subscription On Demand (SVOD)
The subscription on demand is one among the successful revenue models used by many video stream businesses.
The Netflix business plan is also based on subscription on demand.
In this model, users can watch and surf unlimited video content. It makes the ideal platform for users to enjoy the best content any time, anywhere. Viewers pay a predetermined subscription fee once a week, monthly or yearly and get access to a broad range of video content unlimited. Users can also play, pause, rewind, fast forward, and record the programs as per their convenience.
Subscriptions are auto-renewable but users can cancel it whenever wanted. It is generally renewed at the same price, and users can access the content until their next subscription cycle. It comes with a flat fee and video streaming platforms normally cannot fix a different fee structure for different types of content. However, subscription video on demand can easily be clubbed with ad models or pay-per-view models to further monetize. This model fits businesses with a wide range of entertainment video content like Movies, TV programs, series, etc. to engage their viewers in the long term by tying them to a subscription fee.
Transactional Video on Demand (TVOD)
Transactional video on demand (TVOD) works in a specific genre where users have to pay for the videos they want to see. The Transaction model works exactly like those rental services where you buy movies or any other videos online. It is similar to a transaction where users pay to access a particular piece of content they consume. Buying allows users to own the content and keep it with them either on the platform or download to their personal devices.
WWE streaming App is the best example of TVOD model.
YouTube paid videos are another popular example of the same.
In this model, two classifications are there: Electronic Sell-Through (EST) and Download to Rent (DTR). The former is as discussed as above, whereas, in the latter, it is like renting the same content for a particular period at a fee that is less than a sell through.
Advertisement –Supported Video On Demand (AVOD)
Ad-supported video demand is a common form of video streaming model where users can view videos for free but ads are displayed along with free videos.
YouTube is the best example that follows an advertising video on demand model.
Video on demand ads is classified into three; pre-roll, mid-roll, and post-roll ads.
Pre-roll is when the ad plays during the start of the video, and in mid-roll, the ads play in the middle of a video and the one in which the ad plays at the end of the video is termed as post-roll.
It is a good earning model as you can manage to get a lot of ad views with the video content as it is presented to a large audience.
Hybrid of SVOD-TVOD-AVOD
When you have a vast video library and your business thrives, you certainly require a combination of different strategies to monetize your video content in a better way and get the most out of your business. You can use the hybrid of SVOD and TVOD or AVOD and TVOD or even a combination of all these works well.
YouTube is the ideal example of a hybrid business model.
If your user base is deferred and you want a different monetization strategy to suit the needs of varied types of audience, it is recommended to go for a hybrid video on demand model. There will be users who can pay for a monthly subscription and access the video library unlimited and there will be users who just want to spend on particular prices of video according to their interests. You will also have a large set of users who wouldn’t want to pay for watching entertainment videos but still can manage watching ads. Such users can be served through ad-based revenue model integrated with other strategies.
Choosing the best revenue model suited for your streaming business can be tricky and do not hesitate to take expert consultation to pick the best revenue models that meet your needs. For any video, on-demand platform, the type of content is a great influence when deciding the way to make money from the business. When choosing a revenue model, most companies wait until the development, but it has to be considered at the very beginning taking into account its power to change the entire business.
Video on demand models presents an excellent way to profit off your video content instead of just offering another content marketing strategy. There is no limit on how much profit you can make out of it, the more customers you get to sign up, the better. Just like the Netflix business strategy. Unlike conventional products that are restricted by time, cost, and resources, there are no restrictions in this model on how you scale.