Streaming services dominate modern media consumption, each considering unique revenue models. There are five main models: SVOD, AVOD, TVOD, FAST, and BVOD. These models form the foundation of digital content distribution, influencing how users access content and how platforms make money, through various monetization strategies.
For developers, understanding these models is crucial for building streaming applications that meet user expectations. Users expect smooth playback, fast loading times, personalized recommendations, and multi-device support. This blog explains each model's key features and their impact on application design and user experience.
OTTs in the new era of streaming
OTT stands for over-the-top and refers to content streamed over the internet across multiple devices without a traditional cable or satellite provider. The accessibility of OTT content is one of the many reasons it’s so popular. Viewers only need a high-speed internet connection and a device that supports apps or browsers.
Antenna’s quarterly snapshot illustrates the market share of new subscribers (premium) in various streaming services over two years. Overall, there was 35.2M Gross Additions in the second quarter of 2024. Disney+ and Netflix are leading with consistently high market shares, indicating strong user growth. Apple TV+ and Discovery+ maintain lower but steady market shares, suggesting they cater to a niche audience.
Overall, the graph depicts a competitive landscape with shifting market shares among major streaming services.
Video on demand
VOD stands for video-on-demand and refers to any video content that starts simply by pressing “Play”. In comparison, cable and satellite TV follow set schedules, so viewers need to tune in at specific times.
Content monetization models in VOD
While OTT is used to describe the way content is distributed, VOD is used to describe how the content is viewed. But there is some overlap between the two. Both OTT and VOD involve content being delivered over the internet. OTT platforms often provide VOD services, allowing viewers to watch content on demand.
Both models provide flexibility in content consumption. OTT services use VOD as their primary delivery method. The user accesses the content directly from an online platform
Before we get into the specific models, it’s important to categorize them into two broad groups: linear and on-demand. Linear models, like FAST, are like traditional TV experiences, where content is streamed according to a schedule. On-demand models—AVOD, SVOD, TVOD, and HVOD—allow users to choose what they watch and when they watch it.
Each model represents a different method of delivering content, each with its own technical and business impacts. We'll go over each, explaining how they work and why they’re important.
Subscription video on demand (SVOD)
SVOD is a model where people pay a recurring subscription fee (typically monthly and annually) to access a library of films, TV shows, and other content. SVOD services are huge in the streaming industry. Services like Netflix and Hulu offer exclusive content with ad-free viewing.
For creators, SVOD offers many benefits. You can:
- Have a reliable income since viewers pay a recurring fee.
- Reach a broad audience by meeting different viewing preferences.
- Offer subscribers direct access to exclusive content.
- Have full creative freedom since you distribute your content.
- Build a community around your brand.
SVOD also provides users the flexibility to cancel anytime, which can make it harder for producers to retain customers. SVOD manages this with unique new content, aggressive pricing methods, or both.
Now, let’s talk about one of the biggest challenges SVOD services face: and that is ‘churn’. Churn is basically the rate at which subscribers cancel their subscriptions, and it’s a critical metric for any streaming service. High churn rates can significantly hurt revenue and growth, so SVOD platforms plan several strategies to retain subscribers.
The premium SVOD churn rates from Antenna Insights shows how many people cancelled their subscriptions to different streaming services.
A key tactic is the consistent release of new and exclusive content, which keeps the library fresh and engaging, reducing subscriber turnover. Another effective strategy is personalized recommendations, determined by advanced algorithms, suggest content based on individual viewing habits, improving the user experience.
Competitive pricing and flexible subscription tiers also help. By offering various plans, including ad-supported options, and bundling services, platforms provide more value, making it harder for subscribers to cancel.
Free ad-supported streaming television (FAST)
FAST is the closest thing you can get to experience traditional broadcasts and cable TVs. Users can browse several channels without paying a subscription fee, with content being funded by advertisements.
FAST platforms offer a continuous stream of scheduled content, much like traditional TV. This model appeals to viewers who enjoy the simplicity of a linear experience without the need to make viewing choices.
Unlike traditional TV, which delivers content through broadcast or satellite signals, FAST is streamed over the internet. Viewers only need a connected TV and an internet connection. Pluto TV, Tubi, and Freevee are a few examples of FAST services.
Ad-supported video-on-demand (AVOD)
AVOD is a popular monetization model where platforms offer free content supported by ads, which can run before, during, or after videos. The ad revenue is used to cover production and hosting costs.
AVOD is attractive for viewers because they can watch free content. There is a low barrier to entry because viewers don’t need to make a financial commitment. For creators, AVOD is a low-risk way to earn income from content without selling anything.
According to a Deloitte study, 62% of consumers favored lower-cost (or free) ad-supported services instead of more costly ad-free options.
AVOD platforms like YouTube, Roku, and Crackle attract a large audience, offering significant revenue potential for advertisers.
The main source of income for AVOD creators is advertising, which can be unreliable at times. Many creators on YouTube have experienced a massive decrease in revenue. That is because with AVOD you might face:
- Platforms take a cut of your ad revenue: OTT platforms retain a percentage of your ad earnings, reducing your total revenue.
- Content blocked by ad blockers: Ad blockers can prevent ads from displaying your content, resulting in lost potential revenue.
- Audience’s location: Ad revenue varies by location due to different CPM (Cost Per Mille) rates, with some regions generating less income.
- High barriers of entry for creator/partner programs: Joining creator programs that allow content monetization often requires meeting strict eligibility criteria, such as minimum subscriber counts, consistent content output, or compliance with specific content guidelines set by platforms.
Transactional video on demand (TVOD):
TVOD is a model where viewers can purchase or rent specific content they choose to watch, rather than subscribing to an entire library. This model allows viewers to selectively view movies, TV episodes, or other content.
TVOD platforms focus on providing high-quality, on-demand access to specific content, like new movie releases, live sports events, and exclusive concerts. To attract customers, providers often use promotional strategies such as discounts on new releases, bundle deals for related content, free previews, or loyalty programs for frequent users.
TVOD systems require secure payment gateways, digital rights management(DRM) implementation, and efficient content delivery mechanisms. Developers must focus on creating user-friendly interfaces for content selection and purchase, while ensuring strict access control based on transaction status.
These tactics help TVOD services compete in the streaming market while maintaining their pay-per-view model.
Types of TVOD:
- Rental:Users pay to access content for a limited time, typically 24 to 48 hours. After the rental period expires, the content is no longer accessible.
- Ideal for viewers who want to watch a specific movie or show without committing to owning it.
- Examples: Amazon Prime Video, and Apple iTunes.
- Purchase:Users pay a one-time fee to access the content permanently, which they can watch at any time without expiration.
- This model, also known as electronic sell through (EST), is suitable for viewers who want to build a personal collection of favorite movies or TV shows.
- Examples: Google Play, Vudu, Redbox.
- Pay-per-view (PPV):Users make a one-time payment to access a specific show, event, or broadcast on a channel at a scheduled time.
- PPV can be used for time-sensitive events like boxing matches and sports games, where viewers pay for a single viewing opportunity.
- Premium video on demand (PVOD):Viewers pay a higher fee to access new or exclusive content, often before it’s available on other platforms.
- Typically used for early releases of movies or special events, appealing to consumers who are willing to pay more for immediate access.
- Gives studios more control over pricing and release timing through bypassing traditional distribution channels.
Hybrid video on demand (HVOD)
HVOD combines elements of different monetization models, offering users multiple ways to access content. Netflix, Hulu, and Disney+ all fall into the HVOD category because they generate revenue through a mix of advertisements and subscription plans. This approach gives consumers the flexibility to invest their money and time on their terms.
Successfully managing the HVOD model required a solid understanding of user segmentation, content distribution, and the integration of advertising with subscription revenue. Developers need to balance engaging free, ad-supported content with a premium subscription tier that offers enough value to justify the cost.
Over recent years, the trend of viewers opting for ad-supported OTT content has greatly increased. Initially, Disney+, Netflix, and Max saw higher sign-ups for ad-free plans. Over time, the share of ad-supported plan sign-ups grew substantially across all platforms.
Broadcaster video on demand (BVOD)
BVOD is video content produced and published by traditional broadcasters that is available online and on-demand. It connects conventional TV broadcasting with modern streaming services. BVOD platforms use ads in their content to generate revenue. Some offer premium, ad-free tiers for a subscription fee.
Key features of BVOD:
- On-demand access to broadcast content
- A mix of free and ad-supported tiers
- Catch-up TV services
- Live streaming of broadcast channels
Advertising on BVOD platforms offers several benefits:
- Precise targeting: User data helps to place ads more effectively, reaching specific audience segments based on their preferences and behaviors.
- Increased reach: Engage with viewers across various devices, expanding your ad's visibility and audience.
- Better brand safety: Ensure your ads are shown alongside reputable broadcast content, enhancing your brand’s image and credibility.
- Zero ad fraud: An in-house advertising environment where there is no risk of scams, misinformation, or hateful content, ensuring a secure and trustworthy platform for your ad campaigns.
Unlike traditional TV, BVOD platforms let advertisers monitor the performance of their campaigns and monitor data, and analytics about audience behaviour and engagement. This allows for immediate optimizations and adjustments.
