When launching an OTT service, one of the first major decisions you must make involves determining how you will monetize your content. While some older, more established revenue models continue to be popular choices for OTT content providers, a few newer options are becoming increasingly prominent.
By leveraging a multi-tiered OTT revenue model, you can leave this decision up to your audience—and give them the flexibility to choose how they want to pay for your content. Read on to learn more about different monetization models, and the benefits of the multi-tiered approach.
AVOD, SVOD, and Hybrid
Ad-supported video on demand (AVOD), subscription video on demand (SVOD), and the Hybrid model are some of the primary revenue models commonly used by OTT content providers today. Here’s a brief explanation of how these models differ:
AVOD: Within this model, viewers receive access to free content in exchange for watching ads.
Among some of the best-known ad-supported video services are YouTube, Pluto TV, Crackle, and many publisher sites, such as Conde Nast and Vice Media.
SVOD: Within this model, viewers pay a subscription fee in order to watch content.
Subscriber-supported video services make up the largest segment of the OTT universe and include some very big players, like Netflix, Amazon Prime Video, HBO Now, and Showtime. But SVOD also is home to hundreds of other providers, like Hallmark Movies Now and WWE Network—as well as a plethora of very small, niche providers, such as Curiosity Stream and Crunchyroll.
Hybrid: Some OTT services have begun to adopt a hybrid approach—providing both a free, ad-supported service and a premium subscription offering. This creates a soft transition for converting an audience over to a subscription model. Providers can take this strategy a step further by offering tiered subscription models and gating certain content so that only users who are willing to pay a premium can access it.
Hybrid offerings are getting a lot of attention as the cost of content continues to soar, with smaller services looking to programmatic advertising as a potential incremental revenue stream. In APAC, telco PCCW has had success with its Vie OTT service, offering consumers a large selection of lower-value content that’s ad-supported, as well as more premium content on a paid subscription basis. In The United States, CBS All-Access and Hulu are good examples of a truncated hybrid model—offering a service based on a subscription PLUS advertising, or a higher priced subscription package with no advertising. As the name suggests, hybrid models can be quite flexible.
Both AVOD and SVOD come with their own unique benefits and challenges. For those viewers who cannot or will not pay to consume video content, the traditional AVOD option remains a popular and successful monetization model. AVOD allows for precise user-level targeting based on a wide array of attributes and online behaviors—making it an increasingly attractive option for advertisers. AVOD is also a good option to drive audience acquisition and combat subscription fatigue. For services with more established audiences, SVOD offers a more linear, predictable stream of income. SVOD is also an ideal business model for smaller services with tightly focused content and a willingness to gradually build their audience over time.
Other business models
Today’s OTT service providers seek flexibility in their go-to-market approaches, and want to experiment with additional revenue models, including:
Transactional Video on Demand (TVOD): This model allows users to sign up for or download the service at no cost, but requires the purchase of content on a per-title basis. TVOD is popular for long-form movie content or live pay-per-view (PPV) content, such as sporting events and other live events, like concerts. Apple and Amazon, for example, offer customers the option to buy or rent titles, while WWE, UFC, and professional boxing are all using PPV extensively.
Authenticated VOD (AuthVOD): This model often requires users to log in using credentials from another platform, service, cable (TVE), or cellular subscription in order to access content. For this reason, AuthVOD is valuable when coordinating with partnerships or managing multiple properties or branded services. However, AuthVOD can also refer to a free, ad-supported service that requires a viewer to create a login to view. The benefit to the end viewer is the ability to do things like make “watchlists” of content and “pause and resume” across devices. The benefit to the service provider is the ability to know more about the end viewer for marketing and advertising purposes.
The benefits of a multi-tiered pricing model
Offering a multi-tiered pricing model lets content owners give audiences the flexibility to choose which package works best for their viewing needs and cost limitations. By providing your audience with the power to decide how they want to pay for your content (and how much), you can make your OTT service engage more viewers—and optimize your revenue by leveraging more points along the demand curve.
This evolution from the high-priced, stacked-with-channels model into more custom-build viewing seems quite natural—as we’re currently witnessing the golden age of video entertainment. Today’s viewer has a lot of options to choose from, is more price sensitive, and is willing to pay for the content that he or she is passionate about. Many of the most popular channels are major networks; however, the bulk of the paid services consumers are willing to pay the most for are niche. Therefore, multi-tiered pricing will give more freedom and flexibility to the modern viewer in choosing a video service.
Brightcove’s new feature
At Brightcove, we see the value of a content owner being able to price and package their content in different SVOD tiers. In partnership with Accedo and Cleeng, we’ve added our new Multiple Package SVOD offering to OTT Flow, which empowers our customers to provide varied levels of access to their content through different subscriptions. These multi-tier subscription capabilities add sophistication to our market-leading solution at no additional cost for our customers.
With this feature, Brightcove customers will be able to offer vertical or horizontal subscription tiers. Vertical tiers allow customers to sell separate subscriptions for different types of content, which they can bundle as they wish. For example, they can offer one bundle for movies and one for sports content. Horizontal tiers are broken out by volume of content—often referred to as Gold, Silver, or Bronze packages.
If viewers do not have access to a particular asset, they will receive a message that they aren’t entitled to that content and be prompted to click through to the associated purchase page for the asset in question—driving upsell opportunities.
In today’s crowded OTT marketplace, content providers must build and scale their offerings with their target viewer’s interests in mind. As today’s viewers value choice and seek an attractive, relevant value proposition, the multi-tiered OTT revenue model is an exciting new option for service providers to consider.
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