As work from home is becoming the norm throughout the world, people are opting for entertainment through the internet. Movies, television shows, and video series are being launched on video on demand platform rather than in cinema halls.
Popular entertainment media houses and production houses have launched their Video on demand platforms to cater to their audience worldwide.
VOD has generated a revenue of $85,759 million in 2021. This has reduced the consumption of traditional television. 56% of the US population have subscribed to TV in 2021. Though half the US population has subscribed to TV, only 28% of view time is dedicated to TV whereas 68% is dedicated to video streaming on VOD platforms.
This shows how video on demand is the large piece in the pie. In this article, we are going to discuss the history of VOD & its business models in detail.
History of VOD Platform
VOD refers to streaming video content at any time on any device with an internet connection. Any over-the-top (OTT) platform that offers video content can be streamed either on an app or a browser. Users can watch pre-recorded video content of television shows, movies, and series that are released on the OTT platform.
As the Covid-19 pandemic hit the world and countries started implementing lockdown to curb the spread of the virus, subscriptions to the top VOD platforms increased dramatically.
VOD had 904 million subscribers in 2020 which is a huge jump when compared to 11.31 million in 2018. Unlike earlier times where movies were released only in theatres, production houses released movies directly on the Video on Demand Platform in 2020. Worldwide, VOD business generated a revenue of $85,759 million in 2021.
Business models of VOD
There are 4 VOD platform revenue models. They are,
- Subscription video on demand (SVOD)
- Advertising video on demand (AVOD)
- Transactional video on demand (TVOD)
- Hybrid VOD model (SVOD + AVOD + TVOD)
SVOD and AVOD are the most popular video monetization models across the world. SVOD generated a revenue of $39.9 billion in 2021 and AVOD generated a revenue of $246 million-plus $139 billion to a whopping total of $385 billion in 2021. The four revenue models of the VOD platform are explained in detail:
Subscription video on demand (SVOD)
In the Subscription video on demand model, individuals have to subscribe to the OTT platform to view the video content. This is the most common subscription model across all entertainment houses.
There are three subscription plans – monthly, quarterly and annual. Users gain unlimited access to the video content on the OTT platform for the number of days subscribed. The subscription charges are set to suit within the budget of the common man, thereby increasing the number of subscribers.
Pros
Businesses can earn a steady income from SVOD as it is a minimal amount that is charged from every customer and the users are willing to pay regularly to watch entertaining content. SVOD business model is efficient since you can offer attractive sign-up bonuses to attract new subscriptions.
Cons
Fluctuations in the monthly income of the customers or attractive offers of other OTT platforms can lead to a fewer number of monthly subscriptions. With all the free content available on the internet, only users with a liking for exclusive content will want to pay a fee for entertainment.
Advertising video on demand (AVOD)
In AVOD, users can watch video content without having to pay any fee. Revenue is generated by placing advertisements within the video content. It could be sponsor screens, video advertisements, or sponsored content.
Pros
There is no barrier to entry since a large chunk of the world population is interested in consuming free content on the internet for entertainment. This helps the VOD platform grow faster. OTT platforms that target a specific demographic or user avatars can charge high rates from advertisers for providing a highly targeted audience.
Cons
A large audience base has to be built before the OTT platform can get any advertisers. Also, a large number of viewership is required to make a good profit out of advertisements.
Transactional video on demand (TVOD)
Viewers can pay per video to download or watch it online to gain access to view it. This is also called the pay-per-view (PPV) model or pay-per-download (PPD) model. It could be either a one-time purchase to download the video or a rental to watch a video.
Pros
Exclusive content that is not available on the internet sells as TVOD. Professionals and businesses who have limited video content and want to monetize it utilize the TVOD model. One-time events, sports, instructional videos, or film debuts are the most popular kinds of videos.
Cons
There is no consistent revenue as most of the audience is attracted to SVOD and AVOD. Also, viewers have the notion that paying for each video is expensive when compared to a monthly subscription with access to unlimited video monetization platform content.
Hybrid VOD model (SVOD + AVOD + TVOD)
Businesses that want to cater to all the audiences and increase the number of subscriptions with different kinds of video content they offer, follow the hybrid VOD model. They structure the content in such a way that they can categorize the type of content that will be accessible in SVOD, AVOD, and TVOD models.
Pros
Increased revenue with multiple business models combined in one.
Cons
OTT platform has to constantly provide fresh and interesting content to retain its users.
Conclusion
Businesses providing entertainment online are the ones that survive. VOD streaming platforms are booming and will continue to grow exponentially in the years to come.
As work from home is becoming a permanent solution in most countries, internet users will look for ways to access quality in-house entertainment. Tap into this huge market segment and make enormous profits by choosing the right VOD revenue model.
