Watching video content has always been one of the most popular internet activities worldwide, and the COVID-19 pandemic made online video consumption even more notable. To wit, in 2019, the number of video viewers globally was 2.6 billion, and by 2023 this number is expected to exceed 3 billion.

However, as new OTT players are entering the market, the competition is becoming harsher. So when launching your service, choose one of the OTT business models that would correspond to your specific needs. This will allow you to minimize customer churn and increase your bottom line.

Ad-powered content monetization

Ad-based video-on-demand (AVOD) is an OTT business model that presupposes monetizing video through ads. Mostly associated with traditional TV advertising, AVOD businesses provide free content to users and get revenue by selling ads on their videos. This might include video commercials, banners, or fully sponsored content.

AVOD has been growing in popularity in recent years — with Pluto TV, Tubi, Xumo, and YouTube (non-premium) being the most notable OTT players in this niche. If you’re just starting out, this money-making model can be the optimal option, especially if you produce or work with third-party educational, entertainment, or wellness content.

Ad-powered content monetization

Ad-powered content monetization

Viewers access your content multiple times without payment — you grow your user base. However, for some users ads might be annoying, and to prevent them from leaving your platform, think about implementing ML-powered ad placement.

With this innovative method, you can spot the optimal place for ad insertion and adapt your ads for video context, avoiding scene splitting and making your ads less intrusive. This will not only help you boost viewer engagement, but will also ensure brand safety — by preventing dubious ads and inappropriate context.

Subscription-based advertising

Unlike AVOD, subscription video on demand (SVOD) is not free for users. To watch as much content as they want without annoying ad interruptions, viewers should pay a flat rate per month. According to Adobe’s CMO, subscription-based advertising is the most popular content consumption model, with Netflix, Apple TV+, HBO, and YouTube Premium being leaders in this type of content distribution.

Subscription-based advertising

Subscription-based advertising

As you start your SVOD business, remember that with opportunity comes a great challenge. Indeed, subscription video on demand is popular with users and they won’t leave due to ads, but at the same time with so many giants on the OTT arena, you might have difficulties with finding new customers — due to the high entry barrier. Besides, when you gain your first users, be ready to think through solid viewer retention strategies around content exclusivity, loyalty programs, multiple pricing options, and more.

Also, if you opt for SVOD business model, keep in mind that SVOD content is successful when tailored to a niche group and released on a regular basis. And the type of content that works best with this money-making OTT revenue model includes sports tournaments and entertainment content — mostly movies and series.

4 Business Models to Drive More Revenue from Your OTT Service

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Transaction-based OTT business model

Also known as pay-per-view (PPV) or pay-per-download (PPD), transactional video on demand (TVOD) refers to buying or renting a piece of content for a set price. Before you decide to join the TVOD market along with services like iTunes, UFC, Sky Box Office, and CinemaNow, analyze key advantages and disadvantages of this OTT monetization model.

Transaction-based business model

Transaction-based business model

Ideal for small businesses, TVOD business model presupposes instant payments and as a result immediate income that can be used for further business development. However, there’s also a flip side: although immediate, this revenue stream may not be consistent enough.

But if your business revolves around live broadcast of music festivals, sports matches, or film debuts, TVOD is the best way to deliver ad-free experiences for viewers.

Hybrid OTT revenue models

If you want to enable more flexibility for your OTT platform, try a hybrid model. By providing a free, ad-supported, and premium subscription service, you can easily accommodate various viewer demands, while ensuring a reliable revenue stream.

For example, you can offer a wide library of lower-value content on an AVOD basis, and monetize your premium video via subscriptions — the way Viu does it. Or, mostly provide subscription packages, while charging a higher price for particular content through a transcription-based model.

Besides, as part of your viewer engagement strategy, you can give free access to sample content — however, monetizing it with ads — before they sign up on a pay-per-view or subscription basis.

A balancing act

Choosing an OTT business model is not as easy as it seems. Before you decide what way to monetize your videos, you need to analyze the crowded OTT marketplace and identify viewers’ needs. With this information in mind, it will be easier for you to build and scale your offering. Experts in OTT app development, integration, and customization, we can help you satisfy target users’ interests and enter the market with a relevant value proposition.