The world of video is changing: delivery mechanisms, viewing habits and business models are all evolving. Here’s your guide to the realm of video on demand.
The internet becoming mainstream was probably the biggest change in the 21th century, and it shaped the way we view news, entertainment and any type of content in general. With multiple monetization options, technical advances in the field of wired and wireless telecom networks paved the way for online services which seemed incredible only a few decades ago: Youtube, Vimeo, Hulu, Netflix, Twitch, Vimeo and other innovators in the field of online video. Gone are the days when we had access to only a couple dozen TV channels or when we had to buy or rent a DVD for the latest blockbuster.
Nowadays, we can watch just about any program whenever and wherever we may desire or we can simply download it for later viewing. We don’t have to wait for Friday night to see the recent sports highlights, we can simply look up internet clips ourselves by pressing a couple of buttons.
This new wave of on-hand entertainment falls under the umbrella-term “Video On Demand” or VOD for short. Viewers are able to get the content they want when they want it, not when a content owner decides to broadcast it. Let’s see some of the new terms and monetization options that are available for VOD businesses.
Over the top (OTT)
The other term you might have heard is ‘over the top’ or OTT, which refers to material that’s distributed directly to viewers over the internet. OTT is a subset of VOD, which also includes cable and satellite services.
The increasing gravitation towards OTT content simultaneously frees us from cables, geographic restrictions and broadcast schedules, and fundamentally changes the way video is sold, produced and consumed.
For the end user it’s all fairly seamless and invisible, but beneath the technology there are a range of business models that control our access to content. The common acronyms used to describe these different business models applied to online services are SVOD, AVOD , TVOD and PVOD – or subscription video on demand, advertisement-based video on demand, transactional-based video on demand and Premium Video on demand.
SVOD – Subscription video on demand
SVOD is somewhat similar to the traditional packages offered by cable companies – with this system the user has access to as much content as he or she wants, for a monthly fee. Popular examples of this type of service include Netflix, Hulu, Amazon Prime Video and a few newer services from Apple, HBO and Disney. SVOD provides customers with a great deal of flexibility, since they are not tied down by a long term contract for the service. Since they can quit at any time, content providers are pressured to continuously provide exclusive fresh content at a low price.
TVOD – Transactional video on demand
TVOD is the opposite of subscription video, where consumers purchase content on a pay-per-view basis. There are two main types of TVOD, EST or electronic sell through and DTR or download to rent. With EST, users will only have to pay once and they will have access to a piece of content indefinitely. With DTR, users will pay a smaller fee but only have access to the content for a limited period of time.
TVOD is another interesting business model, where customers will have access to content on a pay-per-view basis. Most TVOD companies offer more in terms of recent releases and newer content. This is also because these companies provide the rights holders to the content more revenue. TVOD services also tend to offer price incentives to maintain their customers. TVOD examples include Imagen, Amazon’s Video Store, Sky Box Office and Apple’s iTunes.
AVOD – Advertising-based video on demand
Unlike SVOD and TVOD services, AVOD is free to consumers. However, much like broadcast television, consumers need to sit through advertisements. You can see AVOD in action when watching DailyMotion, YouTube and 4OD, where ad revenue is used to offset production and hosting costs.
Premium content owners rarely use AVOD as it generates lower amounts of revenue than SVOD and TVOD. It’s interesting to note that YouTube has started to move its subscription-based Premium content to an ad-based model, with reports that the service was slow to catch on with users.
PVOD – Premium Video on Demand
With films typically collecting up to 90% of their lifetime gross during the first four weeks of release, studios have long been pushing to shorten the exclusive theatrical window. This is called Premium Video on Demand (PVOD). PVOD differs from TVOD in that it deals with the most valuable and in-demand video content: usually newly-released films. Pricing can therefore be higher to reflect the value of the content, and the terms might be stricter.
Hybrid/Multiple business models
In practice, there are services that operate with hybrid/multiple business models. Take Amazon Video and Sky for example: audiences pay a fixed subscription per month for access to a library of content(SVOD), but brand new movie releases and specific sporting events command an additional fee(TVOD), and also free tier with ads(AVOD).
With the popularity of OTT content soaring, it’s likely that business models will change as technology and consumption habits continue to evolve.
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