Videos have been part of our lives for decades now. From the days of single channel to Cable/Satellite TV and to latest OTT, video technology has seen major changes. The key shift happened with the advent of internet and thereby OTT services. We have moved from waiting for videos on TV to Video-on-demand (VOD) services like YouTube, Netflix, Hulu, Amazon Prime, Hotstar, SonyLIV etc.
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.
The common acronyms used to describe these different video business models are SVOD, AVOD and TVOD – or subscription video on demand, advertisement-based video on demand, and transactional-based video on demand. And we have new one in town as well, PVOD i.e. Premium video on demand.
AVOD – Advertising Video on Demand
This is the most commonly used video business model globally. As the name suggests, users are presented with advertisements as part of the video programs. Users have to watch these advertisements in full and in some cases, they have the option to skip as well after few seconds of mandatory Ads.
Platforms like YouTube, DailyMotion are pioneers in this segment and host millions of videos. Users get to watch the content for free and these platforms generate revenues through Ads. A part of the revenue is shared with content producers as well which makes it a viable business model for all the stakeholders.
Major cost for these platforms are spent on infrastructure and technology. Imagine the amount of servers being used by services like YouTube that hosts billions of videos.
SVOD – Subscription Video on Demand
With this model, the platforms charge a subscription fee from users for revenue generation. Advertisements are not shown for these services as the users are paying subscription fees. Netflix, SonyLIV, Amazon Prime, Hotstar are some of the key examples for SVOD. Note that some of these services run hybrid model, where premium content is part of SVOD and non-premium content is available with AVOD model.
SVOD platforms spend money on not just infrastructure and technology, but also on acquiring the content. In some cases the content costs can be extremely high depending on the production cost and/or potential due to star casts.
TVOD – Transactional Video on Demand
TVOD is more of an hybrid model where users don’t pay a subscription but instead pay for individual content like sports or movies. This model has not been very successful as users do not like the hassle of buying content multiple times. For them the ease of SVOD is more efficient. TVOD services usually offer recent movie releases or sports contents. Some examples of these services are Apple’s iTunes, Sky Box office and Amazon’s video store.
PVOD – Premium Video on Demand
This is more of a recent entrant to the market. With the restrictions during Covid pandemic, some of the premium content/production houses started releasing the movies directly on OTT platforms. In some cases the movies are released in parallel for theaters and OTT platforms. And few production houses released movies exclusively on OTT platforms. This is a new experiment but with increasing uptake of OTT services, this can also become viable going forward. Of course piracy remains a key challenge for this type of model as well.