The video on demand business model has gained immense traction over the last decade. Thanks to its unparalleled convenience and flexibility.
But why is it so special? What fuelled the growth of the VOD business? Unlike conventional television, a video on demand allows users to watch videos anytime.
The fixed broadcasting schedule no longer limits the users.
As a result, there has been a noticeable shift from linear TV to online streaming platforms, especially VOD platforms. This transition has opened new revenue streams and business models for content providers and distributors.
In fact, the global VOD market was valued at $69.55 billion not so long ago, in 2021. However, it is projected to grow at a CAGR of 17.6%, reaching $257.59 billion by 2029. (Techopedia)
So, if you’re a content owner, it is imperative to understand the dynamics of the VOD business, VOD revenue models, the benefits of VOD, etc.
And spending the next five minutes on this blog will provide you with a wealth of information — almost everything about video on demand.
What is the Video On Demand (VOD) Business Model?
Video on demand (VOD) is a way to watch videos whenever possible, at your convenience.
It’s like having a vast library of films, TV shows, vlogs, and online sermons that you can access anytime from your computer, TV, or phone.
Unlike conventional television, you need not wait for a specific time for the show to start.
It gives you the freedom to watch what you like when you like. The VOD business model involves multiple dimensions that contribute to its functioning.
Firstly, VOD platform acquire a wide range of content in collaboration with content creators and production studios.
Some VOD providers also produce original content. It includes movies, TV shows, documentaries, sports events, and online sermons.
This variety of content is essential to attract and engage a diverse target audience. Secondly, VOD platforms make content accessible to users through online streaming.
They generally offer a user-friendly interface where viewers can search, select, and watch their desired content.
Personalized recommendations, genre-based categories, and search functionalities enhance the viewing experience.
Thirdly, VOD businesses also emphasize user engagement and retention. They may release original and also exclusive content to attract new subscribers and retain existing ones.
Moreover, they invest in user experience enhancements. It includes features like high-quality video streaming, offline downloads, cross-device compatibility, etc.
In a nutshell, the idea is to ensure viewers have a seamless and enjoyable streaming experience.
Different Types of VOD Business Models to Generate VOD Revenue
There are several types of Video on Demand (VOD) business models in the market. And each with its own character and ways of generating revenue.
1. Subscription-based VOD (SVOD):
It is by far the most common VOD business model. In SVOD, users pay a monthly/annual fee for unlimited access to a library of content.
Some popular VOD platforms like Netflix and also Disney+ operate on a subscription-based model.
|Pros of SVOD Business Model||Cons of SVOD Business Model|
|Unlimited access to a wide range of content. So, value for money (for consumers).||Over-dependence on the platform’s library.|
|Establishes a constant source of income due to recurring payments.||Ongoing costs may cause subscription fatigue to an average user.|
2. Transactional VOD (TVOD):
This VOD business model allows users to rent or purchase individual movies or shows on a pay-per-view basis. Here, users have the flexibility to choose specific content without needing a subscription.
Examples of transactional VOD platforms include iTunes and Amazon Prime Video.
|Pros of TVOD Business Model||Cons of TVOD Business Model|
|Flexibility to select and pay for specific content. So, it provides more control to users.||Additional costs for each rental or purchase can accumulate depending on viewing habits.|
|No dependence on a subscription. It allows users to engage with content on their own terms.||Limited availability of certain content. Because not all movies or shows may be available for rental or purchase on platforms.|
3. Advertising-supported VOD (AVOD):
This VOD model offers free access to content but with advertisements. Users can enjoy a wide variety of content without paying a subscription fee.
Platforms like YouTube and Hulu (with ads) operate on this model.
|Pros of AVOD Business Model||Cons of AVOD Business Model|
|Free access to content, making it accessible to a wider audience.||Interruptions caused by ads may disrupt the viewing experience.|
|No subscription fees. It provides an alternative for users who prefer not to pay for streaming services.||Limited availability of certain content. Some content is always kept exclusive for subscription-based models.|
4. Coupons and Promotions:
It offers discounts, promotions, or coupons to attract and retain new users. This business model aims to incentivize users to engage with content through cost savings or exclusive offers.
|Pros of Coupons and Promotions||Cons of Coupons and Promotions|
|Cost savings for users through discounts and promotions.||Limited availability of such offers. Promotions may be time-limited or restricted to specific platforms or content.|
|Attracts new users to specific platforms, potentially increasing viewership and engagement.||Effectiveness may vary depending on user preferences and the perceived value of the offered discounts or promotions.|
5. Premium Video on Demand (PVOD):
This VOD business model is somewhat similar to TVOD. However, it allows users to rent newly released movies at a higher price than standard rentals.
It primarily caters to theater-going audiences as it offers the convenience of watching new releases from the comfort of home. Platforms may offer PVOD options for movies that have recently left theaters.
|Pros of PVOD Business Model||Cons of PVOD Business Model|
|Early access to new movie releases. It effectively eliminates the wait for new releases on VOD platforms.||Higher rental costs compared to standard rentals, which may deter some users.|
|The convenience factor. The ability to watch new releases without going to theaters offers users the utmost convenience.||Availability of new releases may vary, depending on licensing agreements and release strategies.|
|It eliminates most of the ancillary charges involved in theater visits like fuel expenses, parking charges, etc.|
6. Pay-per-view (PPV):
It is a VOD business model where users pay a fee to access specific live events, such as sports matches or concerts. Platforms offering live sports events operate on this model.
|Pros of Pay-per-view||Cons of Pay-per-view|
|Access to live events that may not be available through other VOD models.||Higher costs for individual events, especially for a premium or highly anticipated content.|
|No long-term commitments. It allows users to pay for only those events they are interested in.||Limited availability of events, as pay-per-view options may only cover some live events.|
7. Hybrid VOD models:
They combine multiple business models and offer the best of both worlds. They may offer a combination of subscription-based, transactional, or ad-supported options.
For instance, Hulu provides both ad-supported and ad-free subscription plans.
|Pros of Hybrid VOD Business Models||Cons of Hybrid VOD Business Models|
|Flexible payment options. This model lets users choose the plan that fits in their pocket.||Complexity in managing multiple VOD revenue streams. |
Sometimes, it may need additional resources and coordination.
|It offers a diverse income source for platform owners. They are no longer confined to one VOD revenue stream.||Potential for conflicting user experiences depending on the chosen model. For example, users on ad-supported plans may experience interruptions, while premium subscribers may enjoy ad-free, uninterrupted viewing.|
Benefits of a VOD Business Model
A video-on-demand business model offers a number of benefits for both platform owners and viewers.
1. Reach a Wider Audience:
A VOD business model allows platform owners to reach a wider audience. It virtually removes the limitations of conventional TV schedules. With VOD, viewers can access content anytime and also from anywhere.
For example, a TV show that airs at a specific time may not be accessible to everyone due to conflicting schedules.
However, with VOD platforms like Netflix or Hulu, viewers can watch the show at their own convenience.
This broader reach opens up opportunities to attract viewers globally and also increases the potential for content to become popular worldwide.
2. Increase Viewership and Engagement
Traditional broadcasters are increasingly turning to VOD streaming to increase viewership and user engagement.
Many exclusive video contents are now accessible on VOD platforms, owing to their unparalleled flexibility.
Moreover, VOD services enable viewers to customize their experience, choosing the program order and duration.
3. Generate Recurring VOD Revenue:
One of the primary benefits of a subscription-based VOD model is the generation of recurring revenue.
Platforms like Netflix charge a monthly or annual subscription fee to provide unlimited access to a content library.
This steady revenue stream allows content creators to plan and also invest in new productions. And this ensures a continuous flow of fresh content for subscribers.
However, retaining subscribers and offering engaging content is essential for sustained success.
4. Monetize your content in more than one way:
If you’re a content owner, you can use a VOD platform to monetize your content in a variety of ways.
Besides subscription fees, you deploy video monetization models like pay-per-view, ad-based, PVOD, catch-up TV, etc.
However, finding a balance between video monetization and also user experience is crucial. Because excess ads can take a toll on user experience.
5. Personalized User Experience
An online video platform offers unmatched flexibility and also a personalized viewing experience.
A typical user can choose what content they watch when they watch it, and how long they watch it for. So, the ultimate control lies with the user.
In addition, viewers can pick their favorite genres or shows and receive tailored recommendations based on their viewing history.
The video-on-demand business model has undoubtedly revolutionized the streaming landscape. Thanks to the unparalleled flexibility and unrivaled convenience it offers.
In this blog, we have extensively discussed various VOD business models, their pros and cons, and the benefits they offer.
And if you have an idea to build a streaming business using the VOD business model and also need help determining where to begin, feel free to contact us.
Or, schedule a personalized 30-minute call at the time of your convenience. We are here to help.
Our team can help you launch a fully-customized Video-on-demand platform with an industry-leading 50% faster deployment rate.
Frequently Asked Questions(FAQ):
A Video On Demand (VOD) business model involves providing on-demand content where viewers can access videos at their convenience. Users pay for individual videos by subscribing to a service or even by watching advertisements. It allows users to watch movies, TV shows, and other video content online.
The different types of VOD revenue models include subscription-based (SVOD), transactional (TVOD), and advertising-supported (AVOD). SVOD charges users a monthly fee for unlimited access, while TVOD involves pay-per-view or rental fees for consuming specific video content.
On the other hand, AVOD relies on advertising revenue to offer free access to content while driving revenue from pre-roll, mide-roll, and post-roll ads.
A VOD business model offers numerous benefits to platform owners. It includes generating recurring revenue streams, global reach, and data-driven insights.
It also maximizes content monetization and advertising opportunities, allowing for targeted marketing. Additionally, it improves customer retention via subscriptions, leading to long-term profitability.
From a consumer perspective, they enjoy numerous benefits like maximum flexibility, convenience, and access to a vast content library. They can choose what to watch and when without time constraints.
For example, subscription options often provide cost-effective access to a wide range of content, making it an attractive entertainment choice.
To choose the right VOD revenue model, consider your content library, target audience, and monetization goals. For example, SVOD suits those with extensive content catalogs, while TVOD is suitable for premium or exclusive content. On the other hand, AVOD can attract a broader audience but relies on ad revenue.
To monetize your VOD business, implement your chosen revenue model (SVOD, TVOD, or AVOD, PPV).
Secondly, focus on creating high-quality content that appeals to your target audience.
In addition, invest in marketing and user acquisition strategies. This way, you can improve user experiences and analyze data to refine your monetization strategies.