Over-the-top video streaming, or OTT, is on the rise in a big way. In fact, the streaming services industry is set to reach almost $125 billion in revenue by 2025. Besides Netflix and its competitors, traditional broadcasters and huge content creation companies like Disney - plus a host of unexpected businesses - are jumping into the fray.
Even small businesses can create their own OTT platform. But while it may be a no-brainer to get into OTT, pricing such a service is a concern. Here, we’ll go over some basic OTT pricing model guidelines, which begins with deciding how and who to charge.
OTT Business Models
OTT platforms lend themselves to a variety of business models. Wildly creative ideas aside, the main possibilities include:
- Ad-based video on demand (AVOD) – YouTube may be the biggest example. Barriers to entry are low for customers, usually free, and platform owners make money by selling highly targeted ad time in-line, or ad-space in the form of banners or other still graphics.
- Subscription-based video on demand (SVOD) – The best way to make the most money per customer, the SVOD model relies on monthly customer subscriptions. Users could get unlimited access for one price, or providers can set up tiered services to offer more pricing options.
- Transactional video on demand (TVOD) – Also known as pay-per-view, the TVOD model charges customers on a one-time basis either to rent content for a short time or buy permanent access to single pieces of content.
All of these models can be applied to live streaming content as well, and of course, many services employ a hybrid model to maximize ROI.
As in any business venture, a realistic and data-driven look at your platform’s current and potential value from a customer’s point of view will help you arrive more quickly at an OTT pricing model. Some things to consider out of the gate include:
- Purpose of content – What does your content do?
- Audience – Who is your content for? For example, if your audience is used to getting content for free, an SVOD model might not work.
- Competition – Is there anyone else providing a similar service and if so, what are they charging?
- Overhead – Can you afford to undercut the competition?
- Brand recognition – Are you just starting out, or do you have a large, loyal following?
- Cross-collateralization – Will your OTT platform serve partially as a loss-leader or promotional tool to drive real-world sales, or does it need to stand on its own two feet?
As alluded to above, the competition – especially big players – set market expectations when they establish pricing. Unless you’re in a unique niche or carry enough weight to set your own precedent, you’ll likely need to set prices close to what the competition charges. To help with that, here are the pricing structures for some major OTT players.
Netflix uses a tiered model. For $8.99 a month, viewers can watch unlimited programming on one screen at a time in HD. The middle tier, $13.99, allows unlimited viewing on up to two screens at a time. The top tier offers four screens at a time and adds ultra HD for $15.99 per month.
Disney+ costs only $6.99 a month for unlimited access to their extensive library of movies and television shows, which includes the National Geographic, Marvel, and Star Wars franchises. For $13.99 a month, users can bundle this library with ESPN+ and HULU.
Hulu’s hybrid, the tiered model is $5.99 per month for a basic plan with advertisements, with an ad-free option at $11.99 per month. HULU + Live TV ads live television streaming at $64.99 a month.
Prime video is partially cross-collateralized with Amazon Prime itself. Prime members have access to a limited number of on-demand and exclusive titles included with their $12.99 per month membership and can pay for TVOD access to extra content.
What OTT Pricing Model Will You Choose?
Once you’ve decided on an OTT pricing model for your service, there’s no better time than now to jump in. If you haven’t already built your OTT platform, contact MAZ today to get started.