In order to decide which video monetization model will be best for you, you must have a very strong understanding of your audience and your content library.
So let’s dive into the three primary video monetization models and review a few examples of content and audience profiles matched with their best-fit monetization model.
** Note that “VOD” stands for “Video on Demand”, which essentially means viewers are able to choose what, where, and when to watch.
Subscription-based VOD, or SVOD, is a subscription agreement between you as the video provider and the viewer who subscribes to watch your content without viewing or access limits. Think Netflix. Subscribers make a monthly payment in order to have access to all of your content, and this monthly payment automatically renews unless otherwise cancelled.
This type of monetization model provides a recurring revenue stream but the focus needs to be not only on subscriber acquisition but also retention. Businesses that choose to pursue the SVOD model have to regularly update their content at specific intervals to justify a continued subscription from their audience in order to retain their subscribers.
A great way of understanding if subscription based monetization is right for you is forecasting your revenue. We’ve developed a powerful SVOD Revenue Forecast Spreadsheet based on new subscribers, monthly churn, costs and other important variables. Just copy the spreadsheet, and plug in your own numbers.
Download the SVOD Revenue Forecast Spreadsheet to understand how much money you can make with a subscription based video business.
Transactional VOD, or TVOD, involves a free sign up for the service but with an a la carte payment, such as purchase or rental, to watch specific content. This is similar to services that have a collection of movies, series, or sports offerings, like Apple iTunes or pay-per-view events.
This type of monetization model offers content at various prices with the goal of keeping users as repeat purchasers on their platform. Whereas SVOD is like an all-you-can-eat buffet, TVOD is more like a traditional restaurant. The TVOD pricing strategy is contingent upon the content you are offering and the amount your viewer are willing to pay.
While TVOD businesses may earn a higher revenue per view, they don’t have the same retention and revenue security built into their service as an SVOD service
Advertising-based VOD, or AVOD, provides free to watch content for viewers that is monetized through video advertising. Instead of having your viewers pay, it’s now the advertisers or ad networks who pay, typically on a per-thousand basis.
AVOD can be a popular form of monetization because it is easy to get up and running but requires audience scale to generate significant revenues.
While the other monetization models involve a retention-based sales component, AVOD requires getting as many eyes as possible. Instead of retaining paying subscribers, AVOD retention involves volume with the goal of having a consistent stream of people watching your videos (and thereby seeing the advertisements). When it comes to premium content, the AVOD model isn’t as easily justified unless that premium content is being viewed by millions.
Which Monetization Model Is Right for Your Business?
If executed correctly, any of these monetization models could yield significant revenue for your business. Each business model comes with its own type of maintenance or curation requirements, as well as its own strategy for growth. There are even hybrid models where customers can watch videos with advertisements for free and then upgrade to a paid subscription for full catalog access. Read more about Hybrid models in part 2 of this series.
Here is an outline of content and audience profiles that align best with specific monetization models to help you decide which might be a good fit for your video business:
Vertical networks that have focused content and either create or publish videos on a frequent basis are excellent candidates to use an SVOD model. The format is usually longer format content; greater than 20 minutes and usually closer to an hour or more in length. Live streaming on a frequent schedule with archive VOD library also lends itself to providing access to subscribers.
Content libraries where publishing is less often or static and where the content is longer, premium content can look to leverage a TVOD model. This can either be PPV (purchase) or be providing access to videos by a time limited rental. The content focus can be either focused or broad and consist of multiple genres. TVOD can be used for libraries which are smaller but still consists of longer format premium content.
For AVOD to be successful, a large audience is needed to generate significant views and advertising impressions. This model is suitable where the library consists of shorter form content that appeals to a broader audience. Advertising is often used where it would be difficult to gate content and either use a paywall or only provide access to subscribers.
Learn more about the Hybrid model and effectively maximizing revenue in Part 2 of this series.