Monetization of OTT and IPTV
What is monetization in OTT/IPTV?
Like any other industry, the OTT and IPTV market has its structure and patterned business models. Market participants in the B2C segment include:
The art of turning the demand for the entertainment of the audience to revenue is the art of monetization. All market participants will influence the choice of how to monetize. The contemporary approach is to mix the payment tiers: create free bundles and upgrade with premium plans, make symbiosis of advertising and subscription models. All this is about creativity. And targets to keep the audience retained and engaged.
But as we are here to discuss the business approaches, let's highlight the most popular monetization models.
The prototypical approach includes 4 monetization models: SVOD, AVOD, TVOD, and Hybrid. But evolution adds new and new types to the list, such as vMVPD and FAST models which soon will become the drivers.
- The subscribers — they are the main link of the system and the target of the business.
- Content aggregators and TV channels whose main function is to provide and create content to the audience.
- Operators: ISP, MSO, Cable companies, Mobile operators and independent OTT services. They attract content from the vendors above and launch OTT platforms using the competitive video platform software as Telebreeze Video Platform.
- Distribution stores like Smart TVs shops of popular TV manufacturer brands (Samsung, LG), App Store or Google play, or Roku TV channels — here the owner of OTT service comes to distribute his branded platform.
- Those who are buying the attention of the audience to promote their stuff — advertizers and business owners.
The art of turning the demand for the entertainment of the audience to revenue is the art of monetization. All market participants will influence the choice of how to monetize. The contemporary approach is to mix the payment tiers: create free bundles and upgrade with premium plans, make symbiosis of advertising and subscription models. All this is about creativity. And targets to keep the audience retained and engaged.
But as we are here to discuss the business approaches, let's highlight the most popular monetization models.
The prototypical approach includes 4 monetization models: SVOD, AVOD, TVOD, and Hybrid. But evolution adds new and new types to the list, such as vMVPD and FAST models which soon will become the drivers.
Types of monetization models in OTT/IPTV
SVOD
SVOD stands for subscription video on demand. This refers to video streaming services when users must subscribe to in order to access the content. SVOD is the most popular and the simplest way to monetize the service. But one needs to take into attention the specifics of the audience and the VOD library of the content. For example, SVOD tends to attract younger and higher-income users which can be seduced by libraries with more exclusive titles in it. Another challenge may become rigid brand's competitiveness and so called streaming fatigue. For the first the operator will need to invest permanently not only to the content but also to the brand development. For the second — go all-out to fight the churn rates
Anyway, this is the most popular model. The operator may create different packets of content or different plans for streaming devices, and offer them to subscribers depending on the marketing strategy, so-called subscription-based plans.
Example:
Netflix, Amazon Prime Video, Disney+
AVOD
AVOD stands for Ad-based Video on Demand. This type of service refers to ad-based video on demand that is free to its consumers. It makes it attractive to the growing number of subscribers who are overwhelmed by the number of streaming services to choose from.
Here, ad revenue is used to offset production and hosting costs. The operator may take advantage of the low entry threshold for subscribers, which leads to a rapid increase in coverage for subscribers who do not want to pay for VoD consumption. Or monetize "old" content. The advertising model is faster and easier to adopt than the subscription service model but requires a lot of work with advertisers. Once the channels of ads vendors are settled then it is easier to manage the monetization.
To mitigate negative impact to the viewing experience, the operator may use new technologies of ad insertion and smooth transition of ad breaks.
Example:
YouTube, Pluto, Tubi
TVODTVOD stands for Transactional Video on Demand and includes pay-per-view of each individual content, the so-called pay-per-view (PPV - pay-per-view). In the case of a purchase of content, it can be given for so-called temporary use. So the operator gives the opportunity for the subscribers to pay for the TV shows and movies they want to see, not for the bundles or plans.
It is easy to deliver pay-per-view video to the subscribers and has many variants for up-sale - one may start with a base price for a couple of hours and then offer tiered services. The challenge is that the pay-per-view model will require a professional streaming platform that supports TVOD. Also it may be more difficult to keep the audience under the control and may not work as the only revenue source.
The model works especially well for niche or event streaming services.
Examples:
Xfinity (Comcasts sport events), ITsART (streaming platform for Italian culture), Fandango Now
Hybrid
Hybrid model assumes combining two or more of the models above. For example, the operator could be using an ad-based monetization model for their entire video library except for their premium shows, which they could offer as PPV. Some platforms may even combine all three of these models. Or as a part of the retention policy, the operator may suggest a subscriber AVOD plan after SVOD is being canceled.
Example:
Some services like Hulu or Peacock use a hybrid model, combining different types of revenue models. Peacock is a streaming service with three subscription tiers.
vMVPD and FASTs
Two more models are worth mentioning as they grow popular in the OTT business. These are Virtual Multichannel Video Programming Distributor (vMVPD) and free ad-supported streaming TV services (FASTs).
vMVPD is an OTT service that provides their viewers or subscribers with VOD streaming content and linear content from broadcast channels. vMVPD and SVOD services may look similar but they differ when it comes to the content delivered. The main difference is that they appeal to different consumption behaviors.
Link for reading:
TV watching is going back to the future. More people want to watch linear. https://www.nexttv.com/features/channel-flipping-makes-a-comeback?ct=t(streaming-wars-08-23-21)
FAST is very much the same as AVOD, but instead of ad-supported on-demand content, it is ad-supported live TV content. This can be on-demand also, but increasingly it is linear channels with dynamically inserted ads that provides ad-supported video content for free to the audience.
More content owners are using their older content libraries to build niche FAST channels as both a source of revenue, and a vehicle for driving subscriptions to more premium content. The main advantage of the FASTs is that they are closer to traditional broadcast TV but have more potential to innovate and smooth out the advertising experience. This is of the biggest value regarding how the viewer's behavior has changed.
For broadcasters who want to change from traditional over-the-air linear but not fall into subscription video on demand platforms, the best option is to reach more streaming devices or locations. Today FASTs include Pluto TV, Samsung TV Plus, The Roku Channel, and many others.
Link for reading: Why More Advertisers (and Consumers) are Going F.A.S.T. http://comcastadvertising.com/insights/free-ad-supported-tv-report.html
SVOD stands for subscription video on demand. This refers to video streaming services when users must subscribe to in order to access the content. SVOD is the most popular and the simplest way to monetize the service. But one needs to take into attention the specifics of the audience and the VOD library of the content. For example, SVOD tends to attract younger and higher-income users which can be seduced by libraries with more exclusive titles in it. Another challenge may become rigid brand's competitiveness and so called streaming fatigue. For the first the operator will need to invest permanently not only to the content but also to the brand development. For the second — go all-out to fight the churn rates
Anyway, this is the most popular model. The operator may create different packets of content or different plans for streaming devices, and offer them to subscribers depending on the marketing strategy, so-called subscription-based plans.
Example:
Netflix, Amazon Prime Video, Disney+
AVOD
AVOD stands for Ad-based Video on Demand. This type of service refers to ad-based video on demand that is free to its consumers. It makes it attractive to the growing number of subscribers who are overwhelmed by the number of streaming services to choose from.
Here, ad revenue is used to offset production and hosting costs. The operator may take advantage of the low entry threshold for subscribers, which leads to a rapid increase in coverage for subscribers who do not want to pay for VoD consumption. Or monetize "old" content. The advertising model is faster and easier to adopt than the subscription service model but requires a lot of work with advertisers. Once the channels of ads vendors are settled then it is easier to manage the monetization.
To mitigate negative impact to the viewing experience, the operator may use new technologies of ad insertion and smooth transition of ad breaks.
Example:
YouTube, Pluto, Tubi
TVODTVOD stands for Transactional Video on Demand and includes pay-per-view of each individual content, the so-called pay-per-view (PPV - pay-per-view). In the case of a purchase of content, it can be given for so-called temporary use. So the operator gives the opportunity for the subscribers to pay for the TV shows and movies they want to see, not for the bundles or plans.
It is easy to deliver pay-per-view video to the subscribers and has many variants for up-sale - one may start with a base price for a couple of hours and then offer tiered services. The challenge is that the pay-per-view model will require a professional streaming platform that supports TVOD. Also it may be more difficult to keep the audience under the control and may not work as the only revenue source.
The model works especially well for niche or event streaming services.
Examples:
Xfinity (Comcasts sport events), ITsART (streaming platform for Italian culture), Fandango Now
Hybrid
Hybrid model assumes combining two or more of the models above. For example, the operator could be using an ad-based monetization model for their entire video library except for their premium shows, which they could offer as PPV. Some platforms may even combine all three of these models. Or as a part of the retention policy, the operator may suggest a subscriber AVOD plan after SVOD is being canceled.
Example:
Some services like Hulu or Peacock use a hybrid model, combining different types of revenue models. Peacock is a streaming service with three subscription tiers.
vMVPD and FASTs
Two more models are worth mentioning as they grow popular in the OTT business. These are Virtual Multichannel Video Programming Distributor (vMVPD) and free ad-supported streaming TV services (FASTs).
vMVPD is an OTT service that provides their viewers or subscribers with VOD streaming content and linear content from broadcast channels. vMVPD and SVOD services may look similar but they differ when it comes to the content delivered. The main difference is that they appeal to different consumption behaviors.
Link for reading:
TV watching is going back to the future. More people want to watch linear. https://www.nexttv.com/features/channel-flipping-makes-a-comeback?ct=t(streaming-wars-08-23-21)
FAST is very much the same as AVOD, but instead of ad-supported on-demand content, it is ad-supported live TV content. This can be on-demand also, but increasingly it is linear channels with dynamically inserted ads that provides ad-supported video content for free to the audience.
More content owners are using their older content libraries to build niche FAST channels as both a source of revenue, and a vehicle for driving subscriptions to more premium content. The main advantage of the FASTs is that they are closer to traditional broadcast TV but have more potential to innovate and smooth out the advertising experience. This is of the biggest value regarding how the viewer's behavior has changed.
For broadcasters who want to change from traditional over-the-air linear but not fall into subscription video on demand platforms, the best option is to reach more streaming devices or locations. Today FASTs include Pluto TV, Samsung TV Plus, The Roku Channel, and many others.
Link for reading: Why More Advertisers (and Consumers) are Going F.A.S.T. http://comcastadvertising.com/insights/free-ad-supported-tv-report.html
Additional monetization features
Marketing of the streaming service must find ways to monetize and diversify the monetization strategies. Here are several tools from Telebreeze which may be helpful.
Test plans
If you are editing the packages in your SVOD service, some video platforms have the option to create test plans. Test plans allow operators to attract more subscribers with trial access and then promote paid offers to them.
Online shop
OTT middleware has the possibility to operate an online shop where the owner of the platform or advertisers may sell the merch or other relevant goods and services.
Test plans
If you are editing the packages in your SVOD service, some video platforms have the option to create test plans. Test plans allow operators to attract more subscribers with trial access and then promote paid offers to them.
Online shop
OTT middleware has the possibility to operate an online shop where the owner of the platform or advertisers may sell the merch or other relevant goods and services.
Platform-based pricing
The streaming service may deliver the content to a number of devices or limit the streaming devices by editing special payment plans. This strategy was used first by Netflix when entering the local markets. Video platforms offer the possibility to set the platform-based parameters to the payment plans.
The streaming service may deliver the content to a number of devices or limit the streaming devices by editing special payment plans. This strategy was used first by Netflix when entering the local markets. Video platforms offer the possibility to set the platform-based parameters to the payment plans.
Virtual operator model
Companies like Telebreeze provide an opportunity to monetize the B2B inventories of the OTT/IPTV service. The feature allows users to add sub-operators (or virtual operators) to the net and share with their techs and content for agreed payment. This is how to attract independent network owners to the main operator's ecosystem, thus giving opportunities for both sides to scale up. Read more about the virtual operator model here.
Companies like Telebreeze provide an opportunity to monetize the B2B inventories of the OTT/IPTV service. The feature allows users to add sub-operators (or virtual operators) to the net and share with their techs and content for agreed payment. This is how to attract independent network owners to the main operator's ecosystem, thus giving opportunities for both sides to scale up. Read more about the virtual operator model here.
Conclusion
It must be said that contemporary streaming services need to have flexible marketing regarding monetization and distribution opportunities. Now-to-days approach is to combine monetization models and play with them to achieve the goals of attracting and retaining the subscribers.
Making decisions about monetization opportunities one should consider 1) the customer's journey stage in the sales funnel 2) the terms and agreements with advertisers and content owners 3) the status of the owned inventories (the content library - its size and quality) 4) the brand strength 5) investment budget to support churn rate struggle and content library development.
The OTT/IPTV platform and relevant software which is going to be used should combine elements of traditions and innovation, as consumption behavior is challenging. So one needs to ensure that the software is ready to make all the monetization models work together and has potential to follow the future marketing trends. Once it is settled it is good to be flexible and test new models to reach your also ever-changing audience.
Making decisions about monetization opportunities one should consider 1) the customer's journey stage in the sales funnel 2) the terms and agreements with advertisers and content owners 3) the status of the owned inventories (the content library - its size and quality) 4) the brand strength 5) investment budget to support churn rate struggle and content library development.
The OTT/IPTV platform and relevant software which is going to be used should combine elements of traditions and innovation, as consumption behavior is challenging. So one needs to ensure that the software is ready to make all the monetization models work together and has potential to follow the future marketing trends. Once it is settled it is good to be flexible and test new models to reach your also ever-changing audience.