Choosing the Right OTT Model

Digital Landscape

In today’s increasingly digital era, over the top (OTT) streaming is becoming more important than ever before. The ability to stream content across a multitude of devices has been a key factor in content owners’ change of focus. One-by-one, content owners are implementing OTT services simply to keep up with the trends of consumers, and their own competitors. Content owners must then determine what type of OTT service is the best fit for their specific content and programming. A prime advantage of delivering content over-the-top is the various business models available to monetize each OTT service - Subscription (SVOD), Ad Supported (AVOD) and Pay-Per-View.

What are the benefits of each monetization model?

Pay-Per-View is a model that works best when the content being shown is guaranteed to attract customers. This is why pay-per-view events are usually highly exclusive, or a one-time event. Boxing is a prime example of a sport that shows its most coveted events via pay-per-view. There are only a few marquee boxing matches per year, so a PPV model is more appealing to both viewers and content owner -  unlike sports with longer seasons and matches which may have the luxury of signing TV and streaming deals for their continuous content. A key advantage of a pay-per-view model is that you have an opportunity to increase the audience reach of your live event. Say you have a concert lined up in New York City, you have the ability to deliver content in two ways - onsite and digitally. The benefit of this is that you can separately market to those within the NYC metro area who are able to attend in person and those who cannot. To control who can purchase which type of ticket, you can enable geographic restrictions within a certain distance from your live event, so that your digital ticket does not cut into your venue dollars. The drawback with a pay-per-view only model is that sometimes it can be difficult to predict viewership numbers for an event, which makes it challenging to make revenue predictions.[1]

The next OTT model - Subscription or SVOD (subscription video on demand) is one of the most popular models in digital streaming today, with companies like Netflix, Hulu and other dominant forces adopting this model. Similar to pay-per-view, choosing a subscription-based service depends on exclusivity, consistency and popularity of the content. When engaging in a subscription-based model, you must be confident that your targeted audience will be willing to pay a recurring fee in exchange for content. We see viewers opt-in to this model when the content is of interest to them, and there is likely no other place to access the content.[2] An SVOD service, especially when it comes sports, is primarily interested in appealing to the hardcore fan. When choosing this route as a sports content rights owner, you must ensure that you have a strong customer/subscriber base to reduce any type of churn - which is one of the more common challenges with this model.[3] However, another main benefit of implementing an SVOD model is that it is easier to predict revenue projection due to subscribers incurring a standard fee.[4]  When it comes to long form content on OTT services (TV shows and movies),  consumers prefer to pay a recurring fee to have choices from a larger video catalog.[5] 

Lastly, there is Ad-Supported or AVOD (ad-supported video on demand). A strong advantage of implementing an AVOD model is that the service is essentially free, which in the end can attract more viewers. Due to this, your market location is extremely important in order to drive revenue for your service as you can tailor advertisements based on business rules such as geographic region to further drive CPM (cost per thousand) and grow your digital business. Content displayed on AVOD services tends to be short form and less exclusive, due to the fact that the viewer does not face a fee for watching the content.[6]

When choosing the OTT business model that works best for you, first determine what type of content you wish to deliver. This, for the most part, will help dictate the model that should be adopted. If you feel your content delivery strategy falls into two or more areas, don’t worry - you can take a hybrid model approach, ultimately giving your viewers the choice. For example, we often see many SVOD services allow a free trial period in the form of AVOD to help drive subscriptions, with the hope that viewers will convert from being a free user to a paid user. There are many benefits of becoming a paid user over free user, such as access to exclusive and original content, and no commercial or ad breaks - just to name a few. Some services even implement a combination of all models, offering an AVOD model in the form of a free trial, SVOD for exclusive access to content and on-demand catalog, and PPV for a selection of live events.

The multitude of options available to rights owners increases the likelihood of success for your OTT service given the benefits of each respective model, as well as the benefits of a hybrid model.

Sources: 

[1] [2] [3] [4] [5] [6]