With the growth of over the top (OTT) streaming, more and more people are cutting the cord and enjoying media through alternative means. Consumers have more ways than ever before to watch shows, movies, classes, and other types of broadcasts.
Businesses and organizations with media to share need to find the most advantageous way to distribute – and monetize – that content. With the right distribution and monetization model, you can scale a profitable business. And, with the wrong model, you might leave money on the table.
Choosing the right video-on-demand (VOD) monetization model could make or break your business. You have options like AVOD, SVOD, and TVOD to pick from—and each has unique pros and cons.
Select the right one, and you can scale a profitable business. Choose wrong, and you might leave money on the table.
So, what’s the difference between AVOD, SVOD, and TVOD, and which is the suitable monetization model for you? Below, we’ll break down each VOD service and help you pick the best option.
What’s the Difference Between AVOD, SVOD, and TVOD?
Here’s an at-a-glance view of the differences between AVOD, SVOD, and TVOD:
- AVOD (Advertising Video On Demand): Makes money through advertisements by allowing viewers to watch videos for free with ads before and during the content. This method works for businesses with large audiences and high viewer retention. Less competitive since viewers can bounce between videos without losing access or paying extra.
- SVOD (Subscription Video On Demand): Makes money through subscription plans where viewers spend a flat monthly rate to access a library of on-demand content. Users benefit by accessing a large volume of videos they can watch at their leisure, while businesses profit by earning recurring revenue. More competitive since viewers need to be intentional about which subscription plans they purchase.
- TVOD (Transactional Video On Demand): Makes money by demanding purchase or rental prices on a per-content basis. TVOD models work great when you have early access or exclusive content that your viewers are willing to pay a premium to watch. TVOD content converts easily into SVOD once its upfront novelty diminishes.
Let’s dive deeper.
What Is AVOD (Advertising Video on Demand)?
Advertising video on demand (AVOD) is a video monetization model that allows viewers to watch content for free in exchange for ad breaks before, during, and after the content. Many organizations are turning AVOD to provide audiences with free, on-demand content, while still profiting from their viewership.
Instead of paying with their wallet, consumers pay with their time by watching advertisements before and during the video content. This business model is used on popular video platforms like YouTube and Facebook Watch.
Many premium streaming services offer an AVOD option as an entry-level tier to their SVOD subscriptions and use ad revenue to offset lower prices. For example, Hulu’s cheapest streaming option contains ads, and Netflix plans to include a more affordable ad-supported plan in 2023.
Around 59% of consumers want access to ad-supported streaming video options to decrease their entertainment bills.
YouTube is one of the best known AVOD platforms. Audiences need to watch ads before they can watch a video, and if the video is long enough, it will usually be interrupted by more ads.
Tubi is another example of a platform that offers the free streaming of movies and shows from major studios accompanied by ads.
Pros and Cons of AVOD Monetization
Is an AVOD monetization model right for your business? Consider these benefits and downsides before making that decision.
Pros of AVOD
With an AVOD model, you can give viewers entertainment for free, or at a lower rate than if you were using a subscription-based or pay-per-view model. With audiences replacing their cable bills with multiple paid streaming services, AVOD is an appealing option for consumers. In fact, nearly three in five people are open to watching ads to reduce their entertainment bills.
Because of affordability to consumers, an AVOD model is great for customer acquisition. When customers don’t have to pay to enjoy your content, it’s easier to persuade them to come to your platform.
AVOD is also a good basis for a freemium model, in which you lure viewers in with your free offerings, delight them with great content, then upsell them on paid premium content through subscription fees or pay-per-view models without ads.
Finally, advertising video on demand monetization gives you an opportunity to build relationships with advertisers. These relationships can go beyond mid-video ads and could develop into sponsorships and partnerships for creating new content.
Cons of AVOD
The biggest downside of an AVOD model is that it can be difficult to retain customers. Because viewers aren’t financially invested in your platform, they can easily bounce from video to video and competitor to competitor whenever they want.
Additionally, people may not want their viewing experience to be interrupted by ads. To appease those customers, it’s best to offer a paid version of your AVOD services to ensure you’re not losing viewers or leaving money on the table.
Most AVOD-based platforms tend to offer less desirable, or outdated, content, which is part of the challenge of attracting and retaining viewers.
Furthermore, you usually need a very high volume of views to be able to generate revenue. You can typically make more per customer with an SVOD or TVOD model.
While building relationships with advertisers can be beneficial, it also requires a lot of time and resources, and builds pressure. Advertisers who aren’t happy with your viewership or results from being placed on your channel may leave, meaning you’ll have to develop new relationships.
When to Monetize with AVOD
An advertising-based video on demand monetization model is best for businesses that have large, loyal audiences.
For example, a traditional broadcaster like ABC already has brand recognition and loyalty for creating great TV shows over the years. With the advent of over-the-top streaming, ABC can retain audiences as they cut the cord by offering the free viewing of their new and archival shows with ads on their website.
Who Uses AVOD?
Lots of platforms are using AVOD models to hook in viewers with free entertainment. Here are several examples to look to for inspiration:
- YouTube: Online video platform YouTube monetizes and lets creators monetize content by playing ads before, during, and after videos. Nearly all content on YouTube is available to audiences for free thanks to this business model.
- Facebook Watch: Facebook Watch is the place where Facebook users can watch content uploaded by friends and brands on the social media platform, as well as where they can watch original shows produced by Facebook. Facebook makes these shows available for free by accompanying them with ads.
- Tubi: Unlike Netflix and Hulu, which have recently started giving customers a cheaper subscription rate in exchange for serving ads, Tubi’s movie and show library is 100% free to audiences thanks to ads they encounter during their programming.
- Roku Channel: Smart TV brand Roku has its own streaming service: Roku Channel. People can watch Roku originals and other entertainment for free by signing up for a free Roku account and watching ads during the shows and movies.
- Peacock: Peacock, NBCUniversal’s streaming platform, lets audiences consume some of its entertainment for free if they have a Peacock account and are open to seeing ads.
Use Cases for AVOD
An AVOD monetization model is a worthwhile option to explore, but it’s better suited for some scenarios than for others. Here are several use cases for which an advertising video on demand model is ideal:
- If you don’t have enough content to be able to charge a monthly subscription, AVOD monetization is a great option for generating revenue while you’re building up a content library. For example, if you run a fitness studio and are building your library of at-home video workouts, you can make your on-demand, online classes available for free with ads until you have a dozen or so ready to go.
- AVOD is a good way to make money from live streaming events. Monetize live streams with ad breaks. Because of the limited-time nature of a live event, you can generate a lot of viewers if you market the event sufficiently, which can boost advertising revenue.
- After a live streaming event, you can make the playback available for free streaming afterwards with ad breaks.
- Let audiences sample a show on your platform by making the pilot available for free viewing with ad breaks, then require audiences to sign up for your SVOD service or purchase or rent the rest of the season to finish it.
While SVOD and TVOD are popular monetization models, there are several occasions during which AVOD monetization just makes more sense.
How JW Player Supports AVOD
As a complete video platform, JW Player goes beyond AVOD, SVOD, and TVOD monetization models to help you attract an audience and keep them engaged for continued, predictable revenue. With fast video delivery at top quality, JW Player’s streaming services let your viewers consume your content on the device that’s most convenient to them. This platform will even help you optimize your fill rate and CPMs and keep viewers watching, leading to more revenue for you.
What Is SVOD (Subscription Video on Demand)?
SVOD is a video monetization model where users pay a recurring subscription fee to access a library of streamable video content.
Businesses benefit from this model by having consistent, recurring revenue from subscribers, while customers benefit from having access to a large library. Because SVOD is more expensive than AVOD platforms and presents a longer term financial commitment than a pay-per-view basis for customers, SVOD-based businesses have to invest in producing fresh content to stay competitive and provide value for subscribers.
SVOD is the most popular video-on-demand model, and it’s also the most competitive. SVOD platforms saw a surge during the COVID-19 pandemic, leading 85% of consumers to subscribe to at least one paid streaming video service.
Netflix is almost synonymous with SVOD. Other major platforms include Amazon Prime Video, Disney+, Hulu, and HBO Max. Even big-time entertainment producers and broadcasters like Paramount (Paramount+) and NBC (Peacock) have shifted from cable broadcast to live streaming and SVOD.
While SVOD provides recurring income, winning over subscribers isn’t easy. With so many different SVOD streaming options, consumers have had to become pickier with which services they purchase. While you can earn big payouts on a single piece of TVOD content, you’ll have to regularly publish the best-of-the-best videos to keep consumers subscribed to your SVOD service.
Pros and Cons of SVOD Monetization
Could SVOD monetization be right for your business? These pros and cons can help you decide.
SVOD services that offer a free trial have high conversion rates (58%), which means nearly three in five tentative customers turn into paying customers when the trial ends. This conversion rate shows that a free trial is a successful method for attracting customers.
Because SVOD is one of the most popular monetization models, customers will be receptive to and comfortable with committing to a subscription to access your content library.
With an SVOD model, your business gets a regular injection of revenue from customers each month, which can make it easier to manage cash flow. This also means that rather than trying to attract customers every time you release a new show or movie, like you would with AVOD services or TVOD models, you can focus resources on creating new content to retain subscribers.
Finally, SVOD paywalls gate content and create exclusivity. Exclusivity creates a feeling of scarcity, which is a powerful marketing psychology tool. When something is exclusive or scarce, it seems more valuable, which makes customers want to subscribe.
While SVOD-based businesses have relatively high conversion rates after a free trial, they still fail to convert 42% of customers. This means that two in five customers could be bouncing around from free trial to free trial on other platforms, or creating new accounts on your platform and abusing the trial. Issues like this might have been the reason Netflix dropped its free trial in the U.S.
Customer churn is a challenge for SVOD services. An SVOD model works great when you can retain customers. However, most SVOD OTT companies let customers sign up without a commitment, which means they can cancel their subscriptions at any time. With no built-in way to retain customers and revenue, SVOD companies have to constantly create new content to keep customers engaged. Producing or licensing shows, movies, classes, games, etc. is very expensive.
Another challenge SVOD companies have faced is password sharing, which leaves money on the table. Many subscribers to Hulu or Netflix, for example, share their login information with family and friends to avoid having to pay for their own subscription. These providers attempt to combat this by limiting the number of devices on which their content can be watched at the same time.
The downside of SVOD being such a popular business model is that there is so much competition in the space. With few subscribers having unlimited entertainment budgets, they have to decide which of dozens of subscription-based platforms they’re going to join.
Because there’s so much competition in the SVOD sphere, and customers have limited budgets, content creators have to keep their prices competitive. This need places a limit on how much you can charge customers for your product. If you’re spending a lot more on your content than your competition but can’t get away with charging much more, you could go bankrupt.
When to Monetize with SVOD
A subscription-based video on demand monetization model is best for companies and organizations that have a large library of niche content and/or have the resources to constantly create new content.
As one of the most popular OTT monetization models, SVOD is nearly synonymous with streaming. Many companies use SVOD to delight customers and keep them coming back for more. Look to these subscription services for inspiration:
- Netflix: Netflix is one of the pioneers of SVOD OTT streaming. The media company has a massive library of movies and shows that includes both original productions and licensed content. Ad-free plans start at $9.99 per month.
- Hulu: Considered one of Netflix’s top competitors, Hulu is the SVOD platform that first introduced a hybrid AVOD-SVOD model to cut subscription costs. Hulu also produces original content and has access to ABC’s programming. Ad-free plans start at $14.99 per month.
- Amazon Prime Video: Ecommerce giant competes in the SVOD streaming space with Amazon Prime Video. Subscribers can watch original and licensed content with a standalone subscription, as part of their Prime membership, or by paying per view for shows and films that aren’t included in Amazon’s library. A standalone Prime Video subscription costs $8.99 per month.
- HBO Max: Known for producing some of the most highly acclaimed programming, HBO entered the SVOD OTT space several years ago with HBO Max. The platform includes HBO originals, Max originals, and licensed programs. Ad-free subscriptions start at $15.99 per month.
- Disney+: Media monolith Disney made a big commotion when it entered the streaming space. It charges $10.99 per month for ad-free access, and also has deals on bundles with Hulu and ESPN.
- Apple TV+: Unlike other SVOD streaming platforms, Apple TV+ only offers original, exclusive content, like Ted Lasso and the Morning Show. Ad-free subscriptions start at $6.99 per month, which is less than competitors to make up for its smaller library.
Use Cases for SVOD
SVOD monetization is best suited for the following scenarios:
- You already have a large library of existing content.
- You are creating new content regularly, which you can use to retain customers.
How JW Player Supports SVOD
- As a comprehensive video platform, JW Player surpasses SVOD, AVOD, and TVOD to help you lure in an audience and keep them coming back for more predictable, regular revenue. With fast, high-quality video delivery, JW Player’s streaming services let your customers watch your content on whichever device is most convenient for them. JW Player also optimizes your fill rate and CPMs to keep audiences watching, resulting in more sales for you.
What is TVOD?
Transactional video on demand (TVOD) monetization is a pay-per-view model that allows customers to pay a one-time fee to watch a video.
TVOD lets consumers buy content on a pay-per-view basis rather than a subscription model. Viewers can purchase permanent access to a video product or rent it for a limited time (or limited views) for a fraction of the cost.
Pay-per-view content is often easier to market than SVOD or AVOD programming. When you add a pay-per-view title to your library, you can promote it on its own, rather than promoting your entire library to attract customers. If a TVOD customer has a good experience with your platform, they’ll likely come back for more.
TVOD models use exclusivity and recent releases to maximize income. Once the initial stream of new viewers declines, TVOD services can release the content into their library of SVOD or AVOD to repurpose its value. You can find examples of TVOD content on Disney+ new releases, Prime Video, and hotel televisions.
Pros and Cons of TVOD Monetization
Not sure if a TVOD monetization model is right for your business? Let these benefits and potential downsides inform your decision.
- Many OTT providers use a pay-per-view basis for new releases. The novelty of this content inherently attracts customers.
- TVOD is a great monetization model if you have unique or exclusive content. For example, most televised WWE wrestling events are only available through a pay-per-view model. PPV.com charges around $40 for access to a wrestling match that’s exclusively available through their platform. Because there’s no other way to watch these matches, customers have no choice but to pay for them.
- Each new release you add to your TVOD library presents a new marketing opportunity for growing your audience. You can target the specific demographic of people who would be interested in the new release, rather than marketing your entire library. When these first-time customers have a good experience on your platform, they’ll be happy to come back for more.
- TVOD rentals typically cost less than SVOD platforms on average, making rentals appealing to price-conscious customers.
- The biggest downside of the TVOD model is that you’re charging customers a one-time fee, so the model has no recurring revenue built in (unlike a subscription-based model). That means you have to constantly promote your programming and add new content to keep customers coming back.
- If you have the same pay-per-view content as your competitors, you’ll need to work hard to have customers come to you. If you offer the same pricing, you’ll have to attract customers in other ways, such as by providing a great user interface and faster streaming.
- Oftentimes, purchasing a movie through a TVOD model is more expensive to customers than an SVOD subscription. That can make buying perpetual access to one piece of content seem like a bad value compared to having access to an entire library of content.
Need some real-world inspiration before launching a TVOD option of your own? See how these OTT companies use a pay-per-view model to their advantage:
- Hotel Pay-Per-View Entertainment: One of the oldest examples of a TVOD revenue model is pay-per-view entertainment on hotel televisions. Guests can browse a library of movies and shows, then charge whatever they want to watch to their hotel bill. However as more and more hotels implement streaming platforms like Netflix and Hulu in guest rooms, the popularity of their pay-per-view options is waning.
- On Demand: Xfinity’s On Demand lets Xfinity customers buy and rent the latest movie and show releases from almost anywhere, including through their mobile app and TV platform.
- YouTube: YouTube is a great example of a video platform that successfully incorporates TVOD, AVOD, and SVOD revenue models. While YouTube offers ad-based content and ad-free viewing via YouTube Premium, it also has a range of movies and shows available for purchase and rental. Movie rentals and purchases range anywhere from a few dollars to $20-$25 for new releases.
- Prime Video: Amazon’s entertainment media platform functions primarily through a subscription model. However, customers can rent or buy unlimited access to programs that aren’t included in Prime Video’s library. Renting a newly released film costs about $6, while purchasing one costs about $20.
- Google Play: Google’s online store for apps, games, and books is also home to a vast library of pay-per-view titles. With rentals as cheap as $1 during limited-time deals, and purchases of newly released films in the $20-$25 range, there’s something for everyone in the Google Play pay-per-view library.
Use Cases for TVOD Monetization
Here are several scenarios in which a TVOD monetization model is more suitable than AVOD or SVOD monetization:
- Opt for TVOD if you don’t have a large enough collection of content to be able to offer a subscription-based service. For example, if you run a fitness studio and only have three pre-recorded classes available online, you could charge customers for access to each video.
- When you have early access or exclusive content no one else has rights to, such as a WWE wrestling event, audiences will pay a premium to watch it.
- TVOD is great for monetizing educational materials. Online learning company Skillshare uses a subscription model to give members unlimited access to its online courses. However, if they switched to a TVOD model, customers would pay for only the classes they wanted to take (which Skillshare could charge a premium for), which would hold customers more accountable to finish courses and potentially improve their satisfaction compared to a subscription that never gets used.
- Because you can market each TVOD release separately from your other content, you can market to a diverse audience more easily than if you tried to make your entire library appeal to everyone.
How JW Player Supports TVOD
As an all-in-one video platform, JW Player goes beyond TVOD, AVOD, and SVOD to help you attract and retain customers. With JW Player’s fast, high-quality streaming services, your customers can enjoy your content on whichever device is most convenient for them. JW Player also optimizes your CPMs and fill rate to keep viewers watching, resulting in more sales for you.
Mixed Revenue Models
There’s no one-size-fits-all approach to video monetization, which is why most media companies rely on hybrid monetization models.
Many content creators lean towards subscription services because of the success of platforms like Netflix and Hulu. But what if you don’t have enough content to convince someone to purchase a monthly subscription? And what if your content is primarily consumed live and not on demand?
With a hybrid revenue model, you can maximize your sales from customers, regardless of whether their top priority is staying on budget or getting rid of ads.
AVOD With an Ad-Free SVOD Option
Since 41% of consumers are willing to pay to avoid ads, it’s important to offer those customers a premium viewing option. For example, YouTube is making even more money from some audiences with YouTube Premium. While YouTube’s base business model is AVOD, it offers a paid SVOD option that lets audiences watch all content without constant ad interruptions. At time of writing, a standard YouTube Premium plan costs $11.99 per month.
SVOD Model Plus Lower-Tier Subscription Option With Ads
Recently, SVOD-based platforms have been introducing advertising as a way to let customers pay a lower monthly fee. This mixed revenue model lets platforms like Netflix and Hulu capture revenue from customers who wouldn’t otherwise be able to afford, or would choose to forego, their offerings in exchange for a free or cheaper service.
Hulu’s primary business model is subscription-based. The cost of its standard, ad-free plan upon writing is $14.99 per month. However, the platform also offers a Hulu (With Ads) subscription for $7.99 per month. That means customers can access Hulu’s content for almost half the price of a traditional subscription, and Hulu can recoup some of the revenue by supplementing it with ad revenue.
Netflix offers a similar model, with basic, ad-free plans starting at $9.99 per month and a basic plan with ads going for $6.99 per month.
Pay–per–view prices tend to be similar to the cost of a month-long subscription to a streaming service, where customers get unlimited access to a whole library of content. Because of that, it can be difficult to sell customers on paying to watch one movie or episode of a show. However, that sell is easier when you give customers a free sample of what they’ll get after they pay.
For example, you could let people preview the first 15 minutes of a movie or watch the pilot of a show for free. By implementing ads during this free sample, you can still make money. After this preview, customers will be more willing to pay to continue watching the movie, or to watch the next episode or season.
Premiere With TVOD, Transition to SVOD or AVOD
Many media platforms use TVOD to get customers to pay a premium for newly released shows or movies. Maximize profits by introducing new videos as pay-per-view content. Then, after they’ve run their course, transition them to your SVOD library, or make them available for free through an advertising-based revenue model.
Tiered TVOD Pricing
Relatively high prices for pay-per-view content can keep some customers away. Attract price-sensitive customers while maximizing profits by offering tiered pay-per-view pricing.
Many TVOD-based platforms offer purchase and rental options. When viewers purchase a movie, for example, they pay a one time fee that’s higher than the cost of a rental (usually $20-$25). Then, they can watch and rewatch that movie as long as the platform exists.
Customers can also rent programming for a fraction of the cost of buying it (usually less than $10). Most platforms give viewers several weeks to begin watching rented content, and have several days to finish it after they’ve started before their access is revoked.
Another way to implement tiered pricing that pertains to TV shows is to offer one price when customers purchase individual episodes and a discount when they purchase a whole season at once. Take advantage of the exclusivity and novelty of your content by giving an even bigger discount to customers who pre-purchase access to a brand new show.
How to Choose the Right Video Monetization Strategy
Now that you understand the differences between AVOD, TVOD and SVOD, and the multiple ways you can combine them to create your own custom monetization model, how do you know which one is right for you?
Meet Your Viewers Where They’re At
AVOD, SVOD, and TVOD emerged to give publishers the flexibility to match their content with viewers’ needs. For example, your audience might not want to pay to watch your content, but they don’t mind watching a few advertisements to get access.
In this case, an AVOD model would help you monetize your videos without alienating your audience. Other viewers might not want to punch in their credit cards to watch a single video, but they have no problem doing it monthly to get ad-free access to thousands of videos.
When possible, give your audience options instead of an ultimatum. Allow them to watch content with ads for a discount or provide them with an opportunity to rent (and binge) a television series rather than purchase a subscription. Since 41% of consumers will pay to avoid ads, give them a premium viewing option.
If you were operating with a TVOD model, you might let viewers buy a series on a per-episode or per-season basis with different discount prices. Or you might let viewers watch the first episode of every season for free to give them a taste of the content before they make a purchase.
More options expand your target market and increase your earning potential. You might not be able to lock as many users into a subscription contract, but you’ll improve the user experience and boost viewer retention.
Maximize Your Monetization With JW Player
JW Player is a one-stop shop for all your video content needs. Whether you want to monetize your videos with live streaming or on-demand ad integrations or subscription and transactional VOD streaming, we’ve got you covered.
And while AVOD, SVOD, and TVOD monetization models might be your priority, JW Player goes beyond that to provide the complete video platform to connect with your audience and keep them engaged (which means healthier and more predictable income for you).
Our streaming services process and deliver top-notch video quality faster (and at a smaller size to your audience) to enable them to engage on any device. We’ll help maximize your fill rate and CPMs and keep your audience engaged and watching, which leads to happier viewers and more income for you—a win-win for everyone.
Sign up for a 30-day free trial to see for yourself.