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.
The growth of Over the Top (OTT) streaming has transformed the way producers create and sell video content. Before, you had to count on getting your video in the theaters, on TV, or front and center at your local Blockbuster. Now, you can upload, sell, and stream content from your tablet, phone, Roku, Apple TV, Fire TV, or desktop without any middle person.
As a business, that means you have more options than ever to monetize your video products. Whether you host television series, create how-to videos, or stream live sports, you can choose the best pricing model based on your customers and your company.
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 Is AVOD (Advertising Video on Demand)?
AVOD uses advertising-based video on demand to provide free content for viewers. 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.
What Is SVOD (Subscription Video on Demand)?
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. Users pay a fixed monthly subscription fee to access a library of streamable content—whether that’s television series, movies, or sports.
Major SVOD platforms include Netflix, 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.
Don’t try to make your SVOD products everything for everyone. Niche down and become the go-to source for a certain type of content. For example, you might provide VOD yoga classes or cooking courses.
What Is TVOD (Transactional Video on Demand)?
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.
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.
A TVOD model offers more options when it comes to marketing your products. Every time you have a release, you can expand your market by advertising the new content (rather than an entire library) to anyone that’d be interested—and first-time buyers have a good chance of coming back if they have a good experience.
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: 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: 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: 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.
How to Choose the Right Video Monetization Strategy
None of these three monetization models is necessarily better than another. Each has its own pros and cons that make it a better fit depending on your production, content, and consumers.
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?
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.
You won’t build a loyal following overnight. Decide how you will grow your audience and keep them coming back for more.
You might want to eventually create an SVOD platform, but starting with a TVOD model might be better for drawing in initial customers while you build awareness and your content library.
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 our 30-day free trial to see for yourself.