If you're a content owner and are considering how best to monetise your content, it’s critical that you understand the differences between the main streaming business models, namely AVOD, SVOD and TVOD.
Although it can seem like a maze of acronyms at first, it’s important to get to grips with the streaming jargon. There are many considerations to factor in when deciding whether to generate revenue from your content through advertising with AVOD, through a subscription fee with SVOD, or by charging viewers on a pay-per-view basis, as with TVOD. Key considerations include the type of content, the size of the content library, the target audience and their location. In this blog we’ll break down the key components of AVOD, SVOD and TVOD, and consider their distinct differences.
AVOD (Advertising Video-on-Demand) provides the viewer with content for free and generates revenue through advertising. As a Video-on-Demand (VOD) service, users can choose what to watch, when they want. Ads are targeted and may be shown before (pre-roll ads), during (mid-roll ads) and after (post-roll ads) the content. AVOD services generally offer old, lower value shows and movies, instead of premium content and new releases. Examples of AVOD services include Hulu, Peacock, Pluto TV and YouTube. It is a more popular model in some regions than others, and being free, also tends to appeal more to people with little or no disposable income. Some media companies use the lure of free AVOD content to attract viewers, then over time, drive them to premium paid SVOD services.
AVOD represents a lucrative opportunity to engage with a wide audience and generate revenue through targeted advertising. By leveraging data analytics and audience segmentation, businesses can tailor their marketing efforts to specific demographics, maximising revenue from ads. For such a service to be profitable, service owners need to attract and retain enough viewers to generate decent ad revenue. However, although it’s likely to be easier to attract users to a free AVOD service rather than a costly SVOD service, AVOD service providers still need to focus on delivering an enjoy able user experience. This can be challenging with ad-supported services because viewers can quickly get annoyed with ads, particularly if they are not relevant, are too frequent, or are repeated too many times.
SVOD (Subscription Video-on-Demand), like AVOD, is a VOD service; so, viewers can stream content on-demand. Where it differs, however, is that viewers pay a subscription fee, which is usually monthly or annually, for unlimited access to the content library. With SVOD, revenue is generated through subscriptions rather than advertising. Examples of SVOD services are Netflix, Disney+, Amazon Prime Video and Paramount+.
SVOD is ad-free, so viewers can enjoy an uninterrupted viewing experience. This helps to keep viewers engaged and watching for longer. Generating income through subscriptions rather than advertising provides content owners with a regular and recurring revenue stream. However, when users are paying a subscription fee, both the content and user experience must be high quality to justify the fee. Otherwise, users will feel that the service is not value for money and will quickly take their custom elsewhere. Competition is fierce and churn is an ongoing issue. Having great exclusive content helps to attract service users and can help to build a loyal fan base. SVOD services tend to invest heavily in their content library, with original productions making up a good chunk of the catalogue. Original productions are a critical part of their success because clearly users are not going to pay to watch content that they can get elsewhere for free. As a result, SVOD services face a constant battle to attract new subscribers and keep them interested.
Next, we come to TVOD (Transactional Video-on-Demand) which is different yet again because viewers hire or purchase individual shows or movies on a pay-per-view basis. Examples of TVOD are Sky Box Office and iTunes. Some video providers also incorporate elements of it with SVOD or AVOD. Both Disney+ and Amazon Prime Video are SVOD services but also offer some content on a TVOD pay-per view basis.
TVOD works well for premium and exclusive content that viewers are willing to pay for, such as sports events or new movie releases. It can appeal to those viewers that only stream occasionally and don’t want to pay monthly subscriptions. Video services may also use TVOD as a means to attract subscribers by offering access to new and exclusive content, then drive those viewers to sign up to an SVOD service.
While TVOD presents a flexible monetisation strategy for premium content and specialised offerings, it is difficult to sustain as a standalone model because there is no recurring revenue to rely on.
Now that we’ve covered the basic differences between AVOD, SVOD and TVOD, let’s do a quick recap and comparison.
● AVOD relies on revenue from advertising, while SVOD relies on subscription fees for revenue.
● AVOD offers free content with ads, making it accessible to a wider audience demographic. SVOD, on the other hand, requires a subscription but provides an ad-free experience, so users are more likely to stay engaged.
● When it comes to choosing between AVOD and SVOD business models, determining which model is most suitable will depend largely on the target audience, the location, the type of content, size of library, and the available budget to invest in new content.
● AVOD generates revenue through ads, whereas TVOD generates revenue from individual content purchases or rentals.
● It is easier to reach a wide audience with AVOD than TVOD because the former is free to access.
● AVOD is suitable for older content with lower value while TVOD is better for premium content.
● TVOD involves users paying for individual pieces of content, while SVOD requires a subscription for unlimited access to a content library.
● SVOD provides a regular income stream, while TVOD depends on one off purchases so has no recurring revenue.
● SVOD services need a large library of high-quality content to attract users, whereas TVOD attracts users with individual titles so does not need such a large content catalogue.
VOD video providers may also take a hybrid approach which incorporates both AVOD and SVOD. Sometimes this is referred to as HVOD (Hybrid-Video-in-Demand). Most of the main SVOD video providers have adapted their business models over the last few years and now offer tiered pricing packages that combine both SVOD and AVOD features. These tiers are intended to broaden revenue streams and also prevent churn by giving viewers more choice over how they access content. Under the hybrid model, viewers can choose to access the SVOD content library ad-free at the top price, or at a lower cost with ads. Alongside the hybrid AVOD/SVOD model, some service providers also add in TVOD elements, with some exclusive content only available on a pay-per-view basis.
There are lots of factors to consider when deciding whether to monetise your content through an AVOD, SVOD, TVOD or a hybrid approach. Each model offers unique advantages and disadvantages and caters to different business requirements and audience preferences, so a sound understanding of their nuances is essential.
What is clear is that the VOD market is continuing to grow. According to one analyst firm, the VOD market is projected to grow from USD 146.6 billion in 2023 to USD 270.3 billion by 2028, at an annual growth rate of 13%. This continued growth will no doubt create opportunities for services and content owners to monetise their content in a variety of different ways.
Veset’s all-in-one cloud playout solution, Veset Nimbus, can help you to distribute your content to AVOD, SVOD and TVOD, alongside reaching satellite, cable and terrestrial audiences.
To find out more about Veset Nimbus or to discuss how we can help you to monetise your content by reaching a wider audience, get in touch.
