1 January, 0001 5 min read

How OTT platforms make money

Chema Fernández Diaz
Co-Founder, StreamViral
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In 2020, we saw an increase in the number of over-the-top (OTT) platforms come on the market. OTT streaming services allow the user to stream video content across multiple devices (i.e. laptop, Smartphone, tablets) from anywhere at any time. Netflix, Disney+, Amazon Prime are household names today. The marketplace is becoming increasingly competitive and no doubt this will lead to greater competition for high-quality content to attract and retain viewers.
According to Research and Markets, the OTT market was valued at USD 85.16 Billion in 2019 and it is expected to reach USD 194.20 Billion by 2025. Moreover, major media brands, sports leagues/federations, small to large businesses are turning to streaming services to increase their brand, engage with their audience and monetise their content.

There are a number of ways OTT platforms can make money. First, platforms need content, either developing their own or buying it from providers. Next is creating different monetisation models that will attract subscribers. A majority of platforms use video on demand (VOD) business models where users are able to view the videos at their leisure.

The three types of VOD models are:

Subscription Video on Demand (SVOD)
SVOD is a video-on-demand service that allows subscribers all access to a video content library for a certain recurring fee. The fee may be charged according to the company’s pricing model (daily, weekly, monthly, or annually). Once the subscriber has paid for access to the service, they can watch as many videos as they want as per their subscription. Netflix, HBO, Amazon Prime, Disney+ are examples of companies using this model. Creators or businesses that have a niche offering specialised content, SVOD might be the best option to monetise content if consumers are willing to pay for it.

Advertising Video on demand (AVOD)
AVOD refers to ad-based video on demand that is free for consumers. The ad revenue can offset the production and hosting costs. The AVOD model might be attractive to some creators as a way to monetize their videos. Advertisers pay you to place those ads in front of your followers. For big media brands or key influencers who know they can attract millions of views a month, AVOD can be a profitable option.

Transactional Video on Demand (TVOD)
TVOD service allows users to buy content on a pay-per-view (PPV) basis. Users are charged per video or video package rather than all access to the entire library. This is the most popular video monetization model among many publishers, especially those that live stream sports where they can leverage PPV as their primary revenue driver. With TVOD, organisations have more control over what content their customers consume, and for how long.

Hybrid Model
OTT platforms may also use a hybrid model that combines one or two services listed above. Users can either access the content with a paid membership, subscription or pay for what they view known as a pay-per-view. Video streaming will continue to grow in the coming years. Creating an OTT platform is not just for top brands or organisations. Passionate and talented individuals, fitness instructors, entertainers, and more can join the online video space to grow their brand and business.