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Business Models for Video Monetization

If you are looking to make money from videos online, you need to understand the current types of video monetization on the market today. Getting paid for videos online is the process of monetization. The online video world today is focused on videos on demand or VOD.  There are three mainstream models for businesses to make money from publishing videos online or VOD. Subscription Video on Demand (SVOD), Transactional Video On Demand (TVOD), and Advertising Video On Demand (AVOD). This article will give you an overview of these models. For more information about these, you can also check out this blog.

What Are the Monetization Models?

Subscription Video on Demand (SVOD) is where the video distribution company charges a fee for accessing their library of videos. The fee is generally a fixed amount assessed periodically (weekly, monthly, annually, etc.). This model is used by many mainstream video service providers such as Netflix, Amazon, HBO, Disney, and others. The SVOD model is most closely resembles the old TV services and is more comfortable for older viewers that are used to accessing a fixed set of content. The main difference is that instead of having channels, it has unique content or shows as the old systems had. SVOD providers also often offer the ability to view content offline.

Transactional Video On Demand (TVOD) provides a portfolio of VOD that has a cost to view per video or content channel. This is similar to the old pay-per-view systems that the cable TV providers introduced years ago, and it is still a very solid business model today. You see, this model is typically used with premium content, very niche content, and learning/training videos. In addition, transactional VOD offers the ability to either buy or rent the content. The customer may permanently purchase a video or be offered temporary viewing (rental). Another option or advantage that TVOD has is downloading for local (offline) viewing. This model is used by major service providers like Apple, Amazon, Google, YouTube, and others.

Advertising Video On Demand (AVOD) most closely resembles the old TV advertising model, with ads interspersed within the content. This is also the model adopted early on in the internet age, with ads placed onto web pages. However, the content itself is usually free to view, with the advertiser paying the video or web content owner to display their advertisements in the content. The world’s most well-known video distribution platform, YouTube, uses this model and many others such as Hulu, PlutoTV, Roku, Crackle, and more.

Source: vimeo.com

What Are the Positives and Negatives of Each Model?

Subscription Video on Demand (SVOD) tends to be used by the largest VOD providers and is best for services with very large content libraries. It also has a number of positives in its favor. Probably the biggest benefit of the SVOD is the highly stable income stream. Since subscribers have to pay in advance for the ability to view content, the service provider can very accurately know their revenue stream. The next most important benefit for this model is that the user base tends to have a very high retention rate. Customers tend to stick with what they have and know. This means that the number of customers or users is very steady. Another advantage of the SVOD model is that the cost of trying new content is very low and is also very easy to do. It is typically very cheap for providers with very large amounts of content to add something new for providers. Likewise, since they manage huge videos, it is also easy for them to add (or remove) content.

SVOD also has some negative aspects. As we noted, this model is most appropriate for major providers with huge amounts of content. If you have a very small portfolio and/or a small number of subscribers, this model may not work well. Scale factor – agreements for revenue distribution are critical with this model. Since this model is strongest for large amounts of content, it is key that the cost per content is low. The last negative we will note for this model is that marketing and advertising for large amounts of diverse content can be challenging.

Transactional Video On Demand (TVOD) has lower risk because of the lower cost of entry. It is easier to manage revenue distribution since the money is received per video or view. The per-transaction accounting makes it simpler to estimate expenses and cash flows. The above makes it a good model for businesses just getting into video monetization. Users are more likely to purchase a single video or view than commit to a subscription.

The downside of the TVOD business model is that customer retention is a challenge. This also leads to giving users free trials (try before you buy) and an overall growth limit.

The Advertising Video On Demand (AVOD) is the easiest model to distribute and deliver revenue because the transactions are with the advertisers versus individual customers or viewers. There are also a number of options for the delivery of the advertisements. Audiences simply publish your content, and you do not have to worry about managing subscriptions or individual purchases. Finally, you can enable the advertiser to target their audiences better using the content and viewer information. 

The negatives of AVOD are that it generally requires a lot of views to make content profitable. In addition, it is more challenging to target advertising because you do not have the viewer information before publishing the content, and this model typically only works for very large content distribution platforms.

In Conclusion

Selecting the right video monetization business model for your venture is key. Be very aware of the differences, advantages, and disadvantages of each. It is also important to know that leveraging more than one model simultaneously is possible.

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