3 Ways to Approach OTT Monetization

During lockdown, many OTT providers saw a sharp rise in subscriptions as well as an overall increase in streaming figures. Now that society has started to open up again and audiences are enjoying a wider selection, the challenge will be to keep viewers engaged over the long term.

The OTT market offers no shortage of platforms and new contenders are arriving all the time. With a saturated market, how can OTT providers make the most of their content and monetize their service effectively?

The SVOD model

The subscription video on demand (SVOD) approach often forms the default setting for a monetization strategy. For OTT market pioneers, adopting the subscription model as standard was certainly logical. ‘Try before you buy’ offers hooked new users and gave platforms the opportunity to showcase a broad selection of content in order to gain loyalty. However, in markets such as Australia where subscription services are already well-established, providers need to weigh up if this method will suit their offering. Indeed, many households already have multiple subscriptions. Recent reports from AMPD Research & Media Partners Asia show that households are now subscribed to around 4 SVOD services on average.

A subscription model works best when users have a sense that they are getting value for money. This means content and lots of it. A large back catalog and new engaging content added regularly justifies the ongoing commitment of a subscription. Local providers have their work cut out if they plan to compete with the global budgets of brands such as Netflix and Disney. In APAC the SVOD market has increased by 19% this year already but local SVOD offerings such as HOOQ, iFlix, and Lightbox have all dropped out. New entrants to the market adopting a subscription method will need a keen understanding of their target demographic to make an impact. As well as offering customers alternative value outside of the big players.

The AVOD model

Advertising-backed video on demand (AVOD) offers an alternative for customers who are unable to afford the price tag. As well as tempting those who are just looking to avoid additional SVOD outgoings. Audiences have the benefit of enjoying premium content, without a cost attached, meaning new providers are able to establish an audience quickly. It is then possible to combine the two methods and offer a paid-for premium tier, with no advertising to those viewers able to afford it.

This model is particularly successful in territories where the target audience has a low disposable income but a big appetite for content. Last year, a report from Asia Pacific OTT TV and Video Forecasts, estimated that Asia Pacific OTT TV revenues will reach $48 billion in 2024, and AVOD made up 52% of this.

One of the key issues with this model is the potential for churn if the advertising becomes irrelevant. By implementing personalized advertising technology using viewer data, providers can help to ensure that the audience sees only relevant messages. This approach offers greater value, the audience is less inclined to become frustrated and are more likely to engage or at least live with the ads.

The TVOD model

The transactional video on demand (TVOD) approach is a great option for monetizing live premium content. In the wake of the pandemic, the sports industry needs to slowly embrace live streaming to provide alternatives to traditional broadcasting. TVOD offers the opportunity for sports rights holders to monetize individual matches, games, or even the last few minutes of games. Either as a premium offering on their own platform or through deals with other services. Monetizing individual games in this way is likely to prove vital, as the sporting sector endures ongoing upheaval due to Coronavirus.

Other industries that have previously relied on audiences packing out live venues will have to adapt to the new normal too. We are now seeing everything from box-office releases to theatre productions, streamed through a pay-per-view option as a way of monetizing content during the closure of live venues.

Finding the best approach

There is no one size fits all approach to monetization, the key focus should be to select the best method based on a number of factors. OTT providers need to think about market trends, the type and format of the content they are offering, as well as the demographic they are targeting. Some may find that dividing their strategy up to incorporate a combination of all 3 approaches makes the most sense.

It’s clear that there is significant competition in the OTT arena, but we certainly haven’t reached peak consumption by any means. As more and more consumers in developing markets come online, video consumption in those markets rises. What OTT providers will need to bear in mind, is that eager new VOD consumers will become just as selective as established viewers once the market matures. Wherever your service is based, understanding your audience and offering them the appropriate choice will be the difference between success and failure.