The Definitive Guide to OTT Monetization: What OTT Monetization Models to Consider

There is no question whether over-the-top (OTT) content streaming is the future of media consumption – we can already see its dominance over traditional distribution models. As successful as some of these OTT content streaming platforms, such as Netflix and YouTube, are, there is no one clear-cut way to approach OTT monetization.

Before we dive into the various OTT monetization models you can use, we need to define what OTT content monetization is and why it has become so popular in the current era of the internet. As a video hosting and OTT monetization platform, we at Dacast know a thing or two about how this process works.

So, if you want to explore the best OTT monetization models and find the best fit for you, we suggest diving into our guide. We will guide you through all the OTT monetization options available, outlining their pros and cons, and helping you determine which options are best suited for your content type.

Table of Contents

• What Is OTT Monetization
• OTT Monetization Models
• Which Model Suits Your Streaming Business Best
• Why Users Prefer OTT Streaming to Linear Media Consumption
• Common Pitfalls of OTT Monetization
• Rely on Experts for Successful OTT Monetization

What Is OTT Monetization

Over-the-top monetization refers to the various OTT strategies employed by content providers to generate revenue through internet-based streaming services, bypassing traditional cable or satellite television distribution. This approach enables OTT content delivery directly to viewers via various devices and creates a profit by selling the right to consume it (DTC – direct-to-consumer), licensing, or advertising. If you are a content owner or a license holder, you can enter into an agreement with OTT streaming platforms that will distribute the content you own. These distribution agreements help set the terms and conditions of the financial compensation. You may get compensated based on the subscribers who viewed your content or the ad impressions made. 

Not all content is the same, and neither are the audiences, so it’s paramount for your success to choose the OTT monetization models wisely. Choosing a particular model can skyrocket your content to global popularity, thanks to the access the internet provides. That is exactly why you need to know what the specific OTT monetization models offer. 

OTT Monetization Models

While OTT video monetization is still in development, which means it changes almost every day, several OTT models stand out. Each of these models has had a profound impact on the way we consume media, so it’s a good idea to consider all of them.

To explore the differences between these OTT monetization models, you should know exactly what they bring to the table. We can help you compare subscription-based video on demand (SVOD), ad-supported video on demand (AVOD), transactional video on demand (TVOD), premium video on demand (PVOD), as well as hybrid OTT monetization options. 

SVOD

Subscription video on demand monetization models are the most popular when it comes to OTT content hosting. They work on a fairly simple principle: users pay a monthly subscription to the platform and they get to watch your content. You receive compensation based on the monthly subscribers who consume your content on the platform.

Although there are many platforms in this space, the most popular ones are Netflix, HBO Max, Disney+, and Hulu. While most of these platforms have their own original content, they also source a lot of content from outside creators. That is why the SVOD might be an ideal monetization model for you. Still, consistently adding new and engaging content is required to retain subscribers.

Users have complete control over when and how they consume the content you’ve created, which is why this monetization model brings in a lot of revenue. Instead of being tied to a specific time slot, users can choose when to watch your content, when to pause, rewind, and replay it, which significantly impacts its popularity. 

Pros

• Simplifies the monetization process
• Direct effects on popularity thanks to word of mouth
• Subscribers who joined for other content can easily discover yours
• Loyalty to a streaming platform guarantees returning viewership

Cons

• The content must stand out from the myriad of similar titles
• Subscriptions drop during periods of no content production

AVOD

Ad-supported video on demand is another popular OTT monetization model, especially among smaller or individual content creators. The AVOD monetization model gives you the opportunity to upload content directly to your account for free without worrying about compensation agreements.

Once your content starts receiving decent viewership, you can make advertisement deals with different brands. The ads that play during your videos can be connected to the content, such as a Coca-Cola ad during a food review video, but they don’t necessarily have to be.

The amount you may receive per ad depends primarily on two things: the number of views the video gets or the number of subscribers your account has. Although these ads are similar to the commercials we associate with cable TV, they have one significant difference – they are much shorter. That is exactly why viewers choose it over traditional media.

Pros

• Content creators have a higher level of control
• Multiple streams of income from different brands seeking to advertise
• Creators can choose the ad pricing
• Ads don’t distract from the content

Cons

• Unskippable ads make viewers feel frustrated
• Premium subscription models can circumvent ads

TVOD

Transactional video on demand is one of the most straightforward and profitable OTT monetization models you can turn to. The concept that TVOD is based on is as simple as it gets: you provide the content to the streaming platform, which then charges viewers to purchase or rent your content. 

You and the other party can agree to the compensation percentages, and instead of basing it on the number of viewers or subscribers, you can base it on the amount earned from purchasing and renting. The viewers’ transaction is focused on a single piece of content, instead of access to all content.

The user might pay for a single episode or a season of a TV series, or they can pay for a single movie from a series of multiple titles. Not only does this offer a clear-cut way for viewers to get to your content, but it also enables you to earn money from the same viewers on the same piece of content multiple times.

It is up to the viewers to decide whether they will rent the piece of content one time or opt to purchase and download it to their devices. Amazon Prime and iTunes are the most prominent examples of platforms that offer this type of OTT monetization. 

Pros

• Multiple payments for the same content
• Simple and direct method of compensation
• Platforms with built-in payment methods that make money transfers instant
• Viewers don’t have to deal with ads

Cons

• Free trial periods to attract new viewers don’t work
• Viewers cannot access all of your content, which might deter them

PVOD

The premium video on demand monetization model is typically connected to either SVOD or TVOD, depending on the OTT solution provider. This model enables you to deliver exclusive content to premium viewers earlier than the general public, which increases engagement and hype surrounding your content.

With this model, you make a compensation agreement with the streaming platform about the percentage of the earnings you get to keep. It’s much more straightforward than the SVOD model because the PVOD model doesn’t base the compensation percentage on the number of subscribers, but rather the amount of premium payments.

So, if your content draws in 100,000 viewers who pay $20 for the premium video content each, the total profits are $2,000,000, and you get the compensation from that amount. Since it is premium and, in most cases, exclusive content that isn’t available elsewhere, you can set a much higher price than you would for regular content.

Typically, you can release the exclusive content to premium viewers months before the release to the general video content viewership. That way, you generate income with the exclusive content and create buzz about the upcoming general release. 

Pros

• Higher profit margins than with regular content
• Creating excitement about the video content months before the wide release
• Great way to entice potential viewers
• Simple monetization process

Cons

• Viewers might opt to wait until the wide-release
• May cannibalize other forms of revenue

Hybrid

The hybrid OTT monetization model combines two or more monetization models on one platform. For example, an SVOD model platform might choose to implement a PVOD model for users who are willing to pay. The best example of that type of platform is Disney+, which you need to pay a monthly subscription to access. That being said, for exclusive content, such as newly released movies or TV shows, you need to pay a premium price.

Alternatively, you might find a TVOD model on an SVOD platform like Hulu, that enables users to access your live stream or one-of-a-kind video with a single transaction. These hybrid monetization models are becoming more and more popular in recent years because they enable you to reach a much wider audience with your content.

YouTube relies on a hybrid monetization model, combining the AVOD and SVOD models. The ad-supported video on demand model is available for all videos and YouTube shorts you post, while you can find the SVOD model in the YouTube premium sphere.

The hybrid model can bring in a lot of new viewers, but it may also deter some potential users because of the required fees. Moreover, the hybrid model may prove complicated when determining the compensation percentage split between you and the streaming platform.

Pros 

• Wider audience reach
• Multiple sources of revenue
• Prompts trust among users
• TVOD viewers can easily turn into SVOD users

Cons

• Each specific model takes a lot of research and knowledge
• Viewers might be deterred by the complexity

Which Model Suits Your Streaming Business Best

Monetizing the content you work hard on creating is the key to your success, and going at it alone may lead to some missteps. Instead of taking a risk and not getting the most out of the videos you’ve created, you can select the ideal OTT monetization model for you and put yourself in a winning position.

Multiple factors contribute to successful OTT monetization, and you can leverage OTT trends to find the right fit for you. To help you on that quest, we explored each a few tactics to help you get started.

1. Determine Your Type of Content

Determining the type of content you wish to stream and monetize is the first step in this journey because you can build the rest of your approach based on it. Will you make long-form content or lean towards serial streaming? Is the video content you are making better suited to short-form versions that get to the point concisely without taking up too much time? You need to consider these things before choosing an OTT monetization model.

For example, if your content is a one-off long-form video, such as a movie or a documentary, opting for a TVOD model, which enables users to purchase it, might be the right move. On the other hand, if you have a series of videos, such as an online course or a limited TV series, you can consider the SVOD and the AVOD models.

2. Know Your Audience

Before you go forward with any kind of OTT streaming and monetization, you should analyze and get to know your audience. You need to be clear about what you are providing to them, which will enable you to develop a strategy later. Once you have that, you can deduce who will be drawn to your content more.

The most important consideration is the demographic of the content audience and the model best suited to the particular group of people you’re hoping to draw in. For example, younger audiences between the ages of 15 and 35 are drawn to short-form videos more and are less likely to sit through ads. By that logic, having an ad-supported video on demand is not the best solution, but having an SVOD model could be the right move. 

On the other hand, older audiences, between 40 and 65 years old, are much more likely to sit through ads. That said, they tend to lean more towards one-off content rentals and purchases than subscriptions. This means a TVOD or an AVOD model would be better than an SVOD model.

3. Develop a Strategy

Going into the world of OTT streaming and monetization is anything but simple, as there are many opportunities for success, but there are equally as many pitfalls. To put yourself in the best possible position to succeed, you should develop a strategy and stick to it.

For example, if you’re still building your audience and gaining traction with your content, going with the AVOD model is the best option. You can upload the videos for free, which makes them free of risk, and with enough viewers, you can start implementing ads based on your content in the videos.

If your content has an established following, no matter how small, then the right move might be to go with the SVOD model. That way, the dedicated viewers will become subscribers on the platform, and the video presence will attract other potential viewers. 

Why Users Prefer OTT Media to Linear Media Consumption

The simple answer to this question is that potential viewers prefer OTT media services over traditional media services because of accessibility. The internet has created an environment in which all of us can access our favorite pieces of media with a simple click, whenever we choose to.

You can use this demand for accessibility to your advantage. Instead of turning to cable or satellite TV, you can publish your content on platforms with AVOD, SVOD, or TVOD models. That way, you have almost direct access to the revenue they generate and a much higher level of control over your own content. 

Common Pitfalls of OTT Monetization

Before you dive into the world of OTT monetization, you should know the common risks in order to avoid them. To start with, you need to make sure that you negotiate a fair compensation percentage that will reward you adequately for your hard work. In addition to that, you need to manage distribution partnerships efficiently and effectively.

Finally, properly evaluating the particular value of each of your videos or series can be tricky, especially if you have no prior experience in the field. All of these pitfalls can be avoided by simply hiring a company with years of experience in the world of OTT monetization, such as Dacast. 

Rely on Experts for Successful OTT Monetization

Over-the-top content platforms and streaming are the future of content creation and monetization. That is why you should discover which OTT monetization model works best for your content and the goals you are hoping to achieve by publishing it.

If you’re unsure where to start, you can always get in touch with us at Dacast. Let us help you navigate these decisions based on our own experience. You can get a completely free trial period on our OTT platform without providing any payment information beforehand.

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