The OTT video streaming industry is booming. Many businesses and organizations realize the potential of video streaming platforms. They are considering launching their own. They appreciate the possibility of reaching people worldwide and generating videos from their videos.
One of the main concerns a business may encounter is choosing an OTT solution with the right monetization models and OTT data analytics– how you are going to generate revenue.
The problem of selecting an appropriate OTT solution is crucial as its functionality will allow you to provide viewers with a specific user experience. For example, if it maintains a recommendation engine, your viewers will be able to receive recommendations on videos they might like. If not, they will need to spend some time finding a video they want to watch next.
But that is not the main point of this article. There is a number of common OTT monetization models, among which you need to choose how you will make money. The model also defines how people access your videos — whether they pay for access or watch videos for free.
If you want to create a video streaming platform, we recommend you contact Setplex. The company can offer a solution that will help you operate smoothly and achieve your business goals.
Table of Contents
Four OTT Pricing Models, Which Will Bring You Revenue
Advertising-based revenue-generating model
An advertising-based revenue-generating model has been a buzzword in the video streaming industry for a while. Many huge video streaming companies are introducing an ad-based model as an option for viewers.
This model allows people to watch videos for free while content providers make revenue by advertising. Customers don’t purchase access to the content library but watch ads during the playback instead.
A content provider will need to seek partnerships with advertisers either on their own or with contact agencies.
An ad-based revenue-generating model is usually for those whose audience is willing to pay less for watching videos. Ads can become a profitable approach here as targeting is more accurate in the online space. People interested in the product or service are able to see the ad and go to the website to learn more.
The video streaming industry has many services that offer people to purchase a subscription. As there were a lot of such services, individuals got tired of so many subscriptions to pay. According to some experts, it is subscription fatigue, although not all agree that it exists. Still, those who support this idea think that viewers switch to ad-based services because of multiple subscriptions.
Subscription-based revenue-generating model
The subscription-based model is still quite popular in the video streaming world despite a huge demand for advertising among viewers. It is convenient both for a business and a user.
Businesses have a regular income, and viewers purchase a subscription that gives them access to a huge diversity of videos. They can binge-watch as many movies, shows, or educational videos as they want. The playback won’t be interrupted by ads that can last several minutes.
Furthermore, subscriptions can be cancelled at any time a user wants, while traditional television requires a long-term contract, which is less comfortable for viewers.
The price of a subscription to an online video streaming service is usually lower than a cable or satellite. That’s why viewers can have several subscriptions with different types of content.
Despite the popularity of advertising-based models, researchers predict the growth of subscription-based video streaming services. For example, they forecast global revenue growth from $75.83 billion in 2022 to $171.86 billion in 2028. They project the same concerning the number of viewers. They said it will increase from 738.9 million in 2022 to 1.89 billion in 2028.
Pay-per-view revenue-generating model
A pay-per-view model is also known as a transaction-based revenue-generating approach. While a subscription gives viewers access to all videos on the platform, a pay-per-view model requires payment for every single piece of content. When a consumer purchases one video, the rest of them remain inaccessible.
Providers who choose a pay-per-view model sometimes allow viewers to download videos on their devices or opt for a rental mode.
Hybrid revenue-generating model
A hybrid monetization model is a combination of several described above. It gives a lot of opportunities to content providers to diversify revenue sources. Moreover, users can choose a suitable payment option for them.
There are many ways to mix. For example, providers offer two subscription plans to customers. They can buy an ad-based subscription at a lower price or obtain an ad-free subscription plan at a higher price. In this case, people of different incomes can choose what they want.
Furthermore, providers can offer a bunch of videos on a subscription basis and create a Premium content group. In this case, people can watch videos available on a subscription. Watching a Premium video will require extra payment from viewers.
Some providers blend subscriptions and a pay-per-view approach. As a result, the catalogue of videos is available on a subscription basis, while new releases require an additional price.
Final Thoughts
We have described the most common monetization models for VOD (video-on-demand) services. These are videos available at any time a viewer wants. A content provider should keep in mind that monetization models can evolve as the platform grows. You may start with advertising and switch to subscriptions when you have an extensive content library.
However, you can stick to one monetization model or test them all with the right OTT solution. Then, you will be able to make an informed decision as you will have lots of analytics data. You might understand that you have more viewers or purchases when you operate on a pay-per-view pricing model or any other.
For live streaming, monetization models can be different or the same. After the live stream ends, you may save the video and make it available on demand then.
Consider all monetization models properly, and then decide what pricing approach suits you and your viewers the best.
