Streaming monetization models: SVOD, AVOD, FAST, TVOD, BVOD

Streaming services dominate modern media consumption, each considering unique revenue models. There are five main models: SVOD, AVOD, TVOD, FAST, and BVOD. These models form the foundation of digital content distribution, influencing how users access content and how platforms make money, through various monetization strategies.

For developers, understanding these models is crucial for building streaming applications that meet user expectations. Users expect smooth playback, fast loading times, personalized recommendations, and multi-device support. This blog explains each model's key features and their impact on application design and user experience.

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OTTs in the new era of streaming

OTT stands for over-the-top and refers to content streamed over the internet across multiple devices without a traditional cable or satellite provider. The accessibility of OTT content is one of the many reasons it’s so popular. Viewers only need a high-speed internet connection and a device that supports apps or browsers.

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Antenna’s quarterly snapshot illustrates the market share of new subscribers (premium) in various streaming services over two years. Overall, there was 35.2M Gross Additions in the second quarter of 2024. Disney+ and Netflix are leading with consistently high market shares, indicating strong user growth. Apple TV+ and Discovery+ maintain lower but steady market shares, suggesting they cater to a niche audience.

Overall, the graph depicts a competitive landscape with shifting market shares among major streaming services.

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Video on demand

VOD stands for video-on-demand and refers to any video content that starts simply by pressing “Play”. In comparison, cable and satellite TV follow set schedules, so viewers need to tune in at specific times.

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Content monetization models in VOD

While OTT is used to describe the way content is distributed, VOD is used to describe how the content is viewed. But there is some overlap between the two. Both OTT and VOD involve content being delivered over the internet. OTT platforms often provide VOD services, allowing viewers to watch content on demand.

Both models provide flexibility in content consumption. OTT services use VOD as their primary delivery method. The user accesses the content directly from an online platform

Before we get into the specific models, it’s important to categorize them into two broad groups: linear and on-demand. Linear models, like FAST, are like traditional TV experiences, where content is streamed according to a schedule. On-demand models—AVOD, SVOD, TVOD, and HVOD—allow users to choose what they watch and when they watch it.

Each model represents a different method of delivering content, each with its own technical and business impacts. We'll go over each, explaining how they work and why they’re important.

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Subscription video on demand (SVOD)

SVOD is a model where people pay a recurring subscription fee (typically monthly and annually) to access a library of films, TV shows, and other content. SVOD services are huge in the streaming industry. Services like Netflix and Hulu offer exclusive content with ad-free viewing.

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For creators, SVOD offers many benefits. You can:
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• Have a reliable income since viewers pay a recurring fee.  
• Reach a broad audience by meeting different viewing preferences.
• Offer subscribers direct access to exclusive content.
  
• Have full creative freedom since you distribute your content.
• Build a community around your brand.

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SVOD also provides users the flexibility to cancel anytime, which can make it harder for producers to retain customers. SVOD manages this with unique new content, aggressive pricing methods, or both.

Now, let’s talk about one of the biggest challenges SVOD services face: and that is ‘churn’. Churn is basically the rate at which subscribers cancel their subscriptions, and it’s a critical metric for any streaming service. High churn rates can significantly hurt revenue and growth, so SVOD platforms plan several strategies to retain subscribers.

The premium SVOD churn rates from Antenna Insights shows how many people cancelled their subscriptions to different streaming services.

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A key tactic is the consistent release of new and exclusive content, which keeps the library fresh and engaging, reducing subscriber turnover. Another effective strategy is personalized recommendations, determined by advanced algorithms, suggest content based on individual viewing habits, improving the user experience.

Competitive pricing and flexible subscription tiers also help. By offering various plans, including ad-supported options, and bundling services, platforms provide more value, making it harder for subscribers to cancel.

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Free ad-supported streaming television (FAST)

FAST is the closest thing you can get to experience traditional broadcasts and cable TVs. Users can browse several channels without paying a subscription fee, with content being funded by advertisements.

FAST platforms offer a continuous stream of scheduled content, much like traditional TV. This model appeals to viewers who enjoy the simplicity of a linear experience without the need to make viewing choices.  

Unlike traditional TV, which delivers content through broadcast or satellite signals, FAST is streamed over the internet. Viewers only need a connected TV and an internet connection. Pluto TV, Tubi, and Freevee are a few examples of FAST services.

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Ad-supported video-on-demand (AVOD)

AVOD is a popular monetization model where platforms offer free content supported by ads, which can run before, during, or after videos. The ad revenue is used to cover production and hosting costs.

AVOD is attractive for viewers because they can watch free content. There is a low barrier to entry because viewers don’t need to make a financial commitment. For creators, AVOD is a low-risk way to earn income from content without selling anything.

According to a Deloitte study, 62% of consumers favored lower-cost (or free) ad-supported services instead of more costly ad-free options.

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AVOD platforms like YouTube, Roku, and Crackle attract a large audience, offering significant revenue potential for advertisers.

The main source of income for AVOD creators is advertising, which can be unreliable at times. Many creators on YouTube have experienced a massive decrease in revenue. That is because with AVOD you might face:
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• Platforms take a cut of your ad revenue: OTT platforms retain a percentage of your ad earnings, reducing your total revenue.
• Content blocked by ad blockers: Ad blockers can prevent ads from displaying your content, resulting in lost potential revenue.
• Audience’s location: Ad revenue varies by location due to different CPM (Cost Per Mille) rates, with some regions generating less income.
• High barriers of entry for creator/partner programs: Joining creator programs that allow content monetization often requires meeting strict eligibility criteria, such as minimum subscriber counts, consistent content output, or compliance with specific content guidelines set by platforms.
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Transactional video on demand (TVOD):

TVOD is a model where viewers can purchase or rent specific content they choose to watch, rather than subscribing to an entire library. This model allows viewers to selectively view movies, TV episodes, or other content.

TVOD platforms focus on providing high-quality, on-demand access to specific content, like new movie releases, live sports events, and exclusive concerts. To attract customers, providers often use promotional strategies such as discounts on new releases, bundle deals for related content, free previews, or loyalty programs for frequent users.  

TVOD systems require secure payment gateways, digital rights management (DRM) implementation, and efficient content delivery mechanisms. Developers must focus on creating user-friendly interfaces for content selection and purchase, while ensuring strict access control based on transaction status.

These tactics help TVOD services compete in the streaming market while maintaining their pay-per-view model.

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Types of TVOD:
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1. Rental:
   • Users pay to access content for a limited time, typically 24 to 48 hours. After the rental period expires, the content is no longer accessible.
   • Ideal for viewers who want to watch a specific movie or show without committing to owning it.
   • Examples: Amazon Prime Video, and Apple iTunes.
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2. Purchase:
   • Users pay a one-time fee to access the content permanently, which they can watch at any time without expiration.  
   • This model, also known as electronic sell through (EST), is suitable for viewers who want to build a personal collection of favorite movies or TV shows.
   • Examples: Google Play, Vudu, Redbox.
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3. Pay-per-view (PPV):
   • Users make a one-time payment to access a specific show, event, or broadcast on a channel at a scheduled time.
   • PPV can be used for time-sensitive events like boxing matches and sports games, where viewers pay for a single viewing opportunity.
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4. Premium video on demand (PVOD):
   • Viewers pay a higher fee to access new or exclusive content, often before it’s available on other platforms.
   • Typically used for early releases of movies or special events, appealing to consumers who are willing to pay more for immediate access.
     
   • Gives studios more control over pricing and release timing through bypassing traditional distribution channels.
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Hybrid video on demand (HVOD)

HVOD combines elements of different monetization models, offering users multiple ways to access content. Netflix, Hulu, and Disney+ all fall into the HVOD category because they generate revenue through a mix of advertisements and subscription plans. This approach gives consumers the flexibility to invest their money and time on their terms.  

Successfully managing the HVOD model required a solid understanding of user segmentation, content distribution, and the integration of advertising with subscription revenue. Developers need to balance engaging free, ad-supported content with a premium subscription tier that offers enough value to justify the cost.

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Over recent years, the trend of viewers opting for ad-supported OTT content has greatly increased. Initially, Disney+, Netflix, and Max saw higher sign-ups for ad-free plans. Over time, the share of ad-supported plan sign-ups grew substantially across all platforms.

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Broadcaster video on demand (BVOD)

BVOD is video content produced and published by traditional broadcasters that is available online and on-demand. It connects conventional TV broadcasting with modern streaming services. BVOD platforms use ads in their content to generate revenue. Some offer premium, ad-free tiers for a subscription fee.

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Key features of BVOD:
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1. On-demand access to broadcast content
2. A mix of free and ad-supported tiers
3. Catch-up TV services
4. Live streaming of broadcast channels

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Advertising on BVOD platforms offers several benefits:
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• Precise targeting: User data helps to place ads more effectively, reaching specific audience segments based on their preferences and behaviors.
• Increased reach: Engage with viewers across various devices, expanding your ad's visibility and audience.
• Better brand safety: Ensure your ads are shown alongside reputable broadcast content, enhancing your brand’s image and credibility.
• Zero ad fraud: An in-house advertising environment where there is no risk of scams, misinformation, or hateful content, ensuring a secure and trustworthy platform for your ad campaigns.
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Unlike traditional TV, BVOD platforms let advertisers monitor the performance of their campaigns and monitor data, and analytics about audience behaviour and engagement. This allows for immediate optimizations and adjustments.

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Comparing BVOD and AVOD

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Key features of BVOD:

BVOD platforms have direct control over their content, as it is produced by the broadcaster, ensuring ownership and quality. These platforms are integrated smoothly into the broadcaster’s larger media ecosystem, allowing for a smooth user experience and cross-promotion of content. Audience familiarity with the broadcaster's brand and schedule can drive adoption and loyalty to the platform. BVOD platforms operate on a hybrid monetization model, generating revenue through both advertisements and subscriptions.

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Key features of AVOD:

AVOD platforms offer free access to a diverse range of content by licensing from various providers rather than producing it in-house. Revenue is generated through advertisements and sponsorships, allowing the service to remain cost-free for users. By offering content without subscription fees, AVOD is accessible to a broad audience. User data and viewing behaviors are used to optimize ad targeting and enhance advertising effectiveness, balancing user engagement with monetization.

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How OTT advertising works

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The advertising model in OTT platforms is a key driver of monetization, and it operates in several distinct ways:

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1. Ad-supported revenue model:

• Revenue is generated through the sale of advertising slots during content streaming.
• Viewers gain free access to a variety of channels and on-demand content, but the experience is interrupted by commercials.
• This model attracts advertisers because it allows them to reach a large audience, often with targeted ads.
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2. Programmatic advertising:

• Many OTT platforms use programmatic advertising, where ad space is bought and sold through automated platforms in real time. Programmatic advertising relies on a protocol called real-time bidding (RTB).  
• Advertisers bid on ad placements based on specific targeting criteria, such as demographics, viewing habits, and geographical location.
• Allows for more personalized ad delivery, ensuring that the ads viewers see are relevant to their interests, increasing the likelihood of engagement.
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3. Ad inventory:

• Ad inventory is typically divided into pre-roll (ads before the content), mid-roll (ads during the content), and post-roll (ads after the content).
• Pre-roll ads capture attention before the viewer begins watching the main content, while mid-roll ads are inserted at natural breaks in the programming.
• Post-roll ads, though less common, can still be effective, especially for content that leaves a lasting impression.
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‍4. Dynamic Ad Insertion (DAI):

• ‍‍DAI is a technology that naturally inserts ads into a live stream or on-demand content.
• Ads are dynamically inserted based on the viewer’s profile, time of day, or the content being viewed.
• This technology allows for more efficient ad placements and reduces ad fatigue by varying the ads shown to each viewer.
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5. Targeted advertising:

• Platforms often collect data on viewer behavior, including what content is watched, how long it’s watched, and viewer demographics.
• This data allows for highly targeted advertising, where ads are tailored to individual preferences, making them more relevant and engaging.
• For example, a viewer who frequently watches sports content might see more ads for athletic gear or sports events.

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6. Ad load and viewer experience: ‍

• One of the challenges OTT platforms face is balancing ad load with viewer experience. Too many ads can lead to viewer frustration and churn.
• Most platforms aim to keep the ad load light, often around 5-7 minutes of ads per hour, to maintain a good balance between revenue (monetization?) and user experience.
• Some platforms offer options for reduced ad experiences, such as watching a longer ad upfront in exchange for fewer interruptions later.
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7. Server-side ad insertion:

• Enhance the ad delivery experience through numerous options like pod building, contextual advertising, content localization, and per-user playlist (PUP).
• Per-User Playlist: Creates personalized ad-viewing experiences at scale. PUP enables users to see a customized ad playlist based on their viewing habits and metrics like demographics, age, behaviors, location, and interests.
• Stitching multiple ads into a single ad break to maximize monetization. Ad podding is like commercial breaks on traditional TV that play ads back-to-back.
• Helps deliver ads that match the viewer's content type and genre, targeting an already-engaged viewer. For example, showing ads for a superfood brand when the viewer is watching a cooking show on clean eating. 
• Customizing ads based on regional preferences, such as displaying ads for snow boots in cold, snowy locations.

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8. Interactive ads: ‍‍

• Ads with diverse formats capture viewers' attention more effectively, making the advertising experience more immersive.
• By incorporating interactive elements, such as clickable options or gamified content, viewers are more likely to engage with the ads and take desired actions.

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Benefits for advertisers

OTT advertising offers effective monetization opportunities, with 84% of global marketers now including streaming in their media planning.
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1. Cost-effective: Advertising on OTT platforms is often more affordable than traditional TV advertising, allowing brands with smaller budgets to reach large audiences.
2. Measurable impact: With detailed analytics, advertisers can track the performance of their campaigns, such as impressions, clicks, and conversions.
3. Scalable reach: OTT platforms have millions of users, giving advertisers access to a broad and diverse audience.
4. Flexibility in budget allocation: OTT advertising allows for more flexible budgeting compared to traditional media. Marketers can allocate budgets dynamically, choosing between high-reach campaigns, highly targeted placements, or experimental ad formats without being locked into a single strategy.
5. Cross-platform integration: OTT advertising can be integrated across multiple platforms and devices, ensuring a consistent brand message.

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Wrapping up…

The OTT streaming environment is diverse and complex, with each model offering unique advantages and challenges. But understanding is just the first step. Implementing these models effectively requires reliable, adaptable technology capable of meeting the streaming industry's constantly changing demands. This is where FastPix comes in.

Our API platform is designed to simplify the complexities of video content management, whether you are dealing with VOD, live streaming, or a hybrid approach. From metadata management to adaptive bitrate streaming and DRM, FastPix provides the tools you need to build powerful, scalable streaming platforms.

Why not see how FastPix can transform your video workflow? With our free trial, you can explore our features and see firsthand how we can help you create interactive video experiences. However and whatever you want, with FastPix you can (probably) build it. Every single part of FastPix is engineered to help you move faster.

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Click here to start using FastPix for free.