Scroll back through the history of online video services and it’s fascinating to see how their business models evolved.
Netflix, which has been running in some form since 1997, was originally - and famously - a DVD sales and rental company before introducing streaming in 2007. YouTube, perhaps the web’s first true home for short form video, was initially free at its outset in May 2005; its first targeted advertising capability wasn’t made available until the following year. And whilst Prime Video (formerly known variously as Amazon Unbox, Amazon Instant Video and Amazon Video) has always been tied to its parent company’s retail membership offering, Amazon also acquired LoveFilm, the DVD-by-mail and TVOD (Transactional Video-on-Demand) provider in 2011.
A commercial innovator amongst these other innovators was a specialist UK newspaper called The Racing Post. Together with the linear TV channel, Racing UK, it had - in 2005 - acquired the newly created rights to screen horse races online.
When its inaugural OTT service launched later that year, it did so with what we’d now call SVOD (a monthly subscription), pay-per-view (£1 to watch a race) and Bet2View (wager £5 with a bookmaker partner and watch the race for free).
These were real novelties at the time in a still embryonic video landscape. And despite having to build almost all of the architecture – the CMS, CRM, DRM, DAM / MAM and payment solutions – from scratch, we might now, on one level, regard this as a relatively simple project. In an age before smartphones and tablets it was, after all, only catering to a single viewing device: Windows computers.
Coming back to 2023, OTT service providers now habitually deploy multiple business models. They don’t launch with them all at once necessarily – they may be introduced more gradually – but the options include:
- PVOD (that is, Premium VOD with day and date release)
- PPV (Pay-per-View, usually for live, time-limited events)
- And the newest (but potentially most profitable over the next few years) edifice on the block, FAST
And in between these skyscrapers are a few townhouses too:
- AVOD-lite (still pay a subscription but watch fewer ads than AVOD)
- B2B2C (or D2D2C where your service is on popular platforms like Amazon Prime Channels or Roku who handle the billing)
- Bundling with Pay-TV providers (e.g. Amazon, Disney, Netflix and the soon-to-be-retired brand, BT Sport on Sky) or operators / telecoms companies (particularly popular in Asia e.g. Jio in India)
- The other PVOD – perhaps we can call it PVODS (Premium VOD for Subscribers)? – where subscribers get to watch a new title weeks or months before AVOD users (e.g. Marvel movies on Disney+)
- vMPVD (content made available on virtual multichannel video programming distributor platforms e.g. Sling TV, Hulu Live TV and YouTube TV)
- And EST (Electronic Sell-Through where, for example, the buyer of a cinema ticket or Blu-Ray automatically gets to watch the title on their preferred platform when it becomes available on-demand)
So which one, or ones, do you choose? The easy answer might be to try most (or all) of them at once. After all, don’t Amazon, Netflix and even the new ITVX (from the UK’s biggest commercial broadcaster, ITV) all operate using multiple models? They do, of course, but not everyone has the budget or resources of those three companies to be able to attempt multiple experiments.
The guiding factors in deciding which options to choose include:
- Who is your audience? What are their key characteristics? And do they have enough disposable income to subscribe to your service (as well as other OTT services in the market) rather than watching for free with ads?
- Can you re-use products developed for Platform A on Platforms B, C & D?
- Who are your most valuable viewers? What’s your funnel to transition, say, AVOD or AVOD-lite customers to becoming fully-fledged subscribers?
- And how can you discourage churn or, at least, drop-off in viewing which may affect the perceived value exchange between you and the customer?
This blog post marks the fifth and last blog post of a five-part series. Read more blogs here!