What is an OTT business?
We will examine how OTT platforms make money by broadcasting video content anywhere where there is an Internet connection.
Statistics
According to Statista, video streaming revenue this year will reach $316.10 billion.
Furthermore, incomes will increase by 10.01% annually. As a result, the market volume is expected to reach 462.90 billion US dollars in four years.
The most active OTT segment is promotional videos. Approximately $205.10 billion will be generated in revenue in 2023.
The number of users in this area is also growing. According to Statista, their number will reach 4,216.3 million in four years.
A key factor in the success is the ability to watch videos on any device and the growing number of connected devices every year.
What is OTT?
OTT (over-the-top) - broadcasting not through traditional means (cable and satellite), but over the Internet. It is a way to deliver content on demand to a device that is convenient for the user. Tariffs determine the cost of access.
This business is in the billions. Among the biggest and most successful platforms are Netflix, Hulu and Amazon Prime Video. We will analyze their business models in this article.
How do OTT platforms make money?
All these services use hybrid models for earning - direct advertising and different monetization models. Let's analyze them in more detail.
Advertizing
In this case, OTT platforms work with advertisers or agencies.
Advertising is placed in three formats:
- Before the video starts playing;
- In the middle of the video;
- Platform banners.
Direct advertising is a good way to earn extra money for an OTT platform.
Advertisers are offered different options for targeted advertising and are given access to platform user data to select the most effective one, optimize ads and track performance.
Targeting is configured according to three parameters:
- geography;
- demography;
- people's behavior.
Most popular monetization models
SVOD : Subscription Video on Demand
Who uses SVOD
- Netflix
- Hulu
- Amazon Prime Video.
What are they doing
Users pay a subscription fee to access the video library. As long as there is an internet connection, users can play any video anywhere, anytime, from any device.
Advantages
Owners of OTT platforms receive a stable income from subscribers. This allows them to estimate future revenues and build long-term plans, as well as evaluate the potential income from purchasing new content.
AVOD: Advertising-Based Video On Demand
Who uses AVOD
- YouTube
- Roku
- Channel
- VUDU
What are they doing
The user accesses both the content created by users and professionally created content, but watches ads. There is also paid content.
Advantages
Streaming platforms earn money from advertisers, not from viewers.
If you are at the beginning of the path to creating content, or you have a limited budget, then you can earn money this way.
TVOD/PPV : Transactional Video on Demand / Pay-per-view
Selective payment for content. Rent or one-time purchase of video.
TVOD is a model that allows users to pay for the video they want to watch, also known as pay-per-view. Viewers usually have the option to either rent or buy the video they want to watch.
Who uses TVOD
- Apple iTunes
- Sky Box Office
What are they doing
The user only pays for the content they want to watch. Platforms provide both novelties and classics (if we are talking about movies).
There are two types of monetization:
- EST – a one-time payment for permanent access to a specific piece of content (the file remains with you);
- DTR – download for rent.
The hybrid OTT revenue model
It combines subscriptions and TVOD.
Who uses
- YouTube
- Vimeo
What are they doing
The combination of paid and free content reaches a wider audience. This model is beneficial to advertisers.
Multiscreen model
Here it is possible to switch between devices and transfer video to multiple screens and devices:
- TVs
- smartphones
- tablets
- computers.
This model allows you to view content, pause, and continue where the viewer left off.
Business models of the top three OTT platforms: Netflix, Hulu and Amazon Prime Video
Amazon Prime Video
Amazon Prime Video generates revenue with a hybrid of SVOD and TVOD:
- subscription content
- rental views
- advertising.
Most of the income comes from subscriptions. Monthly or yearly plans give you access to software, licensed videos, the Music Unlimited streaming service, and even Amazon.com shipping.
Using TVOD allows users to rent movies or shows.
Amazon streams three types of content
- TV shows or movies created by Prime Studios
- Content obtained through licensing deals
- Live broadcasts of sporting events.
Netflix
Netflix generates revenue with the help of a subscription model - SVOD.
This provides them with consistent user revenue and gives them three benefits:
- ability to create their own unique content;
- purchase licenses for quality content created by others;
- pay off streaming and marketing.
HULU
Earn through a combination of subscription and advertising. The main income comes from subscriptions.
Monthly rates:
- Hulu basic plan with ads;
- Cheaper plan with ads - for students;
- Without advertising. (There are a few exceptions);
- Hulu (with ads) + Live TV, Disney+ (with ads) and ESPN+ (with ads);
- Hulu (no ads) + Live TV, Disney+ (no ads) and ESPN+ (with ads).
With ads, you can see ads in different parts of your video, as well as hidden ads and branded content.
In Conclusion
More people are cutting the cord and switching to streaming services. Therefore, if you are looking for an opportunity to make money in the field of OTT services, it is important to find the income model that suits your case.
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