02 / September / 2020

Matter of Choice: OTT Business Model

When we discuss video monetization in 2020, only one thing is clear: video-on-demand (VOD) and live TV market has room for every business model: from pure subscription or ad-supported model to a combination of the two. Here's a summary of what experts are predicting.

Matter of Choice: OTT Business Model

The number of streaming services is only getting more overwhelming. Last year, new services like Disney+ and Apple TV+ joined media giants such as Netflix, Amazon Prime, and Hulu. At the end of 2019, there were already more than 270 streaming services on the market, according to Parks Associates.

Conviva’s analysis says that size and pace of growth are both increasing. Viewership overall is up by 72% year-over-year.

Is It Bread-and-Butter Issue Where Revenue Comes From?

The subscription-or-advertising dilemma is not a business one but much of philosophy.

"It's important to figure out what you're trying to come to and build off of that," says Gabriel Berger, CEO of ThinkAnalytics, "All services are going to have to make money”.

Subscription vs. VoD

Video service providers have everything to offer and consumers need to figure out how to obtain their viewing experience. While some people question how nearly 300 services can stay in business, the capacity for viewers to seek niche content is still increasing

According to Deloitte's survey, viewers have an average of three streaming subscription services. A Morning Consult poll showed that OTT customers are ready to spend $17–$27 for all of their services. 

Winning business mix will still be a combination of subscriptions and AVOD. According to the TiVo Q4 2019 Video Trends Report AVOD dominates consumers' top service bundles.

Cut the ads?

Matt Smith, executive director of business development and strategy at Comcast Technology Solutions, comments: "There was some research that said people don't want to watch ads. I don't think that's true. We've all been conditioned to, in our traditional or digital viewing platforms either sit and watch something in a linear fashion and have the ads, or if you have a DVR, you might skip through some. Or if you have a premium channel, you're used to that channel not having any ads other than promos for their own content. But today, things are evolving, things are changing. I think we are discovering as an industry, that people are okay with watching ads”.

This is confirmed in SPB TV's 2020 Survey: 48% of respondents feel comfortable with advertising.

The industry is getting better about delivering ad payload with relevant data so that viewer sees ads that are really relevant. Industry specialists have already started to say that personalized ads are that magic unicorn: personalization based on location, age, economic strata, and other data will deliver different ads to different viewers.

Until recently, the monetization question was either/or: am I going to charge a subscription or am I going to support it with advertising? Today both strategies can be successful. It's highly likely that future will see publishers or content rights holders charging a smaller subscription fee and offering a limited ad payload.