Monetize Your Content: AVOD, SVOD, TVOD

High-quality shows and movies, or profound documentaries, require time, talent, and budget poured into them. Market-dominating production companies, like Netflix or Hulu, can afford to create high-quality video content because they get the return on investment from a massive subscriber base.

A smaller, regional OTT provider can acquire streaming rights for the same high-demand content from these, but still struggle with stalled subscriber numbers and a dry revenue stream. Sound familiar?

This is the quiet reality many content providers, production companies, and OTT operators are facing. In this article, we’ll break down the three dominant VOD models—SVOD vs. AVOD vs. TVOD—to help you weigh their trade-offs and choose the right strategy for your platform and target audience.

Why (not) Use YouTube?

Before we delve into other video monetization models, let’s explore why YouTube is not the best option out there. Certainly, there are PLENTY of YouTube users out there that want to watch videos, so there is likely users that want content you have to offer. But what are the drawbacks?

• There is a TON of competition
• YouTube can change your profit limits
• Monetization is based on views or clicks

Which in essence means that you are at the mercy of YouTube, and how much money you can make. YouTube can even remove your stream of income overnight if they choose to. Scary, huh? It certainly is.

There are three monetization models out there that you can use (if you have the right tech backing you). All of these models revolve around VoD streaming (Video-on-Demand). Let’s explore these video monetization models:

AVOD Monetization Model (Advertising Video on Demand)

AVOD allows users to access video content for free, but plays ads before, during, or after content, allowing creators to monetize without charging.

An example of a classic AVOD business model is YouTube: you want to watch a video, and an advertisement pops up before it starts. Many other big market players adopted the same model to keep the lower-priced subscription tiers: as of September 2023, 50% of new Disney+ subscribers opted for the ad-supported plan.

Often, you can skip the advertisement after a while. A viewer can either see (impressions) or interact (clicks) with your advertisement, and you get paid. But, you most likely have to have a big following to cash in.

There are a few pros of AVOD vs SVOD:

• Free content keeps viewers coming back
  Offering free access to shows and movies lowers the entry barrier to a broader audience, which brings in more ad impressions.
• Straightforward revenue sharing
  With AVOD, revenue distribution is typically based on the number of ad views per video.
• Flexible ad placement enhances engagement
  Ads can be strategically placed at the beginning (pre-roll), middle (mid-roll), or end (post-roll) of a video. This flexibility allows for a less disruptive ad timing.
• Targeted advertising increases effectiveness
  AVOD platforms use viewer data to deliver ads based on demographics and preferences.

What’s the catch, then? There are a few downsides.

• You’ll need a serious scale to stay profitable

AVOD might be free for viewers, but streaming video isn’t cheap. You’ll need a large and active user base to offset bandwidth costs and keep ad revenue flowing.

• Revenue takes time to build

Don’t expect instant returns. It takes ongoing effort like consistent content creation, smart promotion, and audience growth to generate steady income.

• Cross-device access is a must

If your platform isn’t optimized for phones, tablets, smart TVs, and everything in between, you’re leaving viewers—and ad dollars—on the table.

SVOD Monetization Model (Subscription Video on Demand)

The SVOD model, or Subscription-based Video on Demand, allows users to access ad-free content by paying a subscription fee, typically billed monthly or annually. This model often includes premium features, such as exclusive content, early access to releases, and offline viewing capabilities.

The SVOD model continues to lead the VOD market, commanding approximately 85% of the global market share in 2024. By 2029, its estimated GAGR will sit at nearly 11%.

An example is Netflix. This business model pays you a recurring subscription fee for each subscriber, either monthly or annually. That means for a single price, your subscribers can watch all the content they want. It’s a straightforward, simple model, and the current industry standard. You will be closely examining the churn rate, which is the annual percentage of customers who stop subscribing to a streaming service. You want to keep your customers fully engaged, so they don’t leave. That means a good UX (to find videos) and a solid content library (so there is a great selection to choose from).

What’s in it for you as an operator?

• Higher user retention. Subscribers are more likely to engage with the platform’s content, making it easier to analyze and segment user preferences.
• Predictable revenue. Recurring subscription fees enable reliable revenue forecasting based on user behavior and retention rates.

But beware of some limitations:

• Requires scale for profitability. The model demands a substantial user base or higher subscription fees to cover operational costs.
• Complex revenue sharing. Determining which content drives subscriptions can be challenging, often necessitating pre-paid licensing agreements or performance-based bonuses.

TVOD Monetization Model (Transactional Video On Demand)

When subscribers use a pay-per-view (PPV) service, like purchasing a big boxing match from Fox Sports, for instance, you’re looking at the TVOD model. Your subscribers only pay for what they want (Pay-per-view), and you attract viewers with exclusives. To sum up the advantages:

• People pay for what they want, when they want it
  TVOD puts the viewer in control. Whether it’s a movie rental or a live concert stream, users can buy exactly what they want with no strings attached.
• Perfect for one-time events
  Pay-per-view (PPV) shines when it comes to sports matches, music festivals, or exclusive broadcasts. If you’re streaming something big and time-sensitive, TVOD helps you capitalize on that urgency.
• Flexible pricing and access
  You can offer content à la carte, bundle it, or add one-time paid extras. Plus, with features like guest mode and in-app payments, users can make purchases on the fly without mandatory registration.
• Past content still earns you money
  Already streamed that big match or event? TVOD allows you to keep it available as on-demand content, allowing new viewers to purchase it after the fact.

However, there are certain drawbacks if we’re talking SVOD vs AVOD vs TVOD:

• Tough to build long-term loyalty
  Since viewers only pay when something catches their eye, you’ll need to keep the pipeline full of high-interest titles or events.
• Constant marketing hustle
  Unlike subscription models, where revenue is recurring, TVOD requires you to resell each title or event every time. That means ongoing promotion, more audience targeting, and more time spent on campaign strategy.
• Revenue streams can be unpredictable
  If your event underperforms or your newest release doesn’t gain traction, the returns can fall short. TVOD is highly dependent on content performance, timing, and market demand.

Video Monetization Model Comparison: AVOD vs SVOD vs TVOD

What Is the Best Video Monetization Strategy for Your Own OTT Business?

In the world of OTT, the key thing is to be available wherever your subscribers are—anytime, on any device. Whether they’re at home or on the go, viewers expect seamless access across screens. For service providers, monetization is equally critical. That’s why it’s essential to understand the strengths of the business models we’ve covered:

• AVOD model allows you to remove financial friction and expand your reach through ad-supported models.
• SVOD is ideal for platforms with an extensive content library and long-term engagement strategy. It scales well. You can (and should) continue adding content to your library, making it more valuable for subscribers and potential subscribers alike.
• TVOD and PPV work well for high-demand, exclusive, or event-based content.

Integrating TVOD with SVOD or AVOD models can offer a balanced approach to content monetization. For instance, a platform might offer a subscription-based service for general content, while providing premium or exclusive titles on a pay-per-view basis. This hybrid model caters to diverse viewer preferences and maximizes revenue potential.

Many OTT solution providers stick to one model and limit your monetization options. Naturally, the best way to avoid this is to acquire a platform that allows you to:

• Offer a mix of monetization models
• Manage the pricing in an easy and flexible way
• Control content and monitor its performance
• Adjust your strategy as you go
• Reach subscribers on any device, anywhere in the world

Nora, Setplex’s future-proofed OTT middleware, was built with this in mind. It enables operators to deploy flexible monetization strategies tailored to different content types, regions, and business goals. With built-in support for hybrid models, Nora allows you to combine SVOD, AVOD, TVOD, and even FAST, maximizing value across your entire video library and live event pipeline.

To learn how Nora can help you get rid of single monetization model shackles and expand your revenue opportunities, download the Nora 3.0 spec sheet or book a demo with the Setplex team.