SVOD vs. AVOD vs. TVOD: VOD Services Explained
The traditional media consumption model is old news. Media consumers have more options at their fingertips than ever before, via mobile devices, tablets, laptops and even smart home devices.
According to a recent report by Grand View Research, the worldwide streaming video market will reach $223 billion by 2028. As technologies like the cloud, AI and blockchain enable more streaming options, consumers will demand more and more from media providers. Poor experiences and lackluster functionality means lost revenue.
Streaming media companies must ensure high-quality digital experiences for video on-demand (VOD) as well as a consistent revenue stream from consumers. But there’s no singular business model for VOD services. As more entertainment providers enter the space, they bring their own revenue-generation models that might offer a competitive edge over their competition.
Several types of VOD services have emerged, namely:
subscription video on-demand (SVOD)
transactional video on-demand (TVOD)
advertising-based video on-demand (AVOD)
So, what are SVOD, TVOD and AVOD? How well do these types of VOD services deliver revenue for media companies? We’ll pit SVOD vs. AVOD vs. TVOD to help your business make an informed decision for your over-the-top (OTT) product launch. Remember, however, that all three types of VOD services depend on high-quality customer experiences to succeed — it’s all too easy to cancel a subscription these days.
Types of VOD services
As content delivery systems evolve with advancements in technology, companies can deploy a variety of monetization strategies. Some established VOD services have a larger, more loyal customer base than others, so it’s best to consider all options prior to a product launch.
Before we get into SVOD vs. AVOD vs. TVOD, let’s explain each term individually.
What is SVOD (subscription video on-demand)? SVOD follows a subscription-based monetization model in which the consumer is charged a flat rate every month or year, no matter how much content they consume. Similar to traditional cable or satellite TV packages, SVOD often ties the consumer into a short-term contract or no contract at all, giving them flexibility to cancel as they please.
Some examples of SVOD service providers include Netflix, Disney+, Hulu, Apple TV+ and HBO Max.
What is AVOD (advertising-based video on-demand)? This type of VOD service offers content to consumers for free, but with commercial advertisement breaks. Some media companies enable interactive ads, in which the customer can choose between company advertisements to watch or even see nearby locations for a particular store or product. With the AVOD model, the company depends on that revenue stream to stand up the platform and support future content. AVOD is common among television channel apps and platforms for user-created videos.
Some examples of AVOD service providers include YouTube, Facebook Watch, Peacock, IMDb TV and Pluto TV.
What is TVOD (transactional video on-demand)? Most consumers know TVOD as pay-per-view, in which they purchase access to a piece of content, such as a movie, television show or sporting event. TVOD transactions can take place as a short-term rental or long-term license — in most cases the consumer does not actually own the content they purchase; it just doesn’t expire unless the consumer violates the terms and conditions of the service or the VOD provider goes out of business.
Some examples of TVOD service providers include Vudu, Google Play, iTunes and Redbox.
SVOD vs. AVOD vs. TVOD
As traditional means of viewing and interacting with content evolves, media companies must get creative in how they monetize their platforms. But how do they choose between SVOD vs. AVOD vs. TVOD? Generally, it depends on the platform and the library of content available to customers. Here are some common examples of when to use each type of monetization method for VOD services.
SVOD is an intriguing option for media companies, as it comes with a flat source of income on a regular basis. Media companies like recurring revenue, and SVOD was a popular model for consumers for early cord-cutters. However, when compared to AVOD and TVOD, SVOD models today can struggle with customer retention, as providers must regularly entice customers with content or price promotions to renew — many will include a discounted annual fee, for example, to keep customers subscribed. Customers, more likely than ever to exert their choices in a digital marketplace, are wary of recurring charges and of media companies’ attempts to limit access to multiple users or devices. To succeed with an SVOD model, media companies must offer a comprehensive and fresh library of content to keep customers hooked. SVOD might also be an intriguing option for companies that cannot — or simply don’t want to — consistently secure ad revenue to keep the platform running.
AVOD helps ensure a revenue stream for content that might not generate direct or recurring revenue from customers. Companies that produce or collect an extensive content portfolio often take advantage of an AVOD model. Free content, however, often comes with a tradeoff. Media companies that use the AVOD model might struggle to retain customers, either because the content is of lower perceived quality than what SVOD or TVOD providers offer or because users become frustrated by commercial interruption. AVOD might also come with unique technological barriers to ensure that ads display appropriately and are customized and interactive for the user.
Compared to SVOD and AVOD, TVOD offers the clearest expectation for provider and customer alike. When you sell a rental or license, you know exactly the operational cost and overhead for each type of content, which allows for more accurate pricing and profitability. Likewise, customers know exactly what they’re buying. However, there’s no guarantee a customer will use a TVOD platform more than once, even if you provide some free content. To boost customer loyalty, TVOD providers often need to match or beat competitor prices. Because a TVOD customer might be infrequent, it is hard for the platform to collect enough data for content recommendations that entice them to come back. TVOD providers must also be able to quickly and accurately identify the user’s location to process payment and provide content in the correct language.
SVOD, AVOD and TVOD all have their strengths and weaknesses — for this reason, many media companies utilize a blend of different approaches. Larger companies can even implement different types of VOD services based on the product. For example, YouTube provides user-created content for free to customers (AVOD), while also offering premium content to rent or purchase (TVOD) and a separate subscription-based entertainment service with live TV (SVOD). Likewise, Hulu takes a hybrid approach with its platform, currently allowing four tiers of pricing that essentially offer a combination of SVOD and AVOD, plus the opportunity to bundle with Disney+ and ESPN+. Disney+ and Apple also take hybrid approaches to VOD monetization. Amazon Prime Video enables users to add free trials of other streaming platforms, like AMC+, as another way to entice customers.
As this space matures, keep in mind that other alternatives will emerge as companies seek better ways to retain customers and revenue. For example, the pandemic yielded a new model: premium video on-demand (PVOD). While similar to SVOD and TVOD, PVOD enables a subscriber early access to a movie or piece of content that they would typically have to pay separately to watch — the most notable example being a movie currently playing in a theater. The PVOD model might charge the user an extra amount to watch the content at home or provide a short window for viewing the content under the base subscription.
Pricing for VOD services
Pricing for SVOD, AVOD and TVOD largely depends on the size of the business and how competitive it needs to be in the marketplace. An established subscription-based streaming media provider can command a higher premium for its vast and popular catalog of services, while a newcomer must find ways to entice subscribers already spending money on other platforms.
There are several ways a streaming media provider can attempt to stand out with a VOD service, including:
freemium, or gated, pricing model
Each type of promotion can beckon customers to a platform, but they will only stay if it meets their high expectations. Sure, users expect a large volume of content for their money, but they also expect VOD services to work effectively and efficiently on every device. All it takes is a little bit of friction for users to cancel and move on to a competitor, who might offer a promotion of their own.
Customer experience with VOD services
VOD services must work flawlessly every day, any time and on almost any device — not an easy task. Organizations must first prioritize devices for testing, then attempt to validate platform functionality, user experiences, payment methods and language translations. Good luck accomplishing that in a testing environment.
Here’s where the Applause community of digital experts comes in. Applause’s vetted testers can validate functionality for VOD services anywhere around the world, checking for the bugs in scope, then delivering a report right into your bug tracking system. If you want to verify that your target users can interact with your platform seamlessly, Applause can conduct broader exploratory or UX testing with users that fit your demographics to identify any points of friction or frustration.
It doesn’t matter if you choose SVOD, TVOD or a hybrid monetization approach — you simply must make sure users can successfully pay for your platform, and with ease. Applause provides payment testing with real users and real transactions to ensure all forms of payment are accepted. Even if you choose an AVOD monetization model, real-world testers can verify whether advertisements are correctly personalized for their location and, if customized, their interests. And there’s little chance VOD platforms will launch with support for just one language. Conduct localization testing with Applause to make certain your VOD services can reach users all around the world in their natural language.
Ready to get started? Reach out to Applause today to learn how we deliver value to the world’s largest streaming media companies, and how we can help you provide an amazing digital experience for your users.
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