Streaming on OTT platforms is becoming the gold standard for consuming entertainment content worldwide.
As a result, the number of OTT platform choices for consumers is growing fast, making it a fertile market. Yet, this growth poses stiff competition for the existing VOD players and new market incumbents.
This blog explores OTT monetization, its different models, and the best way to optimize it for your OTT streaming platform.
According to a July 2023 Hub Entertainment Research report, 35% of consumers surveyed say the maximum amount of services they would use would be seven—and most haven’t maxed out yet.
Knowing the potential is one aspect. Identifying the best way to prepare content for monetization is another ball game. Thus, choosing the right monetization path is essential.
After all, pricing is among the vital purchase influencers and a key churn driver.
Understanding OTT Monetization
OTT monetization includes the different methods and strategies by which OTT companies can generate revenue from content delivery models.
Getting monetization right for your streaming platform is essential as it helps you to:
- drive revenue by boosting sales
- shape user experiences by implementing pricing that aligns with user preferences
- build a comparative advantage in the competitive ecosystem
- support a sustained growth pace
- ensure relevance in the dynamic landscape
The problem: Cracking the code for monetization can take time and effort.
There can be several circumstances to navigate. These include:
- A highly competitive market coupled with uncertain economic circumstances
- The rising phenomenon of subscription fatigue among consumers
- Customer preference for value for money
- Balancing the cost of producing or licensing high-quality content against subscription fees without compromising on quality
- Recovering different operational and infrastructural costs like support, technology, marketing, etc. According to research, running a streaming service is quite expensive, and many studio leaders have warned that streaming content investment will peak in 2023 and 2024.
Monetization can get complex because it requires balancing all of these aspects. It requires factoring in dynamic elements like changing consumer behaviors, technological advancements, and the market scenario.
Then, how can broadcasters land their monetization strategy?
Short answer: There’s no holy grail regarding monetizing effectively.
It’s all about experimenting and combining different monetization models to balance revenue generation, user satisfaction, and sustainable growth.
Let’s explore the key OTT monetization models in greater detail.
What are the types of OTT services?
Subscription-based Monetization (SVOD)
SVOD is among the most popular monetization models. In this model, broadcasters grant users access to content against a recurring fee.
There are usually different pricing tiers and fee plans based on varying levels of content access or additional features.
According to Cleeng x Omdia research, published in The evolving path to profitability, subscriptions currently fetch the highest revenue share for OTT broadcasters.
If you want to boost revenue with SVOD monetization, an excellent way is by leveraging marketing tactics such as:
- Free trials: They give users a feel of the platform and get them hooked on the content, convincing them to pay if they like the service.
- Promotional offers: These include coupons or discounts, which are known to elevate the users’ value for money perception.
- Putting subscribers in the driving seat, working with them, and not against them. This means not locking them in with a subscription. In other words, it allows them to upgrade or downgrade their subscription packages based on their changing requirements.
Advertising-based Monetization (AVOD)
In this model, broadcasters provide users access to free content supported by advertisements.
In turn, the OTT platforms earn revenue from advertisers through the ad impressions, clicks, or views they can generate. As an OTT broadcaster, inserting ads is possible in two ways - in-stream and programmatic.
- Instream advertising focuses on integrating ads within the streaming content. It may play before, during, or after the main content.
- Programmatic advertising leverages automated technology to buy and sell digital ad space. The method uses algorithms and technology to target specific audiences and optimize ad placements in real-time.
Since there’s no subscription fee for accessing AVOD content, you can expect to attract a more extensive audience base with it. This can include even those viewers who may be hesitant to pay for content but are open to ad-driven interruptions during streaming.
Targeting and personalizing is a powerful strategy for increasing engagement and revenues with AVOD.
- Targeting can work for you at a demographic level or behavioral level. You can also leverage it contextually and, for example, display sports ads while streaming sports content.
- Personalizing works in terms of elevating the user experience. It’s possible by sharing tailored or customized ad recommendations.
However, what’s critical is that you balance the ad frequency and user experience. Inserting too many ads or keeping disruptive placements can lead to user dissatisfaction. This may potentially drive viewers away. On the contrary, too few could pose a problem in covering costs. Thus, getting this balance right can be tricky. An intelligent way ahead lies in leveraging data analytics. This can help to understand audiences, create targeted ad campaigns, and maximize ad revenue opportunities without compromising the quality of user experience.
“We are expecting that streaming companies will manage ad loads in a sensible way, and so Omdia is still forecasting good growth for paid online video in 2024. The movement from free to pay will happen, although there will still be room for the paid services to thrive. But all of the factors we have highlighted mean that the balance is quite precarious, and the poor implementation of advertising, or the imposition of price increases too quickly and too steeply, could well threaten that expected growth,” said Maria Rua Aguete, senior research director in Omdia’s media entertainment practice.
Transactional-based Monetization (TVOD)
In this model, you can monetize individual pieces of video content.
This means that viewers can purchase specific viewing options of their choice and pay for them on a per-view basis.
These viewing rights are typically for a limited duration and come without any recurring payment requirement. They work well when monetizing new releases or premium content that might not be available on subscription-based platforms immediately.
Boosting TVOD revenue is possible by employing several tactics, such as:
- Ensuring compelling content presentation in the thumbnail description
- Showcasing free previews or content trailers to excite users to pay
- Sharing personalized recommendations
- Offering promotions and discounts
- Providing prompt support in case of queries
However, alongside the tactics, you must also ensure transparency in your pricing structure.
This includes clarifying all information for transactional content, including rental or purchase costs, access duration, and associated fees. Streamlining the checkout experience for utmost ease and integrating popular payment gateways is also crucial to monetizing with this model effectively.
Alongside dedicated SVOD, AVOD, and TVOD, most OTT platforms today offer a combination of monetization methods.
This includes hybrid models with a mix of free and paid content. In this, users get some content for free and can access additional premium content or features through a subscription. This approach helps to attract all kinds of users. When leveraging hybrid monetization, the ideal scenario is to convert passive AVOD users to active SVOD users. In the meantime, advertisements keep providing you with supplemental revenue.
Here’s some food for thought: If you upgrade just 1% of paying subscriptions to an annual plan every month, you can deliver an entire month’s worth of extra revenue!
Effective OTT monetization ultimately delivers user value while providing flexibility and adapting to market trends. Moving forward, some emerging monetization trends and innovations that are likely to expand include:
- Freemium models with microtransactions that allow users to pay for additional content or benefits.
- Integrating e-commerce elements into video content for viewers to purchase products showcased in the content directly
Premium VR/AR content and experiences that offer immersive and interactive entertainment
- Aggregation and bundling
- Branded content creation for additional revenue streams
- Localized pricing based on regional preferences and purchasing power
Finally, let’s get down to how you can put all of this into practice.
How to start implementing new OTT revenue models into practice
Finding success in the evolving OTT market begins with arriving at the optimal hybrid model.
This requires testing different video offer types to see which performs best with your customer base.
Cleeng allows broadcasters to experiment with different offer types through Core, a holistic Subscriber Management System (SMS).
Core allows you to evaluate and develop specialized pricing models based on your unique library. It also identifies how to retain and deepen relationships with subscribers.
Whether you want to sell using annual or monthly subscriptions, complete season passes, or just one-off rentals, all can be arranged within the same offer dashboard.
An offer outlines and defines basic selling terms and conditions, such as:
- Offer Title
- Access Period
- Billing Frequency
- Bonus Option: You can set up a free trial period or add local versions of offers for different countries and currencies.
Nearly all our online value proposition partners offer Server-Side Ad Insertion or other solutions to support your advertising plans. With us, you can work on plans to switch customers from monthly to annual plans and dramatically change the revenue projections of your service.
Take a tour of Cleeng's content monetization center with the short clip below:
Interesting fact: 56% of marketers spend more than half their time optimizing converged TV ad performance. However, only 40% believe their ad optimization practices are ‘very good.’ This means despite the time investment, 60 percent believe their optimization efforts fall short.
How to measure your OTT monetization performance
The best way to measure monetization performance and make optimization decisions is to rely on actual data.
Ultimately, it’s all about maximizing your ROI for your OTT monetization.
Data insights are pivotal as they reveal users' preferences, viewing habits, and engagement patterns. For instance, they flag what content genres, formats, and themes are successful. This understanding helps streamline content offerings, pricing strategies, and user experiences to match audience expectations better. Moreover, data analytics also simplifies accurately assessing the effectiveness of different monetization models.
What are the different metrics to measure monetization success?
If you’re looking to measure your monetization effectiveness, here are some metrics to measure success:
- CPM (Cost Per Mille) or the cost per thousand impressions. This helps to understand the efficiency of ad delivery and pricing. Using it, you can compare costs across different advertising channels or campaigns.
- CTR (Click-Through Rate) is the ratio of clicks on an ad to the number of impressions. Using it, you can assess the effectiveness of ad engagement.
- CPMV (Cost Per Thousand Viewable Impressions) is the cost for ad views that are deemed viewable according to industry standards. This metric accounts for only the viewable impressions. Using it, you can assess ad exposure and potential effectiveness more accurately.
- ARPU (Average revenue generated per user over a specific period). Using this metric, you can understand the revenue potential of each user. This can facilitate comparison between different user segments or subscription tiers.
- Churn rate or the percentage of subscribers who cancel their subscriptions within a given period.
Tracking and acting upon these metrics can help you up your monetization game.
Identify, Experiment, and Measure to Boost OTT Monetization Outcomes
OTT monetization is a critical area for broadcaster business viability. However, navigating it at optimum can be a complex subject with no single right formula. The best way ahead lies in identifying your audience and their needs, experimenting with the different monetization models, and innovating on the go. At the same time, closely measuring outcomes and pivoting the approach is key to attaining excellent outcomes.
Dozens of world-renowned OTT platforms benefit from Cleeng’s monetization platform and expertise. If you’d like to explore your monetization options with Cleeng, get in touch!