Today, consumers are more inclined to purchase or subscribe to video directly from the source, rather paying for inflexible bundled cable services. This direct-to-consumer shift, and increasing number of video streaming services across all devices, have created new opportunities for businesses that want to do more with their video and leverage winning monetization strategies.
The Direct-to-Consumer Trend
Industry trends and forecasts all point toward migrating to OTT, while traditional bundled television services are starting to unravel as networks adapt subscription-based streaming services. In fact, this is not just a “nice-to-have” anymore. A report by The Diffusion Group says that ALL major networks will provide direct-to-consumer video services by 2022.
However, the opportunity to benefit from growing direct-to-consumer options isn’t limited to the major networks. Media-rich companies that represent a wide range of industries, such as fitness, faith, sports, and education, are shifting towards video-centric business models. For many, video has become either the primary or secondary revenue-generating service.
Any video-centric organization that is looking to grow its audience and revenue has the opportunity to get on board with the direct-to-consumer trend. Not to mention, building standalone streaming services allows for the team to have direct control over viewers and distribution. For many media companies, this raises the question: What is the best monetization model for my direct-to-consumer business?
To generate the most revenue, video businesses need to carefully choose a monetization strategy that works best. There are three proven approaches, but whether the approach is successful boils down to the content and audience. Video operations teams need to consider the frequency, duration and focus of their video content, coupled with the size and loyalty of their audience. This helps to identify the best possible monetization solution.
What are the monetization models?
Advertising Video on Demand (AVOD) – the most popular and easy to start model. It’s ideal for businesses that are frequently publishing shorter content with a broad focus to a mass audience. The barrier to entry is low, however, it can be challenging to generate revenue due to the mass audience requirement. Social media marketing efforts often drive the audience base and it can become very resource intensive. Customer lifetime value is typically low. For businesses that fit the basic requirements for AVOD, it can be the ideal choice. However, each company should the challenges of monetizing with an AVOD approach.
Transactional Video on Demand (TVOD) – requires exclusive content, such as boxing or MMA, and an enthusiastic, dedicated fan base who enjoys the businesses’ long-form content. Typically, the businesses that leverage this model deliver content in low to moderate frequency with a broad-to-high focus, and a small-to-moderate audience. An advantage is that it tends to have high revenue per view. The challenge, however, is the continual investment required to make repeat sales. There’s no built-in retention or revenue security with a TVOD approach, however, with the right content and audience, it can be very successful.
Subscription Video on Demand (SVOD) – ideal for businesses with large libraries of longer form content (more than 20 minutes). Live streaming broadcasts also tend to be successful with this strategy. With the SVOD model, video needs to be distributed at a moderate to high frequency. Typically, success happens when there also is a moderate to high focus and audience. When leveraging this model, the business needs a dedicated marketing team because acquisition and conversion are critical elements to success. SVOD’s unique attribute is recurring revenue – and many businesses are able to generate more revenue, faster than with the AVOD or TVOD models. Also, with subscriptions, it is generally cheaper to retain a subscriber than to acquire a new one, which in general can be four-to-five times more profitable.
For businesses without an established video monetization program, SVOD is often a good starting point. For the SVOD model, it is critical to build a marketing strategy that will support customer acquisition and retention to feed the recurring revenue stream. Teams need to figure out which strategies and tactics will drive subscribers. The technology upon which content is managed and distributed also comes in to play. Businesses should focus on selecting an infrastructure that can stream video directly to the consumer while helping the audience and business grow. This takes all the work out of the management and distribution element — freeing up time and talent to focus on creating delightful content for the audience. It’s also important for the business to understand video operations. Customer support is critical, and without good support, all aspects of the business can be impacted.
There are many factors that go into monetizing a direct-to-consumer video business. However, media companies that leverage certain video distribution software are able to not only stream video, but also gain audience insights, advertising and subscription options across all devices — all managed within a single infrastructure. Companies that offer these advantages are working with video-driven organizations to take their video directly to consumers and successfully monetize their business with an SVOD model.