The way of consuming video has turned into a digital model with VoD platforms as the main market players. In this article, we analyze the AVoD and SVoD business models.
During the last years, we observed how video content consumption changed its traditional patterns. The arrival of digital platforms opened a sprawl of possibilities that was boosted by the pandemic. We do not look for our favourite program on the TV Guide anymore, we watch it when and wherever we want and we have more content than ever.
According to the report VoD market trends by the European Audiovisual Observatory, VoD income increased from 388.8 millions of euros in 2010 to 11.6 billions in 2020. Keep in mind that these figures do not even show the impact of Covid-19. An impulse that we can see in the US, where according to Nielsen, the streaming currently represents a quarter of total TV consumption, a 16% increase in comparison with last year.
The numbers are clear. VoD platforms dominate video consumption or are on their way to do it. We have gone from zapping to discussing for hours what series or movie to watch on our digital TV or computer. How do they monetize that leadership? Two business models are fighting to dominate the market: SVoD and AVoD.
SVoD: Netflix as a pioneer
SVoD model revenues come from the payment of subscriptions by the users that enjoy the platform. Usually, through a fixed monthly payment,they can access all the content. This is the classic model defined originally by Netflix, and used also by Amazon Prime Video or HBO.
In fact, this is the main model in Europe. According to the European Audiovisual Observatory, the VoD market in the EU generated 11.6 billion euros, of which 9.7 came from SVoD, more than 80%.
Despite these good figures, this model is reaching its peak. The wide offer of different platforms make it difficult for users, as they cannot afford all subscriptions at the same time and the creation of original content is not always a sign of success. Some companies like Amazon Prime Video are searching for alternatives, like live sport streaming. For example, in the UK, Jeff Bezo's company is broadcasting the Spanish football league, LaLiga.
AVoD model: Beyond YouTube
Unlike the previous model, AVoD generates its revenue through the insertion of advertising, either before or during the content. The user does not pay anything. In this model it is essential to optimize and maximize the benefits generated by our ads, with a proper planning of their broadcast. Having a suitable Media Planning solution can be quite useful in this process.
According to analysts such as Omdia, AVOD has already surpassed SVOD in revenue in the United States and Asia-Pacific. Not only that, but it seems that this model has a promising future for the next five years. According to Digital TV Research, AVOD will experience during this time a 144% growth, with a presence in 138 countries and revenues of 54 billion euros.
But not all that glitters is gold, as this model also found some obstacles. Except YouTube, where the creators upload their content directly, the platforms need a large catalog to attract viewers, with the management challenges that this means. At the same time, advertising can be a double edged sword, as the user is not used anymore to watch ads.
Even if we have a SVoD model or an AVoD one, optimized content planning is vital for our platform. Something that is very simple with a BMS like VSNCrea. This software allows planning the publication of content on VoD channels, OTT, websites or social networks. Users can organize all content, with its associated metadata and broadcasting rights. It also offers a complete integration with the rest of VSN's products.
A mix of models as a solution
Maybe the answer to this battle is in the mid term: A mixed model. Warner Media recently announced the incorporation of an AVoD option for HBO Max in the USA. The company has been offering a free-ad subscription for 15 dollars and now it also has a 9 dollars option with ads and a restricted access to the catalog.
It is not the only platform to offer this option, but it is the first major company that was based 100% on SVOD, that opens up to a different ad-based model. We do not know how the move will turn out, but we are sure that other companies will be watching its success to see if they will join them in this hybrid proposal.
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The way of consuming video has turned into a digital model with VoD platforms as the main market players. In this article, we analyze the AVoD and SVoD business models.
