Many companies would like to have such a profitable business as Netflix is. Some of them start a video streaming platform and benefit from it. If you are interested in how they do that, continue reading. In this article, we will talk about OTT platform monetization models. In other words, how do these services like Netflix or Disney+ make revenue?
So, how do OTT video streaming services generate revenue?
There are a number of approaches:
Subscription-based OTT platforms require a fee once a week, a month, or a year. After the purchase, viewers can get steady access to video content on a platform. When a paid period ends, a user needs to renew the subscription.
It is different from a long-term contract that cable or satellite television requires. A video platform subscription is easy to cancel. It requires several clicks on your phone. But to cancel the contract, a person should go to a company and do it there. It requires time.
To a business, subscriptions give an opportunity to learn about the audience better. As they will probably use the platform more often, a business will get valuable analytics data. This data can be used to enhance the platform and boost its performance to attract more subscribers later.
The challenge is the subscription fatigue that the video streaming industry has been observing for a while. It happens because people get tired of all the subscriptions they have. Many subscribe to at least 2-3 services. They need to set priorities when joining another one.
Netflix is a famous example of a platform making revenue on a subscription basis. People love Netflix because the company offers content produced by other movie companies and creates its own content. So, there are many famous and original videos there.
Netflix’s subscription cost package depends on the number of screens that can show the platform’s videos at the same time, HD or Ultra HD quality enabling, and the number of devices to download a video on.
However, recently, Netflix announced that soon the platform will be testing a new package. The cost will be lower, but videos will have ads. It is also a model that helps video streaming platforms generate more revenue.
Usually, an advertisement-based monetization model allows viewers to watch videos for free, but they also watch ads. So, they don’t pay for viewing. Instead, a platform shows them ads created by other businesses. These businesses pay for video streaming services to do that.
But some platforms create a package like Netflix’s one. They lower the price for a subscription and add ads to it. So, users still purchase the recurring fee but at a lower cost and also watch ads in exchange.
OTT advertising is beneficial as it increases user acquisition. A platform will likely have many viewers, and it will also generate revenue by running ads. People will use the ad-based platform because it doesn’t require a fee.
Pay-per-view is also called a transactional-based monetization model. Instead of purchasing a subscription, people pay for a single piece of content.
A transactional-based revenue model is good for platforms that don’t offer plenty of videos.
A pay-per-view model offers users two choices: either they obtain continuous access to videos or rent them for a period of time. Also, some platforms allow viewers to download a video on their devices.
This model is said to be the one that helps businesses generate the most money on it.
Of course, OTT platforms have other ways to generate revenue. But these models are the basis. They are a start for video streaming businesses to earn money.