The rise of over the top (OTT) media has empowered audiences to cut the cord and enjoy entertainment on their own terms. People have more choices than ever before when it comes to how they consume movies, TV shows, sporting events, classes, and other video content.
In this brave new world of media, companies are grappling with how to distribute and monetize videos. The right choice can sustain and scale a business, while the wrong one can leave money on the table. One of those choices is transactional video on demand (TVOD).
Can your business benefit from implementing a TVOD monetization model? Is TVOD the right strategy for your goals? This guide to TVOD monetization will answer all of those questions and more.
Table of Contents:
- Video Monetization Basics
- What is TVOD?
- Pros and Cons of TVOD Monetization
- TVOD Examples
- Use Cases for TVOD
- Mixed Revenue Models
- How JW Player Supports TVOD
Video Monetization Basics: TVOD, AVOD, & SVOD
If you haven’t read those guides yet, stick around to learn about the three main monetization models for OTT media: TVOD, subscription video on demand (SVOD), and advertising-based video on demand (AVOD).
Transactional video on demand (TVOD) monetization is a pay-per-view model. To watch a movie, show, or another type of video content, audiences need to pay a one-time fee to buy or rent it.
A popular example of TVOD in action is Amazon Prime Video’s premium “rent or buy” releases. While Prime Video’s main business model is subscription based, it also lets customers buy or rent films and TV shows that aren’t included in the Prime Video library. Prime Video usually charges $19.99 to buy a newly released movie and watch it an unlimited number of times, and $5.99 to rent it for 48 hours.
A subscription video on demand (SVOD) monetization strategy charges customers a fixed, recurring subscription fee in exchange for access to a content library.
Many streaming services, including Netflix, employ an SVOD model. Netflix subscribers pay $9.99 per month for a basic plan, $15.49 per month for a standard plan, or $19.99 per month for a premium content plan. Subscribers can watch as many films and TV shows as they’d like from Netflix’s library as long as their subscription is active.
With an advertising video on demand (AVOD) monetization model, audiences have to watch ads before, during, and/or after video content to gain free access to it.
YouTube is one of the best-known examples of a media platform that relies primarily on an ad-supported business model. Viewers who don’t subscribe to YouTube Premium have to sit through ads before, during, and after videos.
With this basic understanding of the three main video monetization models under your belt, you’re ready for a deep dive into TVOD monetization.
What is TVOD?
TVOD stands for “transactional video on demand.” This OTT monetization model involves customers paying a one-time fee to watch a video. Most TVOD services let customers buy perpetual access to a piece of content, or rent it for a limited time for a fraction of the purchase price. Most businesses that leverage TVOD apply it to newly released shows or films, then make these programs available through AVOD or SVOD after their novelty wears off.
Pay-per-view content is often easier to market than SVOD or AVOD programming. When you add a pay-per-view title to your library, you can promote it on its own, rather than promoting your entire library to attract customers. If a TVOD customer has a good experience with your platform, they’ll likely come back for more.
Pros and Cons of TVOD Monetization
Not sure if a TVOD monetization model is right for your business? Let these benefits and potential downsides inform your decision.
- Many OTT providers use a pay-per-view basis for new releases. The novelty of this content inherently attracts customers.
- TVOD is a great monetization model if you have unique or exclusive content. For example, most televised WWE wrestling events are only available through a pay-per-view model. PPV.com charges around $40 for access to a wrestling match that’s exclusively available through their platform. Because there’s no other way to watch these matches, customers have no choice but to pay for them.
- Each new release you add to your TVOD library presents a new marketing opportunity for growing your audience. You can target the specific demographic of people who would be interested in the new release, rather than marketing your entire library. When these first-time customers have a good experience on your platform, they’ll be happy to come back for more.
- TVOD rentals typically cost less than SVOD platforms on average, making rentals appealing to price-conscious customers.
- The biggest downside of the TVOD model is that you’re charging customers a one-time fee, so the model has no recurring revenue built in (unlike a subscription-based model). That means you have to constantly promote your programming and add new content to keep customers coming back.
- If you have the same pay-per-view content as your competitors, you’ll need to work hard to have customers come to you. If you offer the same pricing, you’ll have to attract customers in other ways, such as by providing a great user interface and faster streaming.
- Oftentimes, purchasing a movie through a TVOD model is more expensive to customers than an SVOD subscription. That can make buying perpetual access to one piece of content seem like a bad value compared to having access to an entire library of content.
Examples of TVOD
Need some real-world inspiration before launching a TVOD option of your own? See how these OTT companies use a pay-per-view model to their advantage:
- Hotel Pay-Per-View Entertainment: One of the oldest examples of a TVOD revenue model is pay-per-view entertainment on hotel televisions. Guests can browse a library of movies and shows, then charge whatever they want to watch to their hotel bill. However as more and more hotels implement streaming platforms like Netflix and Hulu in guest rooms, the popularity of their pay-per-view options is waning.
- On Demand: Xfinity’s On Demand lets Xfinity customers buy and rent the latest movie and show releases from almost anywhere, including through their mobile app and TV platform.
- YouTube: YouTube is a great example of a video platform that successfully incorporates TVOD, AVOD, and SVOD revenue models. While YouTube offers ad-based content and ad-free viewing via YouTube Premium, it also has a range of movies and shows available for purchase and rental. Movie rentals and purchases range anywhere from a few dollars to $20-$25 for new releases.
- Prime Video: Amazon’s entertainment media platform functions primarily through a subscription model. However, customers can rent or buy unlimited access to programs that aren’t included in Prime Video’s library. Renting a newly released film costs about $6, while purchasing one costs about $20.
- Google Play: Google’s online store for apps, games, and books is also home to a vast library of pay-per-view titles. With rentals as cheap as $1 during limited-time deals, and purchases of newly released films in the $20-$25 range, there’s something for everyone in the Google Play pay-per-view library.
Use Cases for TVOD Monetization
Here are several scenarios in which a TVOD monetization model is more suitable than AVOD or SVOD monetization:
- Opt for TVOD if you don’t have a large enough collection of content to be able to offer a subscription-based service. For example, if you run a fitness studio and only have three pre-recorded classes available online, you could charge customers for access to each video.
- When you have early access or exclusive content no one else has rights to, such as a WWE wrestling event, audiences will pay a premium to watch it.
- TVOD is great for monetizing educational materials. Online learning company Skillshare uses a subscription model to give members unlimited access to its online courses. However, if they switched to a TVOD model, customers would pay for only the classes they wanted to take (which Skillshare could charge a premium for), which would hold customers more accountable to finish courses and potentially improve their satisfaction compared to a subscription that never gets used.
- Because you can market each TVOD release separately from your other content, you can market to a diverse audience more easily than if you tried to make your entire library appeal to everyone.
Combined Revenue Models
Although it’s a powerful monetization model on its own, TVOD doesn’t have to be used in a silo. In fact, it’s often more effective when used in conjunction with SVOD and AVOD. The most successful OTT businesses use mixed revenue models to serve customers without leaving money on the table.
Whether a viewer’s priority is watching blockbuster hits as soon as they’re available or binging shows while spending as little money as possible, you can maximize sales with a hybrid revenue model.
Pay–per–view prices tend to be similar to the cost of a month-long subscription to a streaming service, where customers get unlimited access to a whole library of content. Because of that, it can be difficult to sell customers on paying to watch one movie or episode of a show. However, that sell is easier when you give customers a free sample of what they’ll get after they pay.
For example, you could let people preview the first 15 minutes of a movie or watch the pilot of a show for free. By implementing ads during this free sample, you can still make money. After this preview, customers will be more willing to pay to continue watching the movie, or to watch the next episode or season.
Premiere With TVOD, Transition to SVOD or AVOD
Many media platforms use TVOD to get customers to pay a premium for newly released shows or movies. Maximize profits by introducing new videos as pay-per-view content. Then, after they’ve run their course, transition them to your SVOD library, or make them available for free through an advertising-based revenue model.
Tiered TVOD Pricing
Relatively high prices for pay-per-view content can keep some customers away. Attract price-sensitive customers while maximizing profits by offering tiered pay-per-view pricing.
Many TVOD-based platforms offer purchase and rental options. When viewers purchase a movie, for example, they pay a one time fee that’s higher than the cost of a rental (usually $20-$25). Then, they can watch and rewatch that movie as long as the platform exists.
Customers can also rent programming for a fraction of the cost of buying it (usually less than $10). Most platforms give viewers several weeks to begin watching rented content, and have several days to finish it after they’ve started before their access is revoked.
You could provide even more tiers by introducing a TVOD-AVOD model for purchases and rentals. Give customers a discounted rate in exchange for including ad breaks during their programming. Because 41% of consumers pay to avoid ads, you can eventually upsell these customers to get rid of ads.
Another way to implement tiered pricing that pertains to TV shows is to offer one price when customers purchase individual episodes and a discount when they purchase a whole season at once. Take advantage of the exclusivity and novelty of your content by giving an even bigger discount to customers who pre-purchase access to a brand new show.
How JW Player Supports TVOD
As an all-in-one video platform, JW Player goes beyond TVOD, AVOD, and SVOD to help you attract and retain customers. With JW Player’s fast, high-quality streaming services, your customers can enjoy your content on whichever device is most convenient for them. JW Player also optimizes your CPMs and fill rate to keep viewers watching, resulting in more sales for you.