The Three Main Flavors of VOD

If you have followed my blog at all, you know I have been writing about OTT since its birth. OTT (Over the Top Television) has grown for a concept to a major industry. While we associate the term with “cord cutters” or people who stream video off the web, as opposed to taking TV programming from broadcast, satellite or cable TV, the opportunity is actually much larger than that. This is notjust a segment of the marketplace, it may soon be the whole thing.

You might think that cable stalwarts like CNN and ESPN are trembling as OTT grows, the reality is that OTT represents a huge business bonanza, because the future is not so much about cable as it is about content. Great content providers will continue to thrive, no matter what the delivery medium. The biggest players in traditional media are poised to become the titans of OTT. While we always think about smart phones and tablets, the demand is actually greatest for big screen entertainment in the home.

For this blog, I’d like to focus a little more on OTT Video on Demand, which offers consumers the widest selection of content/programming. There are essentially three major flavors: SVOD, AVOD and TVOD. Let me help decipher the acronyms for you.

SVOD is Subscription Video on Demand—think Netflix. Typically, you are paying a monthly fee for a robust video service that has many programs instead of many channels. Other major players in SVOD are Amazon and Hulu. The other subcategory in SVOD are direct to consumer channels, currently available on other traditional platforms, like HBO and CBS All-Access. The giant waiting in the wings is Disney, which is expected to launch its new platform in coming weeks, likely followed by offerings from Warner Media, Apple and NBCUniversal.

AVOD (advertising-supported VOD) is more centered on the device companies, like Roku and Sony Playstation. Hulu currently offers an AVOD option that is lower price than its main offering because it has a mix of advertising. Viacom is behind Pluto TV, and with Viacom’s record of programming, Pluto could definitely be a player going forward.

TVOD is Transactional Video on Demand. This is a model not unlike your cable or satellite company’s pay movies, much like Apples iTunes model.

Of the three models, AVOD looks the most viable and successful because of the ad spending behind it. OTT ad spending will reach $2 billion this year, a sharp increase from 2018, according to research firm Magna Global. AVOD provides a targeted, captive audience for advertisers, and there’s plenty of inventory. What research is showing that the average video completion rate on AVOD was 95%, much higher than the average platform—and longer ads are more feasible. That is partly because it is harder to skip the ads.

So while many people may be cutting the cord to skip TV commercials, the reality is they may be watching fewer actual spots, the spots they may actually be watching will be longer. Thoughts, questions, comments, I’d like to hear from you.