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What Is an OTT Service Business?

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Last editedMay 20222 min read

From Netflix to YouTube, content streaming services have transitioned from novelties to mainstream sources of entertainment. Millions of viewers tune in to online streaming platforms every day, so how can brands build their profiles using the power of video? Over-the-top or OTT streaming services offer plenty of possibilities – but how do they work?

What are OTT services?

The term OTT, or over-the-top, refers to any internet video streaming service. Typical examples of OTT streaming services include HBO Max, Disney+, and other content providers. The first OTT livestream phenomenon took place in 1995, when ESPN hosted a Major League Baseball game online. However, it wasn’t until the late 2000’s with the growth of Amazon Instant Video and Netflix that this type of service really took off in the average viewer’s home. Today, many Americans have ditched traditional cable TV entirely in favor of OTT.According to Pew Research, while 24% of consumers solely viewed streaming content in 2015, this percentage rose to 44% by 2021.

Types of OTT business models

There are many different types of streaming content platforms out there, which means not all OTT service providers follow the same business model. Here are four of the most common types of OTT service company:

1. Ad-Based Video on Demand (AVOD)

The first type of OTT service company is one you’re probably familiar with. AVOD businesses earn revenue through advertising. Viewers can access content for free, but they’ll be shown ads in return. These might be full video ads or less intrusive sponsored content or banner ads at the top of the screen. Advertisers pay the platform to show commercials to viewers. Examples of this type of business include non-premium YouTube and Xumo.

2. Subscription Video on Demand (SVOD)

Another OTT model is SVOD, which charges viewers a recurring fee to access on-demand video content. Perhaps the most famous SVOD example is Netflix, but additional examples include premium YouTube, HBO Max, and Apple TV+. Paying members gain full access to the platform’s library of video content, including exclusive programming as well as licensed content. Some charge a flat fee, while others use a tiered pricing model.

3. Transactional Video on Demand (TVOD)

What if you only want to access a single video at a time? Transactional Video on Demand, or TVOD, services use a straightforward pricing model. The viewer pays a single fee to buy or rent the specific videos of their choice. This form of OTT service company has been around for years, also called pay-per-download (PPD) or pay-per-view (PPV). It’s ideal for sports, music, and other types of events as well as on-demand access to new-release Hollywood movies.

4. Fast OTT service providers

Free, ad-supported streaming TV (or FAST) is similar to the AVOD model we’ve mentioned above. Both offer on-demand content accessed by viewing advertisements, and indeed the two formats are often merged under AVOD. However, FAST typically includes live TV options as well as a curated playlist of channels. It’s a blend that still feels like traditional TV, upgraded with on-demand streaming content. Examples include Pluto TV, which was purchased by Viacom in 2019 to include content from popular cable channels like MTV, Comedy Central, and Nickelodeon.

Which type of OTT service is best?

Each of these OTT models comes with different pros and cons. Netflix is the most successful of the group, but this doesn’t mean that the subscription model is always best. If your business wishes to offer streaming content, you should consider whether you’d prefer to earn revenue from subscribers or from advertisers. You should also think about the volume of videos on offer, whether it’s access to exclusive one-time events or extensive libraries from unique content creators.

In any case, original content is important for the success of any OTT services. Users want access to unique videos they won’t find on other platforms, whether it’s how-to tutorials or feature-length films. You’ll need to think about your target audience, niche content, and how to best serve them with one of the pricing models above.

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