OTT Business Model in 2024 – How OTT Platforms Make Money?
Are you excited to know how OTT platforms earn money simply by streaming content? Then, we have made this blog for you.
If you’re reading this blog, chances are you most likely tuned into an OTT platform in the last 24 hours. Such is the prevalent and indispensable nature of OTT platforms in today’s digital landscape. And, if you happen to be in the United States, you’re faced with a plethora of options.
According to the Parks Associates Video Market Tracker, there are 370+ independent Over-the-Top (OTT) providers in the United States in 2024. Besides, 88% of U.S. internet households subscribe to at least one OTT service, indicating the country’s widespread adoption and prevalence of such streaming platforms.
If you’re wondering how large the OTT market is, we have that data, too.
The Over-the-Top (OTT) market, valued at USD 150.51 billion in 2021, is set to expand from USD 190.32 billion in 2022 to a projected USD 1,241.6 billion by 2030. Anticipating a robust growth trajectory, the market is expected to register a remarkable Compound Annual Growth Rate (CAGR) of 26.42% during the forecast period from 2023 to 2030.
However, a lingering question has likely crossed your mind—how exactly do OTT platforms generate revenue? While subscriptions and advertisements are obvious sources, what other avenues do these platforms explore for revenue generation?
Let’s find answers to these questions in the next few minutes.
Table of Contents
What is an OTT Platform?
OTT (Over-the-Top) platforms are online video and audio distribution services that stream content directly to users over the Internet. These platforms are independent of traditional satellite and cable television providers and allow users to access a wide range of programming without a subscription. Examples of OTT platforms include Netflix, Hulu, and Amazon Prime Video.
But how did they become so popular?
OTT platforms typically offer both on-demand and live content and additional video streaming features like personalized recommendations and ad-free viewing experiences. They constantly evolve and become more popular as more people turn to internet-based entertainment options.
Benefits of an OTT Platform – For Users
An OTT platform offers several benefits for audiences, creators, and advertisers alike.
Let’s see how an OTT platform can benefit the audience.
1. Convenience and Flexibility: One of the significant advantages of OTT platforms is the convenience and flexibility they offer. Users can watch their favorite content at any time and from any place without being tied to a traditional TV schedule. It means that users can enjoy their favorite TV shows, movies, documentaries, and more on their own terms.
2. Vast Content Library: OTT platforms provide a wide variety of content, including TV shows, movies, documentaries, and more, from around the world. For instance, As of 2023, Netflix has a content library of over 7,500 original TV shows, movies, and other original content, including animation, documentaries, and comedies. This extensive content library ensures that users can access a diverse range of entertainment options.
3. No Commitments: Most OTT services don’t require long-term contracts. They give users the flexibility to subscribe or cancel their subscription at any time. Users can also tailor their viewing experience according to their preferences without being locked into a binding commitment (like conventional television).
4. Affordable Entertainment: OTT platforms often offer cost-effective subscription plans, making it an affordable option for accessing a large pile of entertainment content. Additionally, users can choose the subscription plan that best aligns with their budget and viewing habits.
Benefits of an OTT Platform – For Creators and Platform Owners
OTT platforms also offer various benefits for creators, platform owners, and advertisers.
1. Wider Audience Reach: Creators get an opportunity to reach a global audience through OTT platforms. Unlike never before in the past, their content is now accessible to viewers from different regions and demographics. This can significantly expand the potential reach and impact of their work.
For instance, the Money Heist series gained immense popularity worldwide after being acquired by Netflix in 2017, which made it available to a global audience. The show’s unique premise, engaging characters, and thrilling plot twists have contributed to its success, making it one of the most-watched non-English language shows on Netflix.
2. Diverse Content Opportunities: OTT platforms often support a broad range of content types, including TV shows, movies, documentaries, short films, and more. This diversity provides creators with opportunities to explore different formats and genres, catering to varying audience interests.
3. Flexibility in Content Creation: OTT platforms may offer creators more flexibility in terms of content creation. It allows them to produce and showcase content that may not conform to traditional broadcast or distribution standards. This can foster creativity and innovation in storytelling and production.
4. Potential for Long-Term Revenue: By hosting their content on OTT platforms, creators can potentially generate long-term revenue through subscription fees, pay-per-view options, or ad revenue-sharing models. This can provide a sustainable source of income for creators as their content continues to be viewed over time.
5. Data and Analytics Insights: OTT platforms often provide creators with access to viewer engagement data and analytics. This gives them a peek into valuable insights into audience preferences, viewing habits, and performance metrics. This information can aid creators in refining their content and better understanding their audience.
According to research, Asia-Pacific’s M&E market is expected to flourish in the forecast period (2021 – 2026) & reach the highest peak of 7.2% CAGR
With that, a high on demand for live streaming channels has boosted more in generating money on a rapid note.. This has positively reflected the offerings sufficed by service as well as platform providers..
“You should be the pebble in the pond that creates the ripples for change”
– Tim Cook, CEO Apple
Like the quote indicates, let’s keenly identify how top OTT-business platforms make money, & set themselves as standalone players…
How OTT Platforms Earn Money?
OTT platforms make money primarily through subscription fees, advertisements, archival fees, and licensing fees. But, they may have other revenue streams, such as merchandise, affiliate marketing, and sponsorships. They can also generate income by creating and selling their own original content.
Additionally, some OTT platforms may offer premium services for a fee, such as ad-free viewing, personalized recommendations, and additional features.
Overall, the cornerstone of an OTT platform’s success is to offer a quality streaming experience at a competitive price. However, to sustain their business in the long run platforms should continually expand their content library and engage with their users.
We hope this explanation has clarified the various OTT platform business models. However, if any uncertainties persist, let’s understand each model individually.
1. Video Advertising Networks
Enrolling in a video advertising network (VAN) is one of the fastest ways for OTT platforms to monetize their content. VANs facilitate connections with advertisers seeking ad space, allowing you to leverage your streaming domain for lucrative opportunities.
2. Direct Advertising
Exercise complete control over the ads featured on your platform with a direct OTT advertising model. For this, you need to establish a tailored ad video streaming server, which can enable precise control over displayed advertisements.
This approach grants you full autonomy in price negotiations. I.e you can set and manage advertisement rates according to your preferences.
3. Best Sponsorship Deals
OTT sponsorship deals operate in a manner akin to television sponsorship arrangements. In this model, a business pays for the privilege of advertising on a specific piece of content. Streaming services employ various methods to generate revenue by showcasing content through means such as banner ads, displays, or launch screens.
4. Various Monetization Models
OTT monetization is a revenue model used by content providers to monetize their services directly to consumers. It is by far the most common kind of monetization method for OTT platforms across the world.
The success of these models is primarily driven by the increasing popularity of streaming services and advancements in technology that make it easier for consumers to access and consume content.
Some of the customary monetization models include the following.
A widely favored method for monetizing OTT videos is the popular subscription-based video-on-demand model (SVOD). It involves charging users a monthly subscription fee for access to your content. It ensures a steady and recurring revenue stream for businesses while assuring users a stable, glitch-free streaming experience.
Read Also: How Much Money Does Netflix Make?
AVOD, or ad-supported video on demand, is an effective strategy to monetize your OTT/VOD business. In contrast to SVOD and TVOD, where users pay to access content, AVOD relies solely on advertising for revenue. It offers users free access without any subscription fees.
Transactional Video on Demand (TVOD) enables consumers to pay per-view to watch the content. It leaves the users with two options: a one-time purchase for permanent access or renting a piece of content at a lower cost with limited access for a specific time period.
- Hybrid Model
As the name suggests, hybrid monetization involves combining two or more of the above-mentioned models. It can be in the form of free videos supported by ads or a mix of subscriptions and transactional approaches. It allows streaming platforms to rake in significant revenue with strategic combinations.
- Multi-Screen Model
The Multi-Screen Model is akin to the subscription model. It acknowledges that a consumer may possess various devices. With a single subscription, it allows users to seamlessly access the movie library across multiple devices like iPads, tablets, smartphones, etc., for on-the-go convenience.
Which Model is the Best Way to Make Money in OTT?
The most effective way to make money in OTT depends on various factors.
In fact, there isn’t a one-size-fits-all answer.
Subscription-based Video on Demand (SVOD) ensures a steady and recurring income stream through monthly subscriptions.
At the same time, Ad-Supported Video on Demand (AVOD) relies on advertising for revenue, offering free access to users. Transactional Video on Demand (TVOD) allows for pay-per-view options that are suitable for specific content.
Hybrid models, combining elements from different approaches, can also be a strategic choice to maximize profitability.
So, the choice often hinges on your content, target audience, and the balance between user experience and revenue goals.
Ultimately, the best model should consider your business objectives and audience demographics and dynamics.
If you’re considering launching an OTT channel with multiple revenue models, schedule a complimentary demo, and we’ll assist you in its seamless implementation!
In the future, OTT providers are projected to offer new OTT entertainment that consists of additional live as well as on-demand streaming channels. For that matter, some are also available for free… This significant transition will grow in all means showcasing massive growth. Broadcasters in the United States & other countries team up with multichannel video content distributors to provide ready-to-package versions as OTT offers, fueling its market growth.
Furthermore, as demand for material has increased dramatically, a growing number of OTT platform providers are making some of the existing content available for free and launching new content on their platforms. Also, viewers are live streaming concerts, virtually connect through Zoom lectures, attend business meetings, and be a part of online book launches, which is likely to be a significant factor in making up for wholesome revenue. And that’s a win-win situation for both!
If You Already Have An Idea About Starting An OTT Channel With Multiple Revenue Models, Schedule A Free Demo And We’ll Help You Implement It!
Frequently Asked Questions (FAQ)
1. How does Netflix make money from OTT?
Netflix generates revenue through multiple sources, primarily from subscription fees. They offer different subscription tiers, allowing users to choose the plan that suits their needs and budget. In addition to subscriptions, Netflix also earns money through advertising. But it accounts for a small percentage of its overall revenue. They also generate revenue through content licensing and production, as well as through partnerships with other companies.
2. How do filmmakers earn money from OTT platforms?
Filmmakers can earn money through Over-The-Top (OTT) platforms in several ways. One way is through revenue-sharing agreements with OTT platforms, where a percentage of the streaming fees is paid to the filmmaker. Another way is through direct advertising on the platform. Filmmakers can display commercials or promotional material for products or services. Additionally, filmmakers can also earn money through merchandise sales, fan subscription fees, and live events organized by the platform.
3. How does an OTT platform work?
An OTT platform works by delivering video content directly to their devices without a traditional cable or satellite television subscription. It typically uses a combination of compression technologies, adapting resolution and video quality to the user’s internet connection speed, and a user-friendly interface for easy navigation and content discovery.
4. How to sell movies on an OTT platform?
To sell movies on an OTT platform, one must first understand the needs and preferences of the target audience. It involves researching popular genres and themes and analyzing demographics and psychographics. Once you have identified potential customers, create a strong marketing strategy highlighting each movie’s unique features and benefits. Build relationships with distributors and content creators to secure high-quality content for your platform. Finally, optimize your platform for user experience and ease of use. Providing excellent customer support will ensure user satisfaction and repeat business.
5. Which OTT revenue model is the best fit for my business?
The best OTT revenue model for your business depends on various factors, such as the type of content you offer, your target audience, and your competitors. Some popular OTT revenue models include subscription-based, pay-per-view, and advertising-supported. Doing market research and testing different models is recommended to determine which works best for your business.