Over-the-top (OTT) streaming services are coming for cable TV’s crown. According to July 2022 data from Nielsen, streaming services took the top spot in TV viewership for the first time, coming in at 34.8% compared to cable TV’s 34.1%.  It makes sense: the sheer number of OTT services now available means that viewers can find whatever they’re looking for and watch it wherever they want, all on-demand. 

And the market isn’t slowing down: Recent research found that global revenues for OTT TV episodes and movies reached $135 billion in 2021, with an additional $21 billion in revenue forecast for 2022. But increasing market value comes with expanding competition as companies that own content make the move from licensers to OTT providers. 

This expanding market impact has led to the first skirmishes of the streaming wars — the emerging battle to win the wallets of content viewers. In this piece, we’ll set the stage with a look at common OTT business models and offer a quick and simple guide to help survive the war. 

Common OTT Business Models 

OTT services skip traditional cable, satellite, and broadcast TV platforms to deliver content directly to users via the Internet. Perhaps the most familiar example of an OTT provider is Netflix: In 2007, the company began offering streamed video content, to its six million subscribers. By 2022, the company reached 227 million subscribers across 190 countries and generated $25 billion in revenue each year. 

The success of Netflix, however, inspired both copycats and innovators alike. Today, four OTT business models are common. 

Streaming Video on Demand (SVOD) 

SVOD services charge a recurring monthly fee for users to access their content catalog. This catalog changes periodically as new licensing deals are made or expire, but all content is delivered free of ads. While SVOD options have remained consistently popular over the last decade, they’re more prone to customers leaving if prices increase or content availability changes. 
SVOD providers include Netflix, HBO, and Disney+. 

Transactional Video on Demand (TVOD) 

TVOD models offer TV shows or movies to buy or rent for a one-time cost. Also known as pay-per-view (PPV), revenue for TVOD services is often inconsistent since users have to pay for each piece of content they access. 

Sky Box Office, UFC, and iTunes are examples of TVOD services. 

Ad-based Video on Demand (AVOD) 

AVOD services let users access content for free — in exchange, content contains ad breaks. Advertisers pay to place their ads in commercial breaks, which provides the main source of revenue for this model. AVOD options have a low bar to entry for customers since they don’t pay for video content. For providers, the capital risk is more substantial but does offer room to scale — if they find the right audience. 

Pluto TV, Tubi, and non-premium YouTube and Hulu all use an AVOD model. 

Free Ad-Sponsored TV (FAST) 

FAST options are similar to AVOD in that ads are displayed during breaks. The difference is that instead of showing content in response to user demand, FAST hosts linear television channels that offer scheduled programming. In effect, it’s like cable that cuts out the middleman. 

Some companies are also opting for hybrid models. For example, while Disney+ is primarily an SVOD service, it also offers TVOD options by allowing users to pay a premium for early access to new movies. 

How To Survive the Streaming Wars 

With OTT options diversifying, even streaming giants like Netflix are feeling the heat. In Q2 of 2022 alone, the company lost 970,000 subscribers worldwide. Part of the problem is too much choice. Between services such as Disney+, Amazon Prime, Hulu, Netflix, and others, viewer saturation points are being reached. Between the costs of carrying multiple services simultaneously and the sheer amount of content available, customers are getting picky about what they watch and what they pay. 

To survive the streaming wars, the first priority is providing great content. Put simply, the adage holds true: Content is king. If OTT providers aren’t offering content that viewers want to watch, it won’t matter if the service is expensive, cheap, or free — no one will be watching. As a result, it’s critical to conduct user analysis to determine what of your available catalog users actually want to watch. There’s also an opportunity here to create curated content offerings based on geographic and demographic trends. For example, in the United States the top 10 titles on Netflix were all domestically-produced content, while in countries like Brazil, Ecuador, and Hong Kong, the top 10 were all international. 

With great content captured, companies need to maximize their amount of revenue per user (ARPU). For AVOD and FAST services, the easiest way to accomplish this goal is through dynamic ad insertion (DAI). By serving up targeted ads during user video streams, companies can create continually evolving campaigns that become more effective as viewers watch more content. With these types of ads becoming commonplace, however, streaming services need to up the ante with hyper-targeted ads based on both historic user viewing behavior and data-driven inferences about what they’ll likely watch next. 

OTT providers also need to consider the evolving role of solutions such as ML and AI. For example, advanced algorithms can now be used to automatically generate content previews and upscale content to 4k or 8k, in addition to automatically generating metadata. When it comes to metadata, meanwhile, streaming services must position themselves to capture user rather than audience data as the demand for hyper-targeted ads increases. 

Finally, companies need to consider their position on re-aggregation — the move to recombine multiple services into a single, streamlined model for users. If aggregation isn’t the goal, OTT providers need to stand out from the crowd. If they’re willing to become part of re-aggregated services, meanwhile, they need to consider best-fit partners and where their content will exist within new OTT ecosystems. 

Everything Old is New Again 

In many respects, the current OTT market looks much like its cable TV predecessor. In the same way as streaming, cable companies initially offered access to a wide variety of content for a fixed price per month. As new content providers emerged, however, cable added more specialty channels that came with an additional cost. Streaming services now find themselves in a similar position as competition increases and they look for ways to stand out from the crowd. 

Fincons Group has experience in all facets of OTT and can help companies improve OTT revenues by building on the tools and technology they already have. Consider dynamic ad insertion (DAI), which allows content providers to deliver targeted, contextually-relevant ads to capture user interest. Along with granular data analytics to help companies under quality of the streaming experience, or understand what users have been watching and what they’ll watch in the future for use in ad targeting and yield management, along with creation of core KPIs such as ad fill rates. Our custom OTT software development approach also allows us to create frameworks that help streaming services deliver content reliably and at scale to user’s with any device type. 

Our teams make it possible for companies to build scalable solutions and to take a deep dive into their subscriber, ad, and content data to determine where they are on the winning side of the streaming wars, and where they need to change tactics if they’re going to survive. 

Don’t get caught off-guard — prepare for the streaming wars with Fincons. Get in touch. 
 

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