Since then, the jump from traditional TV to digital has steadily climbed. In fact, 2019 saw the steepest decline in traditional ad revenue. For a period of time, it appeared that every major network and media company was launching some type of membership-based, video-on-demand service as for example Disney+, HBO Max and Peacock from NBCU, to name some.
Due to access to new technologies, in less than a decade, audiences have become fragmented into digital users, who get entertained, stay informed and consume products and services on demand, wherever and whenever they want. The attention is now placed on multi-platform services, 24 hours a day with no programming schedules.
Changes in the entertainment industry have radically reduced interest in traditional TV and cable, and both SVOD -Video on demand with subscription- and AVOD -Video on demand with advertising- are the new arena for audience bidding.
SVOD Subscription video on-demand
eg. Netflix, Disney +, HBO Max.
It´s an exclusive membership-driven digital streaming service, appealing to consumers with promises of ad-free viewing experiences and original content. They offer online streaming from a library of movies and television programs, including those produced in-house. These platforms are the option for leaving traditional cable or satellite TV behind.
SVOD models are highly dependent on creating new content in order to keep viewers engaged and retain their membership. It’s no surprise that Netflix spent $15B on original content in 2019, and Apple & Amazon both spent $6B. After all, subscription business models also mean that users can cancel at any time if they no longer find the service valuable. In this model Content is King.
AVOD Advertising video on-demand,
eg. YouTube, Hulu, Roku, Peakock
It´s a video multi-platform service, almost always free or at a very low cost, which rely on advertising to monetize. The ads are displayed according to the content shown and the audience who´s watching.
They provide a fertile model for brands to advertise with the following advantages over traditional TV:
- Fewer ads. The frequency of ads is much lower than that of traditional TV. Furthermore, the ads are generally shorter in duration.
- Dynamic ad delivery. AVOD ads are relevant to the individuals they offer higher personalization and customization of the ad-delivery experience, allowing marketers to speak “directly” to an individual as opposed to speaking into the void.
AVOD vs. SVOD How has the pandemic impacted on video on-demand consumption?
The pandemic found individuals spending more time stuck inside their homes, with less options for recreation and entertainment than ever before.
The combination of saturated streaming services and unparalleled uncertainty has created a level of subscription fatigue. Why pay for a service when there are plenty of free or inexpensive options available? Now, consumers have more time on their hands allowing ad-based video on-demand services to emerge. The mass adoption of AVOD platforms is one of the most significant shifts of the year.
However, SVOD services do have the opportunity to gain massive market share and become the primary platform for consumers. In fact, giants like Amazon, Netflix, and even Apple, are doubling down on this model for good reason. With enough users and new sign ups, these platforms can afford membership churn.
Consider Amazon — with more than 112 million Americans holding a Prime membership, they are subsequently subscribed to Amazon’s SVOD platform as well. If Amazon were to create quality content with decent frequency, consumers may view the Prime Video service as a particularly valuable add-on service that comes with their membership. Apple had a similar approach by offering free Apple+ subs to anyone who’d recently bought an Apple device.
We can conclude that platforms who have a large number of members or subscribers and who manage to retain the attention of these growing audiences will have a better chance of sustaining their value proposition and generating business over time.
