Understand the "SVOD", "TVOD" and "AVOD" terms and business models of streaming services like Netflix

UPDATE NOV 2017: I have created a post explaining the "PVOD" term also. You can find the post here: https://www.linkedin.com/pulse/understand-pvod-term-business-model-streaming-services-mads-kaysen/

For anyone following the dramatic and rapid change in the TV and Video entertainment industry, where the rise of Internetbased streaming services (also called "OTT" - short for "Over the top") is fundamentally changing the way Video is produced, sold, distributed and consumed, the news is clogged with new abbreviations, some which might be good to know and understand.

This post explains the terms "SVOD", "TVOD" and "AVOD", which are basically terms used to describe the different business models applied to online services.

First, lets clarify the "VOD" part, which they all have in common. This is short for "Video On Demand". Basically most streaming services will offer you as a customer the chance to select when and where to watch, and what to watch. This disconnection from the traditional linear programming attribute of what we refer(ed) to as "TV", is a fundamental shift. Also "VOD" is quite applicable, as most OTT services contains no or little live streaming. Which of course is something that might change over time, and already can be found in some markets (check www.sling.com as an example). Doing live is hard. And doing live using IP networks - and the open Internet in particular - is quite hard indeed.

But the term VOD is used interchangeably to describe both the transmission type (ie. watching your selected piece on content, disconnected from what everyone else might be watching at the time) and the concept of online video services in general.

How users are then asked to pay for their access to content, is where models differ.

SVOD = Subscription VOD

Subscription VOD is a type of service, where you enter into a subscription agreement, which will then grant you access to the service - typically to watch until you drop, that means watch with no limits.

Most services will operate with monthly subscriptions, which generally renews until cancelled by the subscriber. This is of course a huge contrast to the traditional Cable TV operator terms, where lock down periods of 6 to 12 months was normal. The "easy in - easy out" aspect of SVOD is something that is defining these services and the whole OTT industry in general, which then in return means the services must work hard to retain customers.

The prime example of an SVOD service is Netflix.

TVOD = Transactional VOD

Transactional (or Transaction) VOD is the counterpart of the "all you can eat"-buffet concept of SVOD. TVOD will normally not charge you anything to sign up for the service/create a user profile. Instead, you will pay an amount based on the content you watch. Most often this relates to movies, but is also used for series and in particular for sports and events. Think Apple iTunes as an example (although strictly speaking not a pureplay OTT service).

TVOD services will normally try and retain customers by offering attractive pricing on selected pieces of content, thereby hoping that users will refer to the service for their general video entertainment needs. TVOD services today is seen to offer more recent releases, because they can better build the business backwards towards the rights owners, as a higher revenue per view is obtained.

Many TVOD services have been in the market for some years, but via STBs (set top boxes) and not as pure OTT services. This is changing.

AVOD = Advertising VOD

Advertising - or Ad-based - VOD is a model that is free for the users, in the sense that you will pay with your eyeballs instead of your creditcard. Think YouTube as an example.

AVOD services is today the least explored business model in the OTT market, especially when looking at premium content. The idea however, that users are free to tune in and watch, in return for spending time watching ads, is of course what build television in the first place.

With the tremendous opportunities for targeting and automating advertising, based on the whole range of user data inherent in using online channels (as opposed to traditional TV distribution, where user metric are rudimentary and prone to errors as you must "survey" users to gain insights), AVOD services might be something we will see more of in the future, though.

There are examples of services that operates with mixed models, where the customer will for example pay a monthly fee, which will grant access to parts or certain types of content. But where there can still also be extra fees applied to watch particular pieces of content, or a live sports event for example. The mix model however have been abandoned by several operators, due to negative customers reactions - like MTG Viaplay for example.