Video On Demand Business Models

  • Published on 03/26/12
  • Written by Metrixstream
Video On Demand Business Models

Want to Start a VOD Business?

Here’s What You Need to Know about Video on Demand

It’s no secret that the way that consumers obtain and interact with videos has changed
drastically in the past decade. Each month sees more closures of traditional “brick and
mortar” video rental stores and the opening of more online video on demand (VOD)
businesses. Today’s consumers want instant gratification, and they want to get this instant
gratification from wherever they happen to be, using whatever computer, TV or mobile
device happens to be at hand. Video on demand – the purchasing of digital video for
instant enjoyment rather than having to obtain a physical copy of the video – delivers
this convenience. Entertainment that is purchased this way can be enjoyed via VOD
streaming or downloaded straight to the computer/media box.

What type of people want to start a VOD website?

The VOD business model can be successful for anyone who has video content that
they want to make available. This includes everyone from school districts to adult
entertainment companies, social media sites to sports and music. Well known video
on demand services include Netflix, Hulu and iTunes (not to mention all of the “adult
entertainment” sites!).

If you want to start a VOD website, how do you handle the technical end of things?
For best results, your VOD business should be built upon a proven video streaming
platform, such as what is offered by well-regarded provider Metrixstream.
Metrixstream’s online VOD streaming platform gives site owners the ability to monetize
video content with built-in functionality for all of five VOD business models. Plus,
content can be encoded for viewing on multiple formats, such as iPhone, iPad and HD.

What are the different VOD business models?

If you are planning to start a VOD business, there are 5 different business models to

  • Pay-per-minute
  • Pay-per-download
  • Pay-per-credit
  • Subscription
  • Rental

What are the benefits and drawbacks of each video on demand business model?

Before you start a VOD website, it is best to take a close look at the pros and cons of
each option, to determine which is the most optimal for your business goals and target

Pay-per-minute or pay-per-credit: Benefits

  • Viewers can preview the content without paying the full price
  • Viewers who want to watch the program again can choose to pay for VOD streaming of the same content multiple times, bringing in more revenue for the site owner
  • VOD business owners can offer tiered credit packages

Pay-per-minute or pay-per-credit: Drawbacks

  • Viewers who prefer to own a copy of the program will not want to pay by the minute for VOD streaming
  • This business model requires the VOD business to have and maintain server hardware to host and provide VOD streaming of the content – which can be a significant financial consideration if you are planning to start a VOD business

Pay-per-download: Benefits

  • Viewers get to keep a copy of the program
  • Viewers pay full price for viewing the content, regardless of how much of it they actually watch
  • The hardware requirements for the VOD business owner are less stringent than for streaming

Pay-per-download: Drawbacks

  • Unlike VOD streaming, there is no recurring revenue for multiple viewings
  • It can be very difficult to control copyright infringement once the videos are downloaded

Subscription: Benefits

  • The site owner can charge a set amount per time period regardless of how much video on demand is actually consumed; this makes it easier to have a predictable monthly income stream
  • Subscription results in increased customer loyalty, as users have pre-paid for their entertainment
  • The VOD business owner can create tiered plans for a pay-per-minute or pay-per-download option

Subscription: Drawbacks

  • While some subscribers may be very light users of VOD streaming orother types of video on demand, others may consumer far more contentthan they’re paying for

Rentals: Benefits

  • Viewers pay full price for viewing the content
  • The owner of the VOD business can make more money when viewers choose to rent the same video multiple times
  • Rental provides better protection of content than the pay-per-download model

Rentals: Drawbacks

  • Video rental provides a smaller profit margin than pay-per-download

Our recommendation: do your homework. Video on demand is not a “one size fits all business model. Before you start a VOD website take the time to determine which model is best for you, and choose an online video streaming platform that will meet all of your current and anticipated future needs.

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