Aug 07, 2019

Consumers’ increasing ability to watch content where and when they want is a massive opportunity for marketers.

  • Break It Down is a series where we dissect the topics, technologies, and jargon that matter most to marketers and advertisers.

Video on demand, or VOD, is a rapidly growing way to consume content. Thanks to its convenience and availability, it’s become increasingly popular among consumers.

By 2023, the global VOD market is expected to be worth $93.99 billion, up from $56.3 billion in 2017, according to MarketWatch. That’s because VOD, which is online video content accessible with the click of a button on a smartphone, TV, or laptop, has granted consumers unprecedented choice in what to watch, and where and how to watch it. For advertisers, that creates massive opportunity for greater control and flexibility in reaching and impacting viewers. They know exactly who saw the ad, where they saw it, and what they did next.

Here's everything else you need to know about VOD:

What it is:

When most people think VOD, they think Netflix, Hulu, or Pluto TV—and they’re right to do so. Their apps and websites let consumers choose TV shows, movies, documentaries, sports, educational programs and more,  to watch wherever and as often as they want.  VOD, however, first arrived in the early 1990s, when Time Warner and Bell Atlantic experimented with on-demand for films. Offerings eventually expanded to include TV programs and other content. Netflix - which launched as a DVD rental service in 1997 -  jump started the streaming revolution when they diversified into streaming in 2007. Since then, streaming services have proliferated as smart TVs have arrived with built-in internet connectivity to access VOD without a laptop or mobile device.

How it works:

VOD is distributed through set-top boxes (STBs) and over-the-top (OTT) devices—smart TVs, Google’s Chromecast, Amazon’s Fire Stick—that enable viewers to wirelessly stream video  from any connected device to their TV set.

Some VOD content—Netflix, Amazon Prime Video—requires a subscription (SVOD), while other services, such as Pluto TV or The Roku Channel, are free for consumers, but supported by ad revenue (AVOD). A third model—transactional video on demand (TVOD)—provides a pay-as-you go experience.

Watching a Wild N’ Out #WildStyle clip posted to YouTube Red (SVOD)—is a different experience than binge-watching Forensic Files on Pluto TV (AVOD), which in turn differs from the the pay-per-download model of buying episodes of RuPaul's Drag Race in the Google Play Store(TVOD).

Many popular services also operate with multiple tiers. Hulu, for example, offers a free ad-supported (AVOD) plan and a subscription-fee based (SVOD) plan, as does YouTube.

Why it matters:

As adoption of what-you-want-when-you-want-it VOD services increases, cord-cutting is on the rise. Advertisers, in turn, are shifting more of their budget to AVOD, which is a native environment for addressable, or targeted, TV ads.

The upside:

"An advertiser can now set a TV campaign live and have it delivering on a TV show in a legacy VOD environment within 15 minutes."

Frank Sinton

President of Beachfront Media

  • For consumers: On-demand content at a per-service price far lower than cable, and often free.
  • For advertisers: Far more platforms—mobile devices, computers, smart TVs—to reach consumers, and far more advanced capabilities to target specific audiences
  • For distributors: Increased revenue through ad campaigns delivered in the VOD space. Beachfront Media president and founder Frank Sinton told TV Revival, “An advertiser can now set a TV campaign live and have it delivering on a TV show in a legacy VOD environment within 15 minutes.”

The downside:

  • For consumers: The proliferation of subscription services can easily cancel the cord-cutting cost savings and lead to subscription fatigue. The average U.S. consumer has at least three video streaming services, and more are on the way, as Apple, Disney, WarnerMedia, and more plan to launch streaming services later this year.
  • For advertisers: While AVOD is rapidly growing, SVOD and TVOD are closed to ads,  lessening opportunities for ad-based media and ad buyers alike.
  • For distributors: While it’s growing rapidly, vMVPD, or services that aggregate live and on-demand linear television but deliver the content over the internet. use is still small. In April 2018, 5% (4.9MM) of U.S. households with Wi-Fi streamed a pure-play vMVPD on their television.

The big takeaway:

VOD has revolutionized viewing habits by allowing people to watch content of all kinds when and where they want, while offering advertisers more opportunity to target specific demos with addressable and programmatic ads. It only continues to grow. The number of SVOD subscriptions in North America is set to climb by 110 million this year, while AVOD ad spend is outpacing dollars spent on other media, and is projected to be worth $47 billion by 2023. As convenient and easy-to-use VOD services  multiply and TV viewing becomes more personalized, if content isn’t available where and when consumers want it, they’ll go somewhere else.

Related Articles