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Amanda Smith
Amanda Smith

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Why Netflix model is the future of VOD business

Netflix Business Model
With almost every industry benefitting from the digital media boom, online Video On Demand (VOD) services is no exception. Unlike the traditional video services, the OTT video streaming has changed the market landscape by providing the consumer with the flexibility of choosing the content they wish to watch at the time of their convenience. These businesses are thereby gaining immense popularity among the online audience with over millions and millions increasing each year. Giants like NetFlix that provide VOD subscription-based services have a presence over 200 countries with 90 million subscribers, and more popping in each year due to the unique and engaging content it provides by understanding the interests of the modern consumer base.

Let us now discuss some of the widely adopted VOD business models, what type of audience they attract and where the future of VOD business lies in.

Subscription Video on Demand (SVOD):

With users having a variety of content to choose from, they pay a fixed subscription fee on the monthly, quarterly, half-yearly or annual basis. During their subscription, they have unlimited access to the content and by analyzing the wide interests of the audience, fresh and new content are uploaded regularly to keep their VOD subscriptions inclining. The subscriptions are usually auto-renewed at the same fee and these services provide easy opt-in and opt-out options to cancel or upgrade their subscriptions anytime.

Transactional Video on Demand (TVOD):

TVOD or Pay Per View services allow the users to rent or buy a particular content they need access to. They pay for each piece of content they consume for a specific duration if they are renting, or allowing them to download and store if they are buying. TVOD services are mostly preferred with live streaming of an event or a sport, by giving the users access just for a particular period of time.

Advertisement based Video on Demand (AVOD):

YouTube is a classic example of an AVOD business model, where the content is available free of cost, but some advertisements are inserted for viewing and generating revenue from advertisers. These services focus on gaining a large set of audience by proving extensive varieties of content (generally user-generated) and their revenue comes from the brands that target the AVOD provider’s viewer base.

Hybrid Video on Demand services:

When you are having a wide audience base, some of them won’t mind going through advertisements for viewing free videos. Your revenue model can be leveraged with the quality of content that is displayed by following an ad-based SVOD or TVOD models, along with other VOD subscription strategies.

Why is SVOD a better model than TVOD or AVOD based services?

For online consumers, the value lies in convenience. With AVOD models focussing on Advertisements as their core revenue model, there is a lot of randomness in the content that it provides. This sometimes forces the user to watch what is streamed rather than giving suggestions as per their choice. On the other hand, TVOD models focus on paying for each stream. Giving the user hassles of performing transactions every time they wish to access a content.

The main advantage of a subscription-based VOD business model is the level of convenience it provides by giving the consumer everything at the price of one. They also offer a flat rate, helping the consumers plan their budget or cancel their subscriptions as and when they require.

NetFlix is a great example to prove the success of SVOD based business models. It is pulling millions of viewers each year from their expensive TV subscriptions by giving flexible options and user engaging content. The current trend of VOD business is highly inspired by the NetFlix business model, due to its open business strategy that keeps the evolving consumer base as their prime focus.

How has NetFlix influenced the online VOD business

Being the largest SVOD service in the OTT landscape, NetFlix continues to dominate the industry with its impressive content line-up and aggressive expansion strategies. Since its inception in 2000, NetFlix’s business strategy has been triumphant against any other video streaming or VOD service in the market. It partners with top media houses around the globe that produces highly engaging, the superfine content of various genres.

The more the options, the more the subscriptions.

With the rise of VOD businesses, there is a humongous content flow in the online media for the audience to choose from. VOD services like YouTube provide free video content for people across all interests, giving a stiff competition to their peers and other providers with different business models. Understanding this pressure from its competitors, NetFlix business strategy focusses on a variety of options. From signing striking deals with DVD companies to putting their own research and making original shows, NetFlix’s content is designed to cover audience all over the globe and with a variety of interests.

NetFlix’s revenue model completely is 100% subscription based. Hence, the video content generated is entirely focussed on the interests of the subscribers. Apart from providing various options to their subscribers like well-known Movies, TV Shows, Serials, Documentaries, Animations and others, they also used the tracked user data in analyzing and creating original content that makes the users satisfied and continue with their subscription tenures.

The future of VOD Business:

NetFlix business model has proved that the only way VOD businesses can strive is by providing dynamic content that keeps the modern and evolving consumer at the price point. The current online audiences are bored with the repetitive content they come across in free streaming sites and don’t mind paying a little more for Original and well-directed content. NetFlix perfectly understands this viewpoint of the online consumer base and provide exclusive and original content, continuously adding more and more users to its subscription list.

tags: Netflix business model, NetFlix revenue model, VOD subscription, NetFlix business strategy

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