This is basic topic for everyone who wants to understand video streaming.
For all the normal people who ignore the meaning this acronym, OTT stands for “over-the-top”: it relates to the way content is delivered over the Internet, as an “over the top” product for which the Internet provider is not responsible. A third party such as a streaming company controls the delivery operations (such as viewing mode, copyrights, and distribution in general).
In general, OTT is the technical way we call the video streaming industry. While all streaming providers distribute content in an OTT modality, what differentiates them is the business model behind it. Basically the difference is represented by the way we pay for the content we consume as end users. As such, the OTT landscape has three main types of players: SVOD, AVOD, and TVOD.
VOD, as Video On Demand, is the element that all 3 models have in common (the transmission type) as all of them allow the user to watch selected content at his/her own leisure.
SVOD: This stands for Subscription Video On Demand. SVOD providers charge a subscription price, usually billed on a monthly basis, allowing end users to watch all the content they want. Netflix, Hulu, and Amazon Prime Video are examples of SVOD. They are able to provide a larger catalog, they generate original content and they can expand their offering with new features, such as download options or multiple screenings at a time (both Netflix and Hulu offer all these options).
Painpoints: this model is the most successful when it comes to generating revenue. However it still shows some weaknesses: content needs constant expansion (and users will never be completely satisfied) and subscription prices need periodical adjustments to be able to support the engineering of a more advanced platform (and users will always complain about this too).
AVOD: Ad-based VOD. These are services that rely solely on advertising to generate revenues, and they are free to the end users. YouTube is the biggest example, but Crackle (the streaming service created by Sony) is another one. AVOD providers require the user to watch ads in order to enjoy the content, and usually have a smaller catalogue. Another example is the free version of Spotify, where the so called “freemium” model implies that you can still use Spotify but you’ll have ads to listen to, you can skip a song only up to 6 times per hour and, more importantly, sometimes you’ll hear tracks from similar artists to the one you were listening to. As a matter of fact, Spotify is an excellent, successful example of a hybrid AVOD/SVOD model, where the free version is a strategic tool to drive users towards to the subscription after testing the service at no cost.
Painpoints: AVOD have limited catalogs (you can’t really find everything you want on YouTube). They also are under constant pressure of creating endless revenue-generating pipelines of ad partnerships.
TVOD: The Transactional Video On Demand is something we have all used at least once. The idea is that you pay for what you watch and there is no sign up charge. This model does not generate loyalty nor enough revenue to be self-sufficient. However it is usually one of the features of non-pure OTT players, such as Apple with iTunes or Amazon with its On Demand products that can be purchased separately whether is a movie, TV series episode or the whole season.
Painpoints: as a feature of a non pure OTT player this model can survive only with the support of a bigger platform (Apple, Amazon) and it can be a profitable line of business but not a stand alone player.
Final considerations. On a daily basis, we are customers of all these models – who has never used YouTube in his life? – . We research content based on availability, which consequentially determines our choices of which model, AVOD/SVOD/TVOD, we decide to use in that specific moment. The price point at which SVOD providers are ($9.99 for Netflix, $7.99 and $11.99 for Hulu Plus and Hulu Plus No Commercial) is just too good to pass on. In a way or another, there is a plethora of movies, TV series, and documentaries out there, so the only question the user should ask himself is: what do I want to watch? And if you feel confused or overwhelmed, there are awesome apps like FanTv that will tell you where your movie/series of choice is available to stream. Can’t get any easier than that.