Experts forecast the video-on-demand (VOD) market will reach $159.40 billion in 2023.). In other words, VOD is here to stay.

VOD is a TV service that allows users to watch a selected TV or movie at their convenience or “on demand”, instead of waiting for the specific day and time when the show airs on a network

More and more platforms offer VOD content, from Netflix to Pluto TV to Peacock. While users experience a seamless video streaming experience, video-on-demand content looks different behind the curtains.

Publishers and advertisers can group video-on-demand content into three different business models: SVOD (subscription video on demand), AVOD (advertising video on demand), and TVOD (transactional-based video on demand). What is the difference between AVOD, SVOD, and TVOD? And what the heck is HVOD (hybrid video on demand)? Which model works best for your business goals? We'll break down the primary VOD services and what makes each unique.

Want to learn even more? Check out our guide to CTV inventory.

What is AVOD?

In the AVOD model, consumers access free or discounted streaming content in exchange for watching advertisements.

How does AVOD work?

AVOD creates a mutually beneficial scenario for advertisers and audiences. Viewers can consume a wide range of shows and movies at a low cost or even for free, enjoying flexibility in terms of when and where they watch. Meanwhile, publishers can still generate revenue by offering ad-supported content.

Examples of AVOD services

• YouTube: The largest AVOD platform, offering a vast array of user-generated and professionally produced content with ads.
• Peacock: Operated by NBCUniversal, offering a mix of TV shows, movies, and original content with ad-supported options.
• The Roku Channel: A free ad-supported service available on Roku devices, offering both on-demand and linear content.
• Tubi: Owned by Fox Corporation, providing a large library of movies and TV shows with ads.
• Crackle: Offers a mix of movies and TV shows with regular ad interruptions.
• Pluto TV: A hybrid FAST/AVOD platform with a large audience and diverse content offerings16.
• Hulu: Offers both ad-supported and ad-free subscription plans, making it a hybrid AVOD/SVOD platform23.
• Freevee (formerly IMDB TV): An ad-supported service from Amazon offering a range of TV shows and movies.
• Xumo: Provides both FAST and AVOD content through partnerships with major content sellers.

What is SVOD?

Subscription video on demand (SVOD) enables viewers to enjoy on-demand video content by paying a recurring rate or subscription fee. It is one of the three common ways video-on-demand (VOD) services monetize their offerings.

SVOD platforms may offer ad-free viewing experiences or include advertising within their programming. Nevertheless, all SVOD services require users to pay a recurring fee in some form.

Netflix is a great example. The platform charges its subscribers monthly or annually in exchange for unlimited access to Netflix's extensive library of on-demand content.

How does SVOD work?

SVOD platforms typically offer tiered packages so viewers can pick a plan that best suits their needs, making it attractive for users of all budget sizes. Even better, unlike traditional cable contracts, viewers can join without signing a long-term contract.

Examples of SVOD services

• Netflix: One of the pioneers and largest SVOD platforms, offering a vast library of movies, TV shows, and original content.
• Disney+: Known for its extensive collection of Disney, Pixar, Marvel, and Star Wars content, it has become a major player in the SVOD market.
• Hulu: Offers both ad-supported and ad-free subscription plans, providing access to a wide range of TV shows and movies.
• Amazon Prime Video: Includes original content and a large library of movies and TV shows, available as part of an Amazon Prime subscription or as a standalone service.
• Apple TV+: Focuses on exclusive original content, including TV shows and movies.
• HBO Max: Offers a vast library of content, including popular TV shows and movies and exclusive HBO content.

What is TVOD?

Transactional video on demand (TVOD) allows consumers to buy and stream content on a pay-per-view basis. This model has three subcategories.

Download to rent (DTR): Consumers make a single, typically smaller payment to gain access to content for a limited duration.

Pay-per-view (PPV): Consumers make a one-time payment to enjoy a single viewing of pre-programmed content, such as sports games.

Electronic sell-through (EST): Consumers make a one-time payment for permanent access to a specific piece of content.

How does TVOD work?

This particular type of video-on-demand service is known for generating substantial revenue by offering viewers timely access to the latest streaming content. Competitive pricing, exclusive content, and promotional offers motivate consumers to repeat purchases.

Take Amazon Prime's video store, where viewers can rent or purchase on-demand content, ranging from single episodes of TV shows to full-length movies and beyond. Instead of committing to a membership, viewers can acquire content as per their preferences.

Examples of TVOD services

• Amazon Prime Video: Offers both subscription content and pay-per-view options for renting or purchasing movies and shows.
• Apple iTunes Store: This store allows users to buy or rent movies and TV shows and provides permanent access to purchased content.
• Google Play Movies & TV: Users can rent or purchase films and series, with options for both temporary and permanent access.
• YouTube Premium: Provides the ability to rent or buy movies in addition to its ad-supported content.
• Redbox: Known for its physical rental kiosks, it also offers digital rentals and purchases through its online platform.
• Sky Box Office: A service that allows users to rent or purchase movies, particularly popular in the UK.

What is HVOD?

There's a new popular kid in town. Hybrid Video on Demand (HVOD) is a transformative force in the ever-evolving world of Video on Demand (VOD) services. This innovative approach seamlessly combines the strengths of ad-supported video streaming (AVOD) with the flexibility of subscription-based (SVOD) and transactional (TVOD) models. In doing so, HVOD caters to the diverse preferences of viewers while redefining the way we experience streaming content.

Examples Examples of HVOD

• Peacock: NBCUniversal's Peacock represents a prime HVOD model, combining free, ad-supported content with premium subscription tiers. Subscribers can enjoy an ad-free experience with added features.
• Pluto TV: Pluto TV offers a compelling HVOD platform featuring a diverse range of ad-supported channels. It provides viewers with a broad selection of genres while maintaining cost-free access.
• At its core, HVOD prioritizes ad-supported programming. However, it doesn't stop there. It offers viewers the freedom to delve into premium, ad-free content whenever they desire. This represents a significant shift in the streaming landscape, prioritizing the needs of audiences who want the best of both worlds.

It's clear that HVOD models are revolutionizing the streaming experience. By making streaming more inclusive and accessible, they showcase the future of VOD. Whether you're drawn to free, ad-supported content or opt for a premium, ad-free subscription, HVOD platforms offer something for everyone, transcending the boundaries of traditional streaming services.

AVOD vs. SVOD vs. TVOD vs. HVOD: What makes each model unique?

Not surprisingly, these acronyms are often confused. Because each model differs in varying ways, it helps to consider their differences by asking the following questions.

Where do advertisers get their revenue from? AVOD and HVOD generate revenue through advertisements. On the other hand, TVOD operates ad-free and relies on viewer fees. In other words, viewers pay a one-time fee to access or own specific content without advertisements.

How often does the platform charge viewers? In a TVOD platform, viewers make a one-time payment to access specific content. SVODs rely on recurring fees, either monthly or annually, as their primary revenue source. AVOD models typically do not charge viewers and primarily depend on advertising to generate income rather than direct payments from viewers. HVOD models often make revenue through the underlying models (AVOD + SVOD is the most common, so they generate revenue out of advertising and viewer subscription fees) they are based on.

What content works best for each platform? Video content that will keep viewers engaged over a long period works incredibly well for SVOD platforms. Think of niche content viewers can't get anywhere else — this kind of content can be a sticky factor that encourages viewers to renew their subscriptions again and again

TVOD works well for monetizing exclusive content, such as limited-edition releases, special events, or live performances. More and more publishers are also using TVOD as a distribution window for films, with movies often becoming available on TVOD before they are released on SVOD services.

VOD Models Comparison

What VOD model works best for me?

Now that you know what makes each VOD model unique, how do you choose which one works best for your brand?

It ultimately depends on your goals and resources. Think about each model's benefits and how they align with your core KPIs and long-term goals. At a high level, the benefits of each model include:

• SVOD provides a consistent, predictable revenue stream.
• AVOD has become especially attractive to advertisers and viewers alike because payment plans and log-ins are not required. The result? The barrier to entry is low, giving advertisers access to a massive, diverse base of viewers.
• TVOD works well with other video monetization models. Give your audience the option to access basic, free content, but lock your most premium content. Once a viewer is hooked, they'll be more likely to pay for exclusive content locked behind a paywall.
• HVOD is growing in popularity because it allows streaming providers to tap into more than one revenue stream to grow their business. Many streaming providers see that a hybrid SVOD and AVOD model can achieve higher ARPU (average revenue per user) than standalone SVOD. They also recognize consumers' subscription fatigue and hesitancy to stay with a streaming service amidst continuous price hikes. Streaming companies have to show investors growth and pay for content that audiences want to watch. They have thus introduced lower-priced subscription packages with light ad loads to keep up with these trends.

Leveraging VOD Models for Your Brand

Video-on-demand content is a golden opportunity for advertisers to reach a massive, engaged audience, but how can you ensure your content reaches the right viewers?

With the right technology, it's possible, even easy. Simulmedia's TV+ platform seamlessly integrates with over 250 networks and publishers, ensuring advertisers can efficiently plan, purchase, and evaluate campaigns spanning VOD programming.

Ready to try it out? Request a demo to get started.