As the digital landscape of television and film consumption continues to evolve, various Video on Demand (VOD) models have emerged to cater to diverse viewer preferences and needs. Among these, Advertising-Based Video on Demand (AVOD) stands out as a key player that uniquely blends accessibility with monetization through advertising. This article delves into the details of AVOD, explaining its components and role in the current media ecosystem.
What is AVOD?
AVOD, or Advertising-Based Video on Demand, refers to a digital streaming service that offers TV and film content at no cost or for a minimal fee, supported by the inclusion of advertisements. This model enables viewers to access a wide array of content without a subscription fee, making it financially accessible to a broader audience. Advertisements are strategically placed before, during, or after the content, and the revenue generated from these ads is crucial for supporting the content creators and the platform itself.
How AVOD Works?
AVOD operates on a framework that involves multiple stakeholders: the streaming platform, content creators, viewers, and advertisers. The synergy between these stakeholders is what drives the AVOD model:
· Streaming platforms host the content and manage the distribution and streaming technology.
· Content creators supply the movies, TV shows, and other video content that attracts viewers.
(Sometimes, streaming platforms and content creators sometimes represent one entity. For example, Disney+ streams a vast array of content owned and produced by Disney, including blockbuster movies from Marvel, Star Wars, Pixar, and its own branded content.)
· Viewers consume the content for free or at a low cost, while viewing ads. AVOD makes entertainment accessible and cost-effective to more people, which is particularly appealing in economically sensitive markets.
· Advertisers fund the model by paying for ad inventory, aiming to reach their target audience through precise programmatic advertising. Advertisers benefit from advanced targeting options made possible by data analytics, allowing them to reach specific demographics more effectively. At the same time, advertisements generate significant revenue, which helps fund platform operations and content acquisition or production.
Examples of popular AVOD platforms include Peacock, Hulu’s free tier, and YouTube, which showcase a mix of user-generated and professionally produced content. These platforms leverage their broad accessibility to attract a vast user base, which in turn provides valuable data and a wide-reaching audience for advertisers.
The Global Popularity of AVOD Services
The digital era has catalysed a significant shift towards AVOD, signalling a pivotal change in how consumers access video content. This transition is underscored by compelling statistics and trends from around the world that highlight the growing preference for AVOD platforms and tiers.
In the United States, AVOD viewer numbers are projected to rise from 157.1 million in 2023 to over 170 million by 2026. This growth is further supported by a notable 29% increase in U.S. households streaming AVOD services from 2020 to 2022, surpassing the growth rates of Subscription Video on Demand (SVOD) services during the same period. Economic factors, including rising content costs and inflation, make ad-supported tiers an attractive option, leading to a projected global AVOD market size of $48.32 billion USD by 2024, with a significant portion originating from the U.S.
The appeal of AVOD extends beyond the U.S., with significant traction in the Asia Pacific and Latin American regions. In Asia, platforms like iQIYI and Youku in China, and Hotstar in India, capitalize on vast population numbers and increasing internet penetration to offer extensive libraries of localized content supported by targeted advertising. This regional approach is resonating with audiences, contributing to a rapid growth in AVOD adoption across diverse markets.
Latin America is also embracing AVOD, propelled by the rising popularity of streaming video services and the expansion of major platforms like Plex, Pluto TV, Roku Channel, and Tubi into these markets. The strong presence of both local and international advertisers adapting their strategies for AVOD, coupled with the high engagement rates of viewers who prefer free, ad-supported content, is driving the growth of AVOD in the region.
Globally, AVOD platforms are not just focusing on ads but are increasingly investing in original content and optimizing ad relevance and frequency to enhance the viewer experience. This makes ads less intrusive and more contextually relevant, improving user satisfaction and retention. Deloitte Global’s survey reveals that 47% of respondents in developed markets regularly watch ad-supported streaming services, indicating a robust consumer preference for AVOD.
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