What Are OTT Platforms And How Do OTT Platforms Make Money?

OTT Platforms generate revenue from multiple streams, thanks to a lot of advantages they provide to viewers, and content producers. If you are interested to know common revenue models of OTT platforms, check the article!

How Does OTT platforms Make Money

OTT is the short form for Over-the-Top and it has become one of the prime sources of media and entertainment over the few years. Such has been the penetration that in many households, OTT has negated the need for a television and a dish-based subscription too. The primary function of OTT is to provide original and streaming content directly to consumers over the Internet. The following blog explores the basics of OTT and describes how they make money. 

What is an OTT Platform?

An OTT Platform provides media content as a product, that is most commonly streamed over the Internet. Contrary to misconception, OTT platforms not only involve video content, but also audio streaming, messaging, and even calling options over the Internet. 

OTT differs from mainstream media because it does not choose the conventional path of telecommunications, cable television, or network providers. Most of all of the content are streamed on the Internet and is accessible by anyone around the world with an Internet connection and a subscription to the OTT platform. 

Many of the OTT platforms offer their content through a subscription model. However, a few of them do offer free content as well with perhaps an in-app purchase or advertising. 

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What are the Benefits of An OTT Platform?

It’s hard to find any youth these days, without any form of OTT exposure. In fact, data suggests that more than half of North Americans have a Netflix subscription at least. The few reasons for the explosion of OTT content is described here: 

1. Valuable Content at an Affordable Cost 

Compared to mainstream media, OTT platform content is seen as more creative, innovative, fresh, and is accessible. Not just that, people do not have to shell out their wallets to get a subscription. In fact, you can get a Netflix HD subscription for as low as $12.99 per month and access 1000s of movies, web series, and other content that is also trending worldwide. Even if you watch a small portion of the available content, it’s still a reasonable price to pay compared to non-OTT platforms like cable TV. 

2. Originality in the Content 

As mentioned above, the content available on OTT is just exclusive to their platforms. From recent times, production houses and film studios have been specifically producing content to be launched on OTT platforms to keep up with the rising audience base there. Some platforms such as “Disney+” and “HBO Go” also stream content that was previously provided on television. 

3. Multiple Device Viewing 

Unlike conventional TV, you can watch OTT platform content on the go. While they can be available on TVs as well, if it has Internet functionality, you can watch OTT content on your computers, laptops, and mobile devices too. In fact, some gaming consoles support OTT too. 

4. More Data and Transparency 

For the content producers and the streaming platform owners, OTT is a means to get more accurate data about who is watching what content, what is their age group, interests, etc. This enables them to customize their content to their audience, either generally or on an individual scale. Such access to data was not possible in the era of television and cable network content. 

Even advertisements are specifically targeted keeping the user in mind, and many OTT platforms provide an option to skip ads, after a short duration of time. Even, on the whole, the average number of commercials on an OTT platform is lesser than what we commonly see on TV channels. This ensures that the user is engaged in the content throughout. 

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Mediums of OTT Content 

Since the medium of OTT is through the Internet, it can technically be viewed on any device that provides a good viewable interface to the Internet through a proper connection. Here are some common mediums of viewing OTT platform content: 

  • Mobile Devices: Easily one of the most popular forms, OTT content on mobile devices is also tuned to work in low-network areas (with lesser video and audio quality). In fact, some OTT platforms have special and cheaper subscription plans exclusively for streaming on mobile phones. 
  • Desktops / Laptops: Most OTT platforms support streaming through a computer. This provides for a better experience typically due to larger screens and better sound quality. Depending on the streaming platform used, the consumer can stream either through a web browser or through a desktop application. 
  • Smart TV: One of the newest but highly trending forms of streaming OTT content. It bridges the gap between the traditional television experience with modern OTT content. The television needs to have the functionality to be able to connect to the Internet and must have OTT streaming apps installed. 
  • Digital Players: Most recent launches of gaming consoles and the Apple TV are other mediums through which one can stream OTT content. 

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How Do OTT Platforms Get Content?

Before understanding how OTT platforms make money, let us see how they acquire content. Typically, there are two methods for getting content into any OTT platform. 

  • Through self-producing movies, web shows, or other online content. The OTT platform funds its own script, gathers a crew, and produces the original content that will stream on its own application. The funding can either be done wholly by the OTT platform or through collaboration with investors in exchange for a profit revenue share. 
  • Through purchasing broadcast rights of filmmakers and other content, to stream exclusively on their platform. This is mostly done on content that is expected to cause demand so that more people subscribe to the OTT platform to view the content. On the other hand, this also increases the library of the OTT platform rapidly. 

Revenue Streams of OTT Platforms 

Here’s the interesting part. OTT Platforms do not have just one way to make money. Here are some common routes through which they earn: 

1. Through User Subscriptions (Video on Demand) – SVOD

In most OTT platforms, users will have to pay a fee to subscribe to the platform and view all the content in it. The fees are further categorized depending on the video quality of the content (like Standard Definition, High Definition, etc), or the time duration (Monthly, Yearly, etc.). The number of subscriptions changes from one platform to the other. Common platforms like Netflix, Amazon Prime, etc. adopt this model. 

2. Through Advertisements (Advertising Video on Demand) – AVOD

In such platforms, users will be able to watch the content for free but with constant ad breaks and commercials. The OTT platform, on the other hand, charges brands and other companies a fee for advertising. Some OTT platforms like Voot, MX Players, and some of Disney+ Hotstar adopt this model of revenue generation. 

3. Through Hybrid (Subscription and Advertising) 

This is a mix of the first two means of revenue generation. The OTT platform may offer both free and paid subscription plans to the users and earn revenue through both means. Typically, this is followed by Disney+ Hotstar, Zee5, etc. 

4. Through Transaction Video on Demand – TVOD

The users can acquire music or video by paying for each particular content or even as a whole. OTT platforms like Apple iTunes, Sky Box Office, follow this model of revenue generation.

OTT Platform Revenue Model Revenue Generated (2020)
Amazon Prime Video  SVOD, TVOD, Hybrid  $25 Billion 
Netflix  SVOD $25 Billion 
Disney+ HotStar Hybrid  $2.18 Billion 
YouTube Premium  AVOD $3 Billion 

Final Thoughts – OTT Platforms 

OTT is the future of entertainment and it is already moving at a fast pace. Although one may argue that the majority market share domination is in between Amazon Prime Video and Netflix, there are plenty of new OTT platforms coming up in various countries across the world, both localized and for the global audience. 

Frequently Asked Questions

If I am a movie director, can I sell it to an OTT platform?

Yes, you can. For that, you have to follow the standard procedure of talking with the OTT platform and prepare the necessary script and documentation. If approved, they might decide to buy your broadcasting rights. Platforms like Netflix pay the entire production cost. 

Which is better – theatre or OTT for the viewer?

Movie theatres continue to be the first medium through which new movies are released. If you want to watch many new releases of conventional movie stars and production houses, movie theatres are the option. Else, OTT is better considering the overall size of the content library and the content quality. 

What are the challenges of OTT platforms?

Increased competition has to be number 1. This brings in the difficulty of bringing in new subscribers. Also, the overall size of online OTT content is becoming so big that much good and valuable content out there may not get due recognition and viewership. 

What are future opportunities for OTT platforms?

Increased penetration into developing markets such as countries in Asia and Africa. Also, with increasing Internet penetration and lesser Internet costs, the absorption of OTT content is widely increasing.

How many people are there on OTT platforms worldwide?

According to the data in 2020, around 2.13 billion people used OTT platforms in that year. This number is expected to be around 3 billion around 2025.