Subscription Video on Demand (SVOD)
What is SVOD?
Subscription Video on Demand (SVOD) is an OTT media distribution model where audiences pay a monthly or annual recurring subscription fee to access video content on an on-demand basis.
The SVOD market now includes 11 platforms with more than 20 million subscribers : Netflix (221.8m), Disney+ (129.8m), Amazon Prime Video (117m), Hulu (45.3m), Apple TV+ (25m), Paramount+ (32m), HBO Max/HBO (76.8m), CuriosityStream (23m), ESPN+ (21.3m), Discovery+ (~20m), and Showtime (~20m).
Why is SVOD Important?
The first SVOD streaming services (Netflix and Hulu) launched in 2007, providing audiences with an on-demand alternative to traditional broadcast television, cable, and satellite programming.
The rapid growth of these early SVOD services contributed heavily to the cord-cutting phenomenon, a pattern of households canceling their multichannel television subscriptions and choosing to consume OTT content instead.
Today, SVOD represents the most mature segment of the OTT media distribution market, with around 80% of United States households having at least one paid SVOD subscription in 2021. Global SVOD revenue is expected to exceed $82 billion in 2022.
With the current growth trajectory of advertising-driven AVOD and FAST streaming services, SVOD subscriber growth is beginning to slow. Platform proliferation has also increased competition in the SVOD marketplace and contributed to high subscriber churn rates of up to 35%.The world’s top SVOD streaming services continue to compete for subscribers, spending billions of dollars to produce original content, license or purchase in-demand content assets, and deploy data-driven techniques to optimize revenue, drive engagement, and mitigate churn.
SVOD service providers are also experimenting with new monetization strategies, including Netflix, who recently announced plans to launch cheaper ad-supported subscription plans in a hybridized AVOD/SVOD distribution model.
How Does SVOD Work?
SVOD Content Goes Over the Top
SVOD streaming services are Over The Top (OTT) digital media streaming services, delivering video content to subscribers over the Internet on an on-demand basis. Subscribers access the service by visiting the service provider’s website or downloading their mobile app on a compatible connected device (e.g. mobile phone, laptop, tablet, etc.).
SVOD Services are Funded by Subscriptions
While AVOD platforms are funded by advertisements and TVOD platforms by individual transactions, an SVOD streaming service is monetized through monthly subscription fees.
Content on SVOD platforms is available on-demand and usually presented without any advertisements, but monthly subscription costs range from $4.99 for Apple TV or Peacock Premium to ~$15+ for Netflix or HBO Max.
SVOD Services Compete For Subscribers
SVOD streaming services compete to attract and retain customers by delivering in-demand video content and optimizing the subscriber experience.
When SVOD streaming services first appeared, purchasing and licensing content assets were the most important strategies for acquiring in-demand content. But now that content ownership has largely been consolidated, the focus has shifted to producing high-quality original content. Analysts estimate that global investment in new content will exceed $230 billion in 2022, with big spenders like Comcast, Disney, and Netflix leading the way.
SVOD Services Depend on Big Data
With subscriber growth slowing and competition for audiences intensifying, the most successful SVOD streaming services are leveraging big data and AI-driven analytics to improve customer satisfaction and retention.
SVOD service providers capture a range of data from their platforms, including content engagement metrics, user behavior trends, and financial data. Analyzing this data empowers SVOD providers to understand consumer desires and trends, deliver high-quality content recommendations, optimize new content investments, and maximize their overall revenue performance.
3 SVOD Examples You Should Know
Launched in 2007, Netflix is the world’s largest and most successful SVOD streaming service. The platform reached an industry-leading 220 million subscribers in 2021 while generating more than $30 billion in gross revenue. Netflix is looking to increase its budget for original content to more than $17 billion in 2022.
Launched in 2019, Disney Plus has rapidly grown into one of the world’s largest SVOD services with 129.8 million subscribers. Disney also owns Hulu and ESPN+, giving the company a total of 196 million subscribers across all its streaming services.
Disney has competed successfully in the SVOD space by releasing new original films and TV shows, exploiting ownership of valuable media properties like Marvel Entertainment and Lucasfilm, and through acquisitions like the 2019 purchase of 21st Century Fox.
Notably, 89% of content that appears on Disney Plus is exclusive to the platform and can’t be streamed anywhere else.
Amazon Prime Video
Amazon Prime Video is a popular SVOD service with more than 100 million subscribers.
In addition to producing original content for a variety of target demographics and acquiring streaming rights for professional sports, Amazon has grown its SVOD service by acquiring MGM studios for $8.45 billion, a deal that gave Amazon streaming rights for 4,000 films and over 17,000 television shows.
3 SVOD Content Distribution Challenges
Monetizing Content at Scale
Industry-leading SVOD platforms like Netflix and Amazon Prime Video own tens of thousands of content assets. To efficiently monetize these huge content libraries, SVOD services need data-driven content recommendation engines that can drive engagement by recommending specific titles based on subscriber preferences and viewing history.
Producing In-Demand Content
With SVOD services spending billions of dollars annually to produce original content, providers need data-driven tools and predictive techniques to anticipate which kinds of content will attract the largest viewership. Predicting audience preferences helps SVOD providers efficiently deploy their content budgets to win and retain the maximum number of subscribers.
Managing Content Licensing Agreements
SVOD streaming services contract directly with content owners (e.g. film and TV studios) to license content for their platforms. SVOD content licensing agreements can take on a number of forms, including:
- Fixed Fee Agreements – A contract where the SVOD service pays a one-time fee to purchase the streaming rights (and possibly other rights) to a given content asset.
- Royalty Agreements – A contract where the SVOD service agrees to stream the content asset and pay the owner a royalty each time the content is viewed.
- MG + Royalty Agreements – A contract where the SVOD service streams the content asset and the content owner receives a minimum guaranteed fee, plus additional royalties based on total viewership.
- Revenue/Subscriber Share Agreements – A contract where the SVOD service streams the content and gives the content owner a share of the total revenue, often a 60-40 or 70-30 split.
As an SVOD platform scales operations and expands its content library, licensing agreements become increasingly time-consuming and costly to manage via manual processes.
Instead, SVOD platforms are turning to software solutions like Revedia that help streamline the process of managing even the most complex content licensing agreements. Content owners can also benefit from software tools that support the licensing negotiation process with accurate content valuation and revenue forecasting capabilities.
Optimize SVOD Licensing Revenue with Revedia
SymphonyAI Media helps SVOD streaming service providers and content owners leverage data from a variety of sources to track distributor and content performance, accurately valuate content, execute complex royalty calculations, forecast revenue, and efficiently manage content licensing agreements at scale.
Our Revedia platform leverages AI-driven capabilities, powered by machine learning, to analyze your data at scale and deliver actionable insights that enhance content performance, subscriber retention, and revenue generation for your SVOD service.