Things have changed since the early days of streaming. It used to be that a subscription to Netflix was more than enough to supplement your basic cable package. Commercial-free streaming was the norm — giving viewers access to premium content without ads for a low monthly fee.
But as the industry grew, subscription video on demand (SVOD) became costly. Big players like Disney+ had wracked up billions of dollars in losses from charging bargain-counter prices for high-quality content. Profitability became a more important metric than subscription growth, so these platforms jacked up the price of ad-free streaming and cut back their investment in original content.
Multiple services competing for eyeballs also saturated the market. Many consumers had already stretched their home entertainment dollars thin, which led to subscription fatigue. As viewers started looking for ways to cut costs, streaming platforms faced stagnating growth and increased churn.
Ad-supported streaming began to grow as an affordable alternative. Major providers launched hybrid video-on-demand (HVOD) models as a way to retain customers — which combined subscription-based and ad-based revenue.
Today, HVOD has emerged as the very middle ground the industry was overlooking. And if the 1 million+ users now signed up for Netflix’s ad-supported tier are any indication of what’s to come, HVOD may well be the future of streaming.
Keep reading to find out about the trends driving HVOD growth and what this means for advertisers.
HVOD, or hybrid video on demand, describes streaming services that blend monetization models, often by offering ad-supported subscription tiers at a lower monthly rate. Netflix, Disney+, and Hulu all fall into the HVOD category because they generate revenue through a mix of commercials and subscription plans.
Another example of HVOD is the combination of free ad-supported content (think YouTube), one-time purchases (like the premium movies rented or bought on YouTube), and linear TV (YouTubeTV). In this case, it’s made up of a mix of TVOD, AVOD, and vMVPD — which we define below.
So what’s the difference between HVOD, AVOD, SVOD, and TVOD? In a nutshell, HVOD incorporates various monetization tactics across all categories.
Here’s a look at the other four-letter business models that streaming platforms use to convert content into cash.
With HVOD, streaming platforms are experimenting with a mishmash of AVOD, SVOD, and TVOD — potentially with some vMVPD and FAST sprinkled in, too. This versatile approach gives consumers the flexibility to invest their money and time on their own terms. It also expands the total addressable market for broadcasters and gives advertisers more avenues for reaching buyers.
A great example of this is Amazon, which offers the SVOD Amazon Prime, is planning to launch an ad-supported HVOD tier, and also offers 150+ linear channels on the FAST service Freevee. This hybrid approach is being driven by a number of factors. Here’s a closer look:
Ad-supported media is on the rise — which should be music to media buyers’ ears. Whether you’re an agency looking to expand into new channels or a brand hoping to reach new customers, HVOD lets you do just that.
But the benefits of advertising on streaming platforms don’t end there. Here are some of the other opportunities that HVOD unlocks:
HVOD platforms support programmatic advertising, which dynamically places commercials based on viewer demographics. The ability to leverage data-driven insights enables precise targeting, ensuring your message lands in front of the right eyes.
Advertising on HVOD platforms is more affordable than running commercials on traditional TV. Programmatic video advertising means that viewers see more relevant ads, and media buyers don't waste their ad spend on the wrong person. This allows more mid-market companies to target ads to individuals rather than taking a "spray and pray" approach.
The HVOD model strikes a balance between engagement and annoyance. Unlike AVOD platforms where watching ads can feel incessant, HVOD's reduced ad frequency ensures that viewers stay engaged without feeling overwhelmed.
HVOD platforms offer analytics that let advertisers measure the impact of their campaigns in real time. This data-driven approach empowers advertisers to fine-tune their campaigns based on detailed metrics.
The ad-free format that dominated the CTV landscape for so long is evolving. Every major streaming platform has added an ad-supported tier. And many are playing the game across all fronts. HVOD is a growing business model that streaming services are implementing to do just that.
Luckily for advertisers, HVOD services unlock targeting, attribution, and other benefits that traditional TV advertising lacks. So what are you waiting for? Find out how Strategus can help you deliver high-performance CTV campaigns with ease. Contact us today.