The OTT industry, without a doubt, is growing hyperactively. From creators to consumers, advertisers, sponsors, and production houses, everyone is exploring the uncharted possibilities for tapping into this soon to become a $1039.03 billion market.
Motivated by the scopes, entrepreneurs are building OTT streaming platforms to make the most out of this potentially a goldmine of a segment. However, there is one big concern that every such start-up faces, and trust me -it’s a life-or-death moment for the businesses.
No! it’s not about how to start OTT business, or how to build an OTT platform. The Internet is full of guides and turnkey solutions that can help you build a decent OTT streaming MVP in just a few days and bucks. The biggest concern is rather-
How to Price Your Platform?
Every business needs to generate revenue, and there could be several ways to do that. However, which way suits your platform the most is the biggest question. You can’t just go on stamping random revenue streams to your dream project. It should be something that works perfectly in your particular scenario.
Even Netflix, could not have survived had it chosen the wrong content pricing strategy. Take YouTube for instance. Had it made its platform subscription-only from the beginning, would it be possible to turn into this massive community with the same content sourcing strategy? Would anyone have paid to watch a bunch of unknown creators?
Remember, the pricing model is not about monetizing your OTT platform, but rather monetizing the content that you are offering. You should model your monetization channel(s) strictly according to the following aspects:
Content Objective
The purpose of your content is a primary determiner of how you can model your pricing. The way your viewers consume your content influences how much they may be willing to pay.
For example: If you are offering a bunch of exclusive content that cannot be found on any other platform, and you are planning to release regular feeds into your library, it makes sense to collect recurring payments via monthly subscriptions –that is, the Subscription Video-on-demand model (SVOD).
However, if you are offering only non-exclusive content that users can find elsewhere, asking them to pay for it would not make sense. Still, if you want to make the most out of it, consider building a free-to-consumer model via Ads. Show them Ads to generate your revenue from the advertisers. You can build a massive library of free content to get maximum views to your Ads.
Apart from this, if you are offering a mix of exclusive and non-exclusive libraries, using a hybrid of Ads and subscriptions could work even better. In case, you also offer special programs with standalone value, you could put an individual price tag on each of them via pay-per-view (TVOD: Transactional Video on Demand).
Operational Costs
An OTT streaming platform bears several operational costs to run efficiently. These additional costs should be considered while pricing your platform. For starters, the cost to develop your OTT platform may include the cost of solutions such as websites, mobile apps, and TV apps.
There are different ways to handle this particular cost. For example, developing the platform from scratch will cost more than using a turnkey solution, such as a Netflix clone script, to build your MVP. The development may cost you not less than $100,000-$200, 00 whereas a Netflix clone script or any such ready-made solution can be bought for as low as $200-$1000. Of course, it should a well-scripted solution with all your required features, or with at least the accessibility for seamless customization on demand.
The next big investment is hosting your platform on different servers, that is Web hosting server for the website, while respective app store servers for the Android, iOS, and TV apps. Depending on the scale of your platform a decent hosting platform may cost you around $100-$200/month.
In addition to web hosting servers, you will need cloud or media storage servers that will not only host your videos but also take care of smooth streaming via streaming servers. For example, a decent VOD streaming package costs around $0.05 per GB on AWS.
Please note that these costs are in addition to the cost of content sourcing. You will have to invest in content sourcing from different distributors to keep your content library up-to-date.
Viewer’s Preference
A good content pricing strategy takes the preference and will of the target audience into account. The preference of how your audience consumes your content links directly to how much they are willing to pay for the same. For example, the exclusiveness of your content; customers are more likely to pay higher prices for the content they can’t watch anywhere else.
However, if your platform is just supplementing the normal content consumption, keeping your prices low is a good strategy. For example, The CW Streaming platform offers the same content via OTT that users can also watch on regular TV channels. So, they chose the AD-based model to keep the pricing nil to the users.
Netflix offers a regularly updated catalog of some exclusive content, hence a more expensive subscription strategy is a good call. Despite this, the platform has also adopted a flexible pricing strategy for its subscription packages at different levels, taking the viewer’s preference into account.
- Want to watch 4K content, and on up to 4 screens? Get the more expensive plan.
- Want to watch SD content on a single screen? Get a cheaper plan.
- From India, and want to watch on mobile-phones alone? Get the cheapest, mobile-only plan.
Netflix’s flexible pricing strategy for different regions is a perfect example of how you can take both audience preference and local operational costs into account to devise a personalized pricing strategy.
Comparative Value Proposition
Another major factor to consider is where your platform stands in the competition to others like you. If users can subscribe to much bigger content libraries for less than $5/month, offering similar kinds of content for a bigger price is not a good idea.
It’s a good idea to inspect your competitors and see how much they are charging, what type of content they are offering, and what other factors differentiate your platform from theirs.
Examples of excellent pricing strategies by top OTT platforms
Well, you might not be thinking about going eye-to-eye with the OTT giants, but their pricing and content strategies will certainly affect your business. So, it’s advisable to understand, or at least take a cue from their strategies.
Netflix:
- Subscription Video on demand (SVOD)
- Multiple subscription packages
- Value proposition: Exclusive content, 4K streaming, Multi-screen.
- Unique strategy: Flexible pricing model for different regions
Hulu:
- Subscription + Ad-based (SVOD+AVOD)
- Cheaper subscription plan for lesser price
- Value Proposition: VOD+ live TV experience
- Unique Strategy: Option to upgrade for an ad-free experience
Disney+:
- Subscription Video on Demand (SVOD) alone
- Comparatively cheaper subscription plan, and flexible according to regions.
- Value proposition: Access to exclusive OTT content from Disney’s production houses.
- Unique Strategy: Offering a bundle of subscriptions with other platforms like Hulu, Hotstar.
Prime Video:
- A combination of SVOD and TVOD (pay-per-view) models in different regions.
- Collection of exclusive, supplementary, and regional content.
- Value Proposition: Both Subscription and Renting options available
- Unique Strategy: Access to multiple services on the Amazon Prime ecosystem.
To conclude
Determining your pricing model is an important step while starting an OTT streaming business. You must sort this out way before building your streaming platform so that you can implement your unique pricing strategy without any hassle. At the end of the day, it’s all about serious profit margins, which you can’t achieve without strategic pricing. So chose your monetization channels carefully.
