Over-the-top (OTT) platforms have revolutionized the way we consume media content. They have disrupted the traditional broadcasting industry by allowing viewers to watch movies, TV shows, and other content on-demand over the internet. As the popularity of OTT platforms has grown, so has their economic impact. In this blog post, we will explore the economics of an OTT platform and how it generates revenue.
The revenue model for an OTT platform is quite simple. It generates revenue by charging its subscribers a monthly or yearly subscription fee. These fees are typically lower than the cost of traditional cable TV packages, which is one of the main reasons for the popularity of OTT platforms.
The revenue generated by an OTT platform depends on the number of subscribers it has. The more subscribers it has, the more revenue it generates. Therefore, an OTT platform’s primary objective is to attract as many subscribers as possible. This is achieved by providing quality content and a seamless user experience.
The content is the backbone of an OTT platform. Therefore, acquiring quality content is critical for its success. OTT platforms acquire content in two ways: by producing their content or by licensing content from third-party producers.
Producing original content is expensive, but it provides the OTT platform with a competitive advantage. It allows the platform to differentiate itself from other platforms and provides subscribers with unique content that they cannot find elsewhere. However, producing original content requires significant investment and is only feasible for large OTT platforms.
Licensing content from third-party producers is a cheaper alternative to producing original content. This approach allows the OTT platform to offer a wide variety of content to its subscribers without incurring high production costs. However, licensing fees can be expensive, especially for popular content.
Marketing and Promotion
Marketing and promotion are critical for an OTT platform’s success. It is essential to promote the platform’s content to attract new subscribers continually. The most effective way to market an OTT platform is through online advertising, social media, and search engine optimization (SEO). Social media is particularly effective in promoting new content and attracting new subscribers.
OTT platforms also rely on word-of-mouth marketing. Satisfied subscribers can be instrumental in promoting the platform to their friends and family, which can lead to increased subscriptions.
One of the advantages of an OTT platform is that it does not require expensive infrastructure or distribution networks. However, there are still distribution costs associated with delivering content over the internet. These costs include server maintenance, data storage, and content delivery network (CDN) services.
Server maintenance and data storage costs can be significant, especially for large OTT platforms. These costs are directly proportional to the amount of content the platform stores and delivers to its subscribers. CDN services help to reduce distribution costs by caching content in multiple locations worldwide, reducing the load on individual servers.
Content delivery is critical for the success of an OTT platform. The quality of the user experience depends on the platform’s ability to deliver content seamlessly, without buffering or interruptions. The quality of content delivery is determined by the platform’s underlying technology, which includes encoding, transcoding, and streaming.
Encoding is the process of converting the source content into a format suitable for delivery over the internet. Transcoding is the process of converting the encoded content into different formats to support various devices and internet connections. Streaming is the process of delivering the transcoded content to the end-user’s device in real-time.
The technology required for content delivery can be expensive. However, large OTT platforms can leverage economies of scale to reduce costs. They can also develop their technology, which provides them with a competitive advantage.
There is an easier way to do this: use In.Live, an OTT-in-a-box service that simplifies storage, distribution, and delivery, and allows companies to create their OTT platform online in a fast, cheap, tech-free and scalable way.