What Is The Difference Between AVOD & SVOD In The World Of OTT?

For many business owners and marketers, the world of OTT and CTV can be confusing. There are so many words and acronyms to learn.

First, there’s OTT, which stands for Over The Top. That refers to content that goes “over the top” of traditional broadcast, cable, and satellite TV. Anytime a consumer is watching streaming video content, they are consuming OTT content.

CTV refers to internet-connected TVs that consumers watch content on. Consumers can watch OTT content on a wide variety of screens, including smartphones, tablets, computers, and TVs.

(Read More: Questions Every Marketer Should Ask Their Marketing Rep About OTT)

Then you get to the type of platforms that OTT content and advertising are available on. The two most common types of OTT platforms are SVODs and AVODs. Let’s break down the difference and what you need to know as an advertiser.

What Is An SVOD?

SVOD stands for Subscription Video On Demand. These are streaming services that require a subscription, such as Netflix, Hulu, and Amazon Prime Video.

Typically, SVOD services make their money off subscription fees, which is one of the reasons why Netflix has been able to operate for years without running ads.

In recent years, many SVODs raised their prices for ad-free access and began offering lower-tier subscriptions that include ads. For example, Hulu charges a $5.99 per month fee for its first tier of service, which includes advertising. Customers need to subscribe to the pricier $11.99-per-month option if they want to bypass these ad breaks.

What Is An AVOD?

AVOD, or Advertising Video on Demand, is the other most common OTT platform type.

These platforms don’t offer any subscription tiers and instead earn revenues generated exclusively from ads. Some examples of AVODs include Crackle, Tubi, Vudu, and Pluto TV.

These platforms typically offer advanced targeting capabilities for advertisers. Business owners and marketers who partner with agencies that buy programmatic OTT advertising typically will have their ads available on an AVOD service.

Because these AVODs make their revenue off ads in between their content these platforms are free for viewers. As more subscription services emerge on the market, AVOD platforms are becoming a popular option for entertainment seekers who don’t want to pay for yet another service.

Consumers are flocking more to AVOD services over SVOD services. Comscore’s 2022 State of Streaming report showed that usage of AVOD services grew 29% from 2021 to 2022 in U.S. households, while the usage of SVOD services grew 21% during the same time period.

According to Statista, of the total OTT revenue in 2022, 51.58% came from AVOD and 40.16% came from SVOD.

Netflix, who is commonly thought of as the leading SVOD platform and one of the first to make an impact, is seeing declines in their subscriptions as competition increases between streaming services. Netflix announced in 2022 that they would be rolling out a version of a hybrid SVOD/AVOD platform, similar to Peacock, that offers both ad-free content for premium-tier subscriptions and an ad platform option for a lower subscription fee.

There are a lot of different ways for businesses to get their advertising message in front of consumers. OTT is one of the most effective marketing tactics in 2023, but it can be confusing. Learning more about how the advertising side of this digital solution works will help you make the best marketing choices for your business.

If you have more questions about OTT, Federated Digital Solutions is here for you. Reach out to us today and we’ll connect you with a marketing expert who can help.