The turning point for ad-supported video services

The rise of Netflix, Amazon Prime Video, Disney+ and a host of other subscription video on demand (SVOD) platforms has led to much discussion about how subscription-based video business can work. This applies to both its development and its operation. The models are now established and have proven to be very useful for consumers and profitable for content producers, even though the latter have invested billions in content creation and platforms.

The AVOD market (advertising on demand or advertising-based videos on demand) is less at the center of the discussion. In this market, the creation of content is mainly financed by advertising revenue. However, while competition for SVOD services is increasing and thus driving prices down, AVOD is an established and strong market - and according to Digital TV Research, it still has enormous potential: global revenues in the AVOD sector are expected to reach USD 56 billion by 2024.

Low entry barriers make it easier to get started - but a strategy is essential

The world's largest and most successful AVOD platforms - especially YouTube and Facebook Watch - have a low barrier to entry, which makes it easier to create content. As a result, independent broadcasting and the targeted development of an audience is comparatively easy: the more the respective producer becomes known, the better their opportunities to earn money with "their" channel. The option to publish content on other platforms further increases these monetization opportunities.

Nevertheless, competition is also an important factor in the AVOD market. After all, it can be quite challenging to build a lucrative business on an advertising model. This is all the more true when third-party platforms come into play - because they also want their fair share of the revenue. In addition, both viewer numbers and advertising revenue fluctuate. In short, here too, aspiring content creators need a strategy with flexible and efficient production at its core. Consequently, it is important to rely on highly adaptable production processes. They make it possible to always have the right answer to the dynamic and usually increasing requirements of the platforms as well as to the changing needs of the audience.

Use "franchise advantages"

In addition to the relatively easy entry, the AVOD business offers numerous other advantages. For example, even newcomers can reach a large, global user base. Feedback mechanisms are already built in and can be used right from the start. Creative freedom completes the list of advantages. The feedback functions also ensure that you can use your own target group in such a way as to make the most of your own creativity. Defined key figures provide a clear understanding: Does the performance of the video meet the expectations of the viewers? Does the video itself meet their expectations and do they like it? On a channel like Brightside, for example, the creative minds responsible make decisions on a daily basis based on audience feedback.

If a particular topic or video producer performs particularly well, this is usually the starting signal for further activities - as this increases the likelihood of further increasing viewer numbers and thus also sales in this environment. Ultimately, the goal for AVOD creative teams will usually be to focus on universal themes that can bring communities together. However, sometimes niche ideas also have the potential to resonate with a wider audience - so they should not be ruled out from the outset. The rule of thumb is: as long as a global audience can be addressed in principle, there is also the potential to establish a global brand with a channel. So thinking big is definitely allowed.

Entertainment is a sought-after commodity

Most AVOD platforms make it quite easy for creators to publish new content or build a brand - for good reason, as it is in both parties' interests. Approvals and clearances, gatekeepers or creative or distribution control are usually not major hurdles. Creative teams therefore have the opportunity to constantly test and publish new concepts. This enables them to gain new partners and viewers and to build up and run successful projects in the long term. After all, entertainment has not only been in demand since a large part of the world's population had to live with restrictions due to the coronavirus pandemic.

The positive momentum is helping creatives: it is more important than ever to offer people fun and positive content - this does not mean keeping them permanently glued to screens. Rather, the right content can be a stimulus to encourage exercise at home or family activities. The fact that advertising spend is currently under scrutiny is not necessarily an obstacle, on the contrary: many insiders believe that the AVOD sector will weather the storm better and recover faster, as its advertising revenues are not directly linked to live TV and sports programs. As this market continues to mature into the mainstream, traditional subscription services may be surprised at how quickly they are confronted with a host of new AVOD challengers.