While the phrase “OTT video” might not exactly roll off the tongue, we’re willing to bet you’ve got plenty of "over-the-top" content in your life already.
Why? Because more than 90% of OTT households subscribe to Netflix, Hulu, or Amazon Prime — and average users of platforms like Netflix watch roughly two hours per day, with watch time only increasing.
But OTT video isn’t only for the big boys of the streaming world. If you’re a creator making high-quality video content, it’s likely you’ve considered how to start an OTT business at some point during your video creation process.
It’s also likely that you’ve got questions.
Why create an entertainment OTT platform
When thinking about entertainment streaming services, at least one of the “Big 3” (Netflix, Amazon, and Disney, which includes both Hulu and Disney+) likely come to mind. And while more major players are entering the “streaming wars” with the likes of CBS All Access, HBO MAX, and Peacock, consumers are taking interest in smaller players, too.
That’s where you come in. Here are two reasons why now is a great time to consider jumping into the streaming space.
The OTT market is ripe for growth
As much of the world spends more time at home to keep communities safe, OTT streaming has skyrocketed. Many families are looking to keep costs low, resulting in even more cord-cutting. Global online TV and movie revenues reached $83 billion in 2019, up from just $50 billion in 2017.
You don’t need to be Netflix, Amazon, or Disney to succeed
There’s plenty of demand for "over-the-top" media outside of the Big 3. In Q3 2019, 24% of U.S. households were supplementing a subscription to one of the big streamers with another service. That means there’s still plenty of OTT dollars that you can snag with the right content.
Choosing an over the top business model
When getting into the entertainment streaming game, one of the first questions creators ask (besides “How do I start an OTT business?”) is “How do I choose a video monetization model?”
There are a handful of options when it comes to parsing your video monetization choices. Let’s get into it.
1. Subscription business model
More often than not, a subscription video on demand (or SVOD) model makes the most sense as a baseline monetization strategy for an OTT entertainment business. SVOD simply means that a customer pays a monthly or annual subscription fee for access to your content.
This format is likely the most familiar to your potential clients already, as it’s the model that built Netflix, Hulu, Disney+, and more. This approach is a great fit if you’ve already got a large library of content locked, loaded, and ready to stream.
2. Transactional business model
Transactional video on demand, or TVOD, is a better choice if you don’t have a vast content library upfront. TVOD lets your customers purchase video content a la carte and generally one at a time – think video rental, made digital.
In most cases though, TVOD serves as a supplement to an existing SVOD strategy. This way, creators can gate specific high-value content while allowing audiences access to a larger bucket of existing videos.
3. Live pay per view
Another option to monetize your video content is with a live pay-per-view business model option. In this case, you would charge a one-time fee for an exclusive live event, such as a virtual screening premiere or a Q&A with the cast or directors.
iBattle TV, which specializes in rap battle content, offers monthly live pay-per-view events that are then made available as a transactional video after it’s over. These live PPV events are a key driver for their success, and are built on top of an existing SVOD model (which includes both monthly and annual subscriptions). It’s a great example of how building an OTT business plan can involve multiple monetization strategies.
The ABCs of VOD
Whatever over the top business model you choose, it’s important to remember that the best choice is whichever option serves your content best.
How do you know if launching an OTT channel is right for you?
OTT streaming platforms are leveling the playing field for independent creators and small businesses to launch their own Netflix-style service. While anyone can launch an OTT channel on Vimeo, you’ll want to make sure at least one of these four factors apply to you.
1. You already have an established content library
When figuring out how to start an OTT business, a common myth creators hear is that they need thousands of titles to launch. That’s simply not true.
We’ve typically found that starting with at least 60 videos works well — it’s a sweet spot for many genres to offer enough content at launch for customers to feel like they have enough videos to make their financial investment in your channel worthwhile.
That said, this benchmark should only serve as a jumping off point. It’s absolutely critical that you have a robust calendar of new content coming down the pipe, too. (More on that in a minute.)
Remember, if you don’t have that much content off the bat, but you’re actively creating new content at a regular clip, you can start selling your existing content transactionally. That way, when you’re ready to launch a subscription channel, you can entice them with promotions as “thank you” for being early adopters.
For a transactional video on demand OTT business plan, aim to release new content at least once per week (if you have enough bandwidth and material to do it more frequently, all the better!).
2. You have an established audience on other channels
At Vimeo, we see many creators grow into an OTT business plan If you have an existing audience on YouTube or other social platforms, you can work on converting your fans into paying customers.
A great example of this: Black & Sexy had a popular web series on YouTube. They asked their audience there to buy the final episode from them as a way to support them creating more content in the future. The response was overwhelming and helped them validate that a paid subscription model could work for them.
For the team at Outfest, they have established a large following of queer artists and film connoisseurs since the early 1980s. With the Outfest Los Angeles LGBTQ festival being an Oscar/Academy awards qualifying film festival, producing the biannual LGBTQ+ film festival is imperative to underrepresented filmmakers to reach the mainstream audience.
Now, amidst the arrival of the COVID-19, Outfest established an OTT streaming service to continue their events throughout the pandemic while amplifying queer stories and voices to their global audience. Outfest knew pursuing OTT was the logical way forward to support their overall mission to empower queer artists and filmmakers.
3. You’ve cultivated unique content and a niche following
Remember what Stranger Things did for Netflix, The Mandalorian did for Disney+, or The Handmaid’s Tale did for Hulu?
Sometimes, just one piece of great, exclusive content can be a huge driver for subscriptions on entertainment OTT networks. Again, building up to our last point, you’ll want to make sure that you have a consistent cadence of new content to keep your viewers engaged.
4. You’re planning a long-term, consistent, content release calendar
We can’t stress it enough: A regular cadence of new content is essential. If your OTT business plan is going to succeed, you’re going to need a steady clip of new, err, clips! Remember, it doesn’t have to involve a slew of new releases every week: if you know you’re going to have one in-demand, high-quality event or title per month, that’s enough.
The Vimeo team has supported entertainment brands to launch an SVOD OTT business plan where new content was released every 30 days. And, because they positioned their model with SVOD, these brands were able to create long-term revenue through auto-renewals of subscriptions. Convenient for customers, steady income for your channel — it’s a win/win.
How to set a price for an OTT business plan
However you plan to get started, consider this: Vimeo is home to more than 1 million end-users and 3 million live streams annually. If you wanna get in on the action, you can try out Vimeo OTT for free right now – and start letting your content work for you.
Meet consumers’ expectations
According to a report from KPMG, consumers already have a price range in mind when evaluating new streaming services. While you may have big dreams of charging a certain price for your content per month, it’s important to remain clear on what consumers want. (Don’t worry, we have specific recommendations for you.)
Just remember that if you miss the mark, you risk either churning your customer, or never acquiring them in the first place. After all, the vast majority of consumers — 81% — say that pricing is the key factor for canceling their subscription.
Understand how genre affects pricing
Sorry to say, but not all streaming channels are created equal. Depending on the type of content you offer, consumers are willing to pay more (or less) for your streaming service.
At Vimeo, we’ve found that pricing your entertainment streaming network between $4.99 and $6.99 per month is, well, on the money for attracting and converting subscribers.
But!
You know what I’m going to say, right?
This only applies when you’re regularly releasing new content. If your cadence is a bit more infrequent, you’ll want to lower the price.
In the entertainment space, especially, there are ample options out there with thousands of series, films, and shorts, and many charge as little as $7.99 per month. You can always adjust your pricing with Vimeo’s OTT platform if you feel you need to change it as your business grows.
Give customers flexibility
Sometimes, loyal fans know they’ll watch your content, so they want to pay upfront. While not common with the big media players, smaller OTT platforms offer both monthly and yearly subscription options.
Setting an annual subscription price isn’t just a matter of taking your monthly price and multiplying it by 12. Instead, consider pricing annual subscriptions 20%-25% less than what it would cost a customer paying month to month. Offering a discount incentive is a compelling strategy to attract more annual payments.
Math is not my strong suit, but I can at least tell you that if you charge $4.99 for a monthly subscription, an annual subscription should be around $49 as a 20% discount incentive.
How much should I charge for my entertainment OTT channel?
When it comes to entertainment networks, what works best?
As a leader in video streaming since 2004, we’ve picked up some helpful insights along the way here at Vimeo. There’s a lot that goes into a channel launch, and understanding how to start an OTT business successfully lies in the first few interactions your prospective subscribers have with your channel.
Welcome prospects with a promo
Persuading someone to give you money when they don’t even know what you offer is… a losing battle. That’s why it’s essential to offer a free trials to attract new visitors to your site to sign up and explore your content. This is especially important for entertainment streaming services, as content libraries in this genre are often larger and updated more frequently.
We’ll get to the point: When it comes to free trials, 30 days tends to work really well. If you don’t have a lot of videos, you’ll want to offer a shorter time frame. Your goal with free trial promotions is to time it just right so prospective customers can get a taste for the great content you have to offer, but don’t make it so long that they can get through it all in a month.
Fortunately, with Vimeo’s turnkey OTT streaming service, you can set and adjust your free trial length anywhere from 3 to 30 days.
Keep the content coming
Get your calendar at the ready, because the cadence at which you release content is important not just for your subscribers, but for prospects, too. If viewers see new content released or teased during a trial, they’ll know that signing up (or, for customers, renewing their subscription) is worth the investment.
Since more than two thirds of free trial sign-ups generally convert to paying subscribers, it’s worth spending some time on this strategy. Plus, OTT channels that offer incremental content releases see churn rates as low as 3.2%, versus channels with sporadic releases see churn rates tick up to over 13%.
Stream everywhere
Entertainment channels can benefit tremendously from branded OTT apps that make your content available on desktop, mobile, tablet, and connected TVs.
According to our own analysis, entertainment networks see a more even split of viewing across the web, connected TVs, tablets, and mobile, compared to other verticals like faith and instructional content.
Secrets of streaming success
What can I do to continue engaging my subscriber base?
When evaluating your options with how to start an OTT business, remember that its success is reliant on factor beyond the channel itself.
Supplement your strategy with social
Make sure that you’re spreading the word and presenting opportunities for your community to engage where they’re already spending time online. For example, Facebook Groups have seen a sharp uptick in usage over the last couple of years, and present an opportunity to bring your subscribers together to discuss your content and share recommendations.
Instagram is a great channel for video content, too. Offer exclusive first looks at upcoming content, share promotions over Instagram Stories, or host live Q&As over Instagram Live.
Bring in influencers
Influencer marketing isn’t just for the latest beauty products or fitness regimens. Entertainment brands can leverage influencers to help promote titles on its OTT channel, especially if those influencers were involved with production.
In collaboration with a distributor, for instance, you could partner with the cast, directors, producers, etc. from a new release to help promote the content.
Connect fans in forums
For a more direct user engagement experience, web users of Vimeo’s OTT platform can leverage built-in forums to facilitate conversation between subscribers. You can also choose to make some or all of your forum boards private to subscribers only.
Wrap-up: How to start an OTT business for entertainment content
We covered a lot, but whether you’re developing original content or licensing content from multiple creators you can leverage OTT streaming technology to monetize your content.
Here’s a quick recap of everything we covered around how to start an OTT business.
For even more information on how to start an OTT business, read our guide, An Insider's Guide to OTT Providers.
Vimeo offers advanced features such as an AI-powered script writer, intuitive video prompting tool, AI caption creator, and video translator tool to enhance your workflow.
An insider's guide to OTT providers
Learn the key ingredients of a robust OTT technology, and how to evaluate which providers get it right, in our free guide.
