With the increased adoption of CTVs across global households, audiences are spoilt for viewing choices. Meanwhile, content owners continue to develop strategies to reach viewers more effectively and lucratively. This demand-supply equation has led to the emergence of various business models, namely SVOD (Subscription Video on Demand), AVOD (Advertising Video on Demand), TVOD (Transactional Video on Demand), and the latest – FAST (Free Ad-Supported Streaming TV). Another business model that gained traction mainly during the pandemic and continues delivering value is PVOD (Premium Video on Demand).
In this blog, we’ll learn more about PVOD, its advantages, and future possibilities.
What is PVOD?
PVOD is a media distribution model where an OTT provider offers viewers exclusive early access to video content, typically a movie, at a premium price.
This content could be:
Released exclusively on OTT
Streamed on OTT in parallel with a theatrical release on the same day
Streamed after a short theatrical release window and not available for general SVOD viewers
It differs from TVOD, which allows viewers to buy or rent already-released video content.
The PVOD Boom!
Although streaming media was gaining traction even before the COVID-19 pandemic, it experienced unprecedented acceleration during and after global lockdowns. With theaters closed, content owners started scouting for innovative strategies to generate revenue and recover production expenses. The PVOD model emerged as a win-win for all stakeholders – content owners, platforms, and audiences. With premium pricing of $20 or more, producers and studios generated revenue on movies that would have otherwise gathered dust on the shelves until released in theaters. Meanwhile, audiences got access to new releases in the comfort of their homes, while platforms acquired more relevant viewers.
As of June 2021, 33% of the US population paid additional fees to watch premium video-on-demand films. Whereas PVOD consumption the year prior, in 2020, was only 19%, according to Statista.
What did this look like in practice?
Universal Studios released its movie Trolls World Tour directly on OTT through the PVOD model. Amazon Prime priced the film at $19.99 for 48-hour exclusive access. It generated $100 million in its first three weeks after release on PVOD in North America. With this strategy, the Studios only saw a mere $6M reduction from its estimated theatrical release.
Disney followed suit by canceling the theatrical release of Mulan and releasing it on Disney+ OTT. Priced at a premium fee of $29.99 for exclusive access, about 25% of Disney+ users opted for this option. Mulan generated a whopping $93 million in its opening week and a total revenue of $270 million.
Other movies that made PVOD a prominent model during the pandemic were The SpongeBob Movie: Sponge on the Run (Paramount Studios), Irresistible (Universal Studios), The High Note (Warner Bros), The Quarry (Lionsgate), Black Widow (Disney), Mortal Kombat (Warner Bros), and more.
Premium Advantages of PVOD
1. Generates additional revenue
PVOD is a valuable tool for studios to generate additional revenue before making content available for SVOD. Pre-pandemic, movies could be released on VOD platforms and then on cable/broadcast TV only after a 3-month exclusivity period. With cinemas back in full operation in 2022, the industry is now skewed towards shortening this exclusivity period. Making movies available for streaming earlier than 90 days opens the door to generating supplementary revenue in addition to ticket sales.
AMC and Warner Bros have agreed to shorten the theatrical exclusivity to 45 days before they can release their movies on VOD platforms. Universal and AMC also have agreed to restrict the theatrical window to 17 days before making content available on PVOD. In 2022, Universal made Minions: The Rise of Gru available on PVOD 33 days after its theatrical release. After that, the movie remained in theaters, selling more tickets than the original Minions, released in 2015. Fast and Furious and Jurassic World franchises saw similar results. The Super Mario Bros movie has generated $75 million in PVOD revenue since May 16 this year. With this strategy, Universal has achieved over $1 billion in PVOD revenue in less than three years, with little-to-no decrease in theatrical ticket sales. Nobody could have predicted that before COVID!
With prominent studios increasingly featuring PVOD releases, it makes full sense for content owners to add PVOD to their distribution strategy. It helps drive new subscribers and increases the overall spending of existing ones.
The other important aspect of the PVOD model is that the studios keep a significant portion of the revenue. Typically, the box office revenue is split between the studios and the cinema in a 50-50 share. With PVOD, the studios take up to 80% share, further adding to their revenues.
2. Garners subscribers’ interest
PVOD helps generate a buzz about the latest releases. It attracts subscribers to get exclusive access, especially during day-and-date releases (when a film becomes available in theaters and PVOD on the same day). With content owners getting stronger at the marketing game, generating the interest of SVOD audiences who would be willing to pay a premium price for good content also works well.
In certain cases, box-office sales even saw an increase when films became available on PVOD, as it acted as an excellent marketing channel. The opposite is also true for art-house films, where a theatrical release serves as a good marketing tool for PVOD rentals and purchases.
3. Helps capture non-theater goers
A Statista report states that PVOD transactions in the US were the most common among millennials in 2022: 24% of the respondents paid at least $19.99 to watch a first-run movie at home. Interestingly, 56% were keen on streaming movies that were released simultaneously in theaters and VOD services.
As a report from Morning Consult shows, after the pandemic, the subscriber base of PVOD is mostly a younger population with high-income households and broader entertainment interests, apart from cinemas, like esports and video games. The same report states that about 31% of video streaming aficionados purchase PVOD content if they are subscribed to five or more streaming services. The probability drops to 7% if the user has subscribed to one or two streamers.
Research reinforces that non-moviegoers are a good target audience for PVOD. It also helps develop a niche audience and helps get accurate insights into what content works well for them.
Does PVOD have a bright future ahead?
While the big screens are here to stay, PVOD isn’t going anywhere either. Content being king, a movie buff will seek out good movies from any available medium. Data plays a crucial role in making PVOD gain the traction it deserves: with studios holding customer and viewership data, getting insights into what works and what doesn’t helps generate more targeted content. We’ve all seen a movie that didn’t perform particularly well in theaters but did exceptionally on VOD. Such films are a gold mine for PVODs.
The key to understanding the PVOD formula is to gain in-depth viewership insights and powerful tools like Amagi ANALYTICS can provide such detailed data.
An additional VOD superpower we tend to ignore is direct access to consumers. Film marketing costs account for 40% of a film’s budget, so direct access to audiences through on-demand platforms provides the right marketing channel to support a film.
All in all, with the power of data and quick access to viewers, PVOD will continue to be a promising source of revenue for both content owners and platforms.