Choosing the right pricing model is especially crucial when it comes to a VOD – and it’s not an easy task.
It’s actually the top question we get from our customers: how do I charge people for these videos, and how much do I charge them?
The reason why it’s so hard to decide this is because unlike with any physical product, the “cost-plus pricing model” doesn’t apply to an online video business.
So in this lesson, we’re going to walk you through the different ways you charge your customers for your video content.
Let’s get started!
As you know, VOD stands for video on demand, and it’s a way of accessing videos from a large online library whenever you want to watch them. Where TV channels and movie theatres force you to watch on their schedule, VOD services allow you to access videos at your own leisure, from any device.
There are three main types of VOD business models you can adapt: SVOD, TVOD, and AVOD. Although, just a heads up, we recommend SVOD the most – we’ll explain why.
Let’s go through the three main types:
Over 70% of Uscreen customers have adapted an SVOD model to their video business, each of which generates an average of $10k a month.
Why does it work so well? Because of something called The Membership Economy.
The Membership Economy is a book by Robbie Kellman Baxter, who was a Silicon Valley product marketer and later a consultant to companies ranging from venture-backed startups to SurveyMonkey, Netflix, and Yahoo!.
The membership economy, she explains, is all about finding your super-users, establishing and growing the ‘forever’ transaction, and building recurring revenue off of something you created once – the possibilities are infinite!
So: would you rather have a customer pay $10 for one movie once or $10 a month for unlimited access to your entire library for years?
While we at Uscreen still do give our customers the freedom to set up their models however they want, we’ve seen over and over again that subscription is the most profitable way to go.
There are a few options for VOD pricing models out there. Our customers have experimented with all of them and eventually stuck to one of three of the following:
Free trials refer to a limited offering (typically 14-30 days) in which a user can access your entire video library for free. After trying out your VOD and seeing for themselves how great it is, a good percentage of users will decide to sign up.
Like, once again, Netflix’s.
This is actually a very common pricing model for all subscription businesses. According to Zuora, this type of pricing strategy has the best conversion rates, up to 20% in some cases.
Freemium, on the other hand, refers to a basic, stripped-down version of your VOD which users can access for free for as long as they want.
Since the consumer never has to make any commitment to buy anything from you, this usually drives large numbers of users but conversion rates tend to be much lower than the free trial strategy–around 3 to 5%.
The problem with Freemium, however, is that you have to focus your efforts on convincing the user to upgrade by constantly highlighting the value of premium products and making sure they’re aware of them.
This model is the least used of all three in VODs, but we will walk you through it briefly anyway.
Varied access model is based on the idea of providing different levels of content access for subscribers based on their subscription plan.
Once again, like Netflix (we’re telling you, they’re doing it so right).
Users can sign up for the 1 SCREEN plan for their infamous $8.99/month fee, or they can upgrade to add screens to their plan and increase their video quality.
This could be applied in any way you want – offer a particular number of views or downloads each month, access to a particular number of books or television episodes, or limit the data associated with a user based on their subscription plan.
We don’t recommend the varied access model when you’re first starting your VOD, but as you grow and have more room to play, the varied access model is definitely something to look into. But for now, keep it simple.
Now that you have your VOD pricing model in place, it’s time to look at price points.
How to Price Your ContentGo to Lesson 2