How OTT Platforms Earn Money: Netflix, Amazon Prime, ZEE5 and More

OTT or Smart platforms are a medium to watch movies, web series, and other videos by using an internet connection. The best thing about the OTT platform is the ease of customization and controls. You do not require a fixed cable operator and enables you to watch the content of your choice.

OTT offers media directly to the end-user, simply by transferring IP packets to ISP and uses a technology known as Content Delivery Network CDN.

Right from Smartphones to Smart Tv screens the content can be watched without buffers and advertisements smoothly at their convenience.

Some of the most famous OTT platforms are Amazon Prime Video, YouTube, Disney+ Hotstar, and Netflix.

Now the question arises, how OTT platforms earn money? To explain in layman language, these OTT platforms earn profits and popularity with the help of their subscribers.

Did you know?There are over 300 OTT platforms available on the internet, but only 10-15 OTT platforms are well known and frequently used.

How OTT media invest in online content?

OTT platforms acquire content in two way:

  1. Self-production – They produce movies and web series by gathering a crew and funding their ideas to create original content for streaming on their application.
  2. Purchasing broadcasting rights – In this option, the OTT platform buys the streaming rights from the filmmakers to showcase that particular movie or series on their application. This is mostly done to increase their content library so that more and more people subscribe to their platform.

This funding is either done by themselves or they collaborate with the investors in return for profit share for that particular video content.

How OTT platforms earn money?

OTT platforms follow one of the four revenue models to make profits. These revenue models are:

Users will have to watch unskippable advertisements in the middle of their content, which might hinder the movie experience.

  1. SVOD – means Subscription Video on Demand. In this model, the OTT applications earn through the subscription money that is paid by the users to view the content. The subscription value changes from platform to platform. This model is adopted by online streaming giants like Netflix, Amazon Prime, and Sony Liv.
  2. AVOD – means Advertising Video on Demand. This model allows the subscribers or users to view the content for free. These platforms earn through the Ad revenue model, where they charge brands and companies for posting ads on their platform. This model is adopted by Voot & MX Player.
  3. Hybrid – This model is a combination of both SVOD and AVOD. In this model, the OTT platform offers both free and paid subscriptions to its users and generates revenue through both models. This pattern is followed by Hotstar plus, and Zee5.
  4. TVOD – means Transaction Video on demand. This model comprises two steaming options that can be chosen by the subscriber as per their needs. This kind of revenue model is followed by Sky Box Office, Apple’s iTunes, and Amazon Video Store.

The Electronic sell-through model (EST) allows the user to get permanent access to the content and the Download to rent (DTR) model where the viewer can rent the content on a temporary basis by paying a minimal amount.

The revenue model of the top 5 OTT platform

The increasing demand and reliability for entertainment have gained huge popularity for OTT Platforms. Every OTT platform offers its content with different subscription plans, revenue models, and services.

These OTT platforms offer premium versions that are ad-free, however, the user will have to buy the premium subscription at the pre-decided rate set by the particular platform.

Let us discuss how OTT platforms earn money and offer to watch millions of content to their users.

1. How Amazon Prime Video make money?

Amazon Prime Video shares its revenue with its parent company “Amazon” and is one of the leading video streaming platforms in India. They work on the foundation of “investment for future plans”.

How does it earn?

Amazon Prime Videos earn revenue through SVOD, TVOD, and the Hybrid model. A report stated that, by the end of 2019, Amazon Prime Video held a market hold of 96.5 million subscribers leading to a revenue of $119 every year.

Supported DevicesAmazon Fire Tv Stick, Android, iOS, Web, Smart TVs, Playstation, etc.

Amazon offers prime videos, prime music, and free amazon delivery with single subscription fees. The maximum number of people take subscriptions not just for video streaming but other benefits offered like free delivery and special discounts.

2. How does Netflix make money?

Netflix is an online streaming platform that offers both original contents as well as various movies and web series.

How does it earn?

Netflix makes its revenue purely through its subscribers. The subscribers pay the subscription fee to get access to the various content on Netflix. Netflix does not rely on Ads to support or earn; it is a complete ad-free application once you have subscribed.

Netflix subscriptions start from Rs. 199 per month and range up to Rs. 799 for a month. This includes access to 1 screen, 2 screens, or 4 screens at a time with HD and Ultra HD quality depending on the type of subscription chosen by its user.

Supported DevicesAndroid, iOS, Playstation, Smart TVs, etc

In the year 2020, Netflix earned annual revenue of $25 billion, which saw a 24% rise as compared to other financial quarters.

3. How is Disney+ HotStar Revenue generated?

Hot star is one of the largest streaming platforms with a subscriber base of 300 Million.

How does it earn?

Hotstar earns its revenues by following the hybrid model, i.e, it earns from both the subscriptions and advertisements. The content is accessible to the viewers for Rs. 199 monthly to Rs. 999 annually. But with the help of brands advertisements on different platforms, Hotstar plus earns their revenue along with gaining popularity.

Did you know?A 10 second advertising spot on Hotstar content is estimated at Rs. 150 to Rs 250 per thousand impressions.

Supported DevicesAndroid, iOS, Smart TVs, Chrome, Web, Fire Tv etc

4. How does YouTube Premium earn its revenue?

YouTube is a worldwide free OTT platform that can be accessed by anyone and anywhere; all you need is an internet connection.

Globally, over 1 billion hours are spent watching videos on YouTube and every minute over 400 hours of content is uploaded on YouTube.

How does it earn?

It earns a huge amount of revenue through advertising brands, products, movies, and other platforms on its steaming videos. It also has side earning from promoting featured content and also affiliate marketing.

Apart from advertisements, it earns through monthly subscription via YouTube Premium where they create original YouTube content.

It does not earn itself but also offers creators to earn from it too.

Supported DevicesGoogle Chromecast, Android, iOS, Smart TVs, iPad, PlayStation, Web Browsers, and many more…

5. How does ZEE5 earn money?

Initially Zee5 was a freemium platform that was working through the successful Zee Tv shows. With the increasing demand and new releases of TV shows and Movies it has turned its business on a higher level.

How does it earn?

The main medium of revenue for Zee5 was advertisement - AVOD based model. However, recently the OTT platform has been focusing on acquiring more SVOD based users.

Recently it has turned its AVOD service to SVOD (Subscription Video on Demand). It provides an array of Bollywood, Hollywood, and original shows, movies, and other rare content in just Rs. 499 annually.

Supported DevicesAndroid, iOS, ChromeCast, Smart TVs, etc

Did you know?OTT platforms like Netflix and Amazon allow more parental controls with the feature of creating a separate childproof user account. All the content on this account is automatically filtered and is kids-friendly.

Concluding Notes

With the rise of digitalization, the OTT platforms are growing extensively in the Indian market. The main component behind this popularity is the low-cost data services and affordable subscription charges. The OTT platforms use algorithm methods to understand their audience preferences. This helps them to acquire and produce content that will attract more subscribers and advertisers to their application and lead to increase in profits.

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