VOD Streaming: Video on Demand Definition and How It Works (2023) (2023)

It’s not exactly a secret that in the world of content, video is the undisputed king.

Just think about it: the latest surveys all agree that most audiences prefer video over all other forms of content.

Along with that, video viewing durations on VOD platforms have shown more than 100% growth in recent years.

Today, VOD is not restricted to just entertainment platforms such as Netflix, Disney+, and Hulu, to name a few.

Large, medium, and even small businesses today are taking advantage of VOD to reach out to clients, customers, and for training purposes.

With engagement more than doubling for influencers and content creators who use streaming videos, understanding how VOD plays into your overall marketing strategy is key.

But what exactly is VOD, and how does it differ from live streaming and OTT?

I’m going to break down all of that today.

What is VOD?

VOD, or Video-on-Demand, is precisely what it sounds like: it’s the ability to play and watch videos whenever and wherever you want to. This is opposed to the broadcast model adopted by traditional media, where you’re forced to watch scheduled content.

VOD can refer to any pre-recorded video content that you watch over the internet. Video streaming services such as Amazon Prime, Apple TV, and HBO are some common examples of entertainment-based VOD platforms.

Although VOD might seem like a recent innovation, it’s actually an old concept. The VOD model first appeared in the early 1990s. Back then, due to massive improvements in data compression and transmission technology, it was possible to distribute video via phone lines.

Sources: tbivision.com

Cut to the present decade, and today we can view VOD content and other on-demand content via the internet through a vast number of services. Even social media platforms such as YouTube, Facebook, and Instagram have emerged as significant VOD channels.

Yet another advantage of VOD playback is that you’re not restricted to a single device such as your TV for consumption. Subscribers to any VOD service can easily use any device, from desktops to laptops and even mobile phones to access VOD content.

Most popular online video services and streaming platforms offer video access on a subscription-based or pay-per-view model. However, the restriction on these platforms is that you can only access content by creators affiliated with these content networks.

If you’re an independent creator or a business looking to leverage the power of VOD, there are a large number of on-demand streaming platforms. These allow you to host, manage, monetize and distribute your VOD content in a seamless manner.

Is VOD the Same as Streaming?

When we’re talking about VOD, the one question that’s bound to arise is whether it’s the same as streaming. The answer is pretty simple: it’s not. Streaming is simply one way you can watch VOD content; the other is to download the video entirely.

When you’re streaming VOD content, the video doesn’t get stored in your device memory. Instead, you’re directly watching the data stream as it gets downloaded and interpreted by the video player. Netflix is the best example of a video streaming service.

In case the platform allows it, you can even download the video for later viewing. For instance, in some cases, YouTube will let you download and store a video for watching later. Keep in mind that these downloads are usually encrypted to work only on a specific app.

Streaming is just one method of content delivery in the case of VOD. Naturally, for seamless VOD streaming, you need to have a broadband internet connection with high bandwidth. Otherwise, you might have to face buffering problems.

Source: cloudflare.com

Thankfully, with the advancement of telecommunications technology and the wide proliferation of 4G and 5G internet connections, bandwidth is seldom a problem today. This allows viewers to stream full-HD and even 4K video content without significant delays.

How Does VOD Differ From Live Streaming?

Many people often confuse VOD with live streaming. If you think about it, there’s a significant difference between the two modes of content consumption. And each also comes with its advantages and disadvantages.

Live streaming is a method of video streaming where the viewers see the video in real-time (with a slight latency in some cases). Here, viewers are part of a live event that’s happening as they are watching it.

Live streaming has several advantages, such as the ones below:

• The sense of participating in an exclusive event
• Massive real-time reach
• Reduction in costs as compared to real-world seminars and meetings
• Suitable for many marketing events such as product launches and press releases
• Ability to use interactive communication tools with the audiences

However, all of these advantages come with their fair share of disadvantages as well:

• Live streaming is time-restricted, which means you have to watch it at a fixed time
• Viewers don’t have the advantage of storing the content right then for later viewing
• Live streams are technically more complicated and resource-intensive than VOD

VOD, on the other hand, uses mostly pre-recorded content that can be accessed at the viewers’ convenience. VOD platforms allow users to access and watch content according to their schedule from any device connected to the internet.

Modern lifestyles and rapidly changing technological landscapes have fueled the growth of VOD. Today, even Live Streaming providers are repurposing their content for release on VOD platforms. VOD brings with it better control, adaptability, and flexible viewing modes.

What is OTT?

Since you’re already reading about VOD, the chances are that you’re familiar with the term OTT. Well, OTT stands for “Over-the-Top” services, i.e., technology and platforms that allow video streaming over the internet.

OTT doesn’t just apply to video streaming but can also work for audio and VoIP calls. All you need for OTT usage is a stable internet connection, and you’re good to go.

OTT has emerged as an attractive mode of content delivery for entertainment providers as well as other businesses. Since OTT video delivery can be done at a fraction of the cost required for traditional broadcasting, it has gained prominence with users and companies.

Source: statista.com

Here’s a list of some advantages that OTT offers:

• Multi-tiered customer-centric pricing plans
• The ubiquity of time and place of consumption
• Seamless user experience across devices
• Real-time audience metrics and customer data
• Minimal disruption in content delivery
• Better content segmentation

OTT technology has made it possible for VOD to become increasingly popular. But is OTT synonymous with VOD, or are there differences between the two? That’s what I’ll discuss in the next section.

What is the Difference Between VOD and OTT?

Despite the thin line between OTT and VOD, the two services have a significant technical difference. OTT defines how the content is delivered to the viewers, i.e., the actual technology used for content distribution.

VOD, on the other hand, is a description of the way the viewer consumes the content. In short, while OTT is the distribution model, VOD is the consumption model. You can watch both VOD and live streams over OTT platforms.

Here it’s essential to mention that OTT technology is one reason why VOD has become so popular the world over. Today, VOD and OTT models are intertwining in complex, hybrid content distribution models.

How VOD Works

Now that you know what VOD is, let’s understand how it works. The following is a brief explanation of the VOD transmission model and the different steps involved in it.

Steps in the operation of VOD:

• First, the video assets are compressed using suitable compression techniques
• Next, the assets are encoded/transcoded into a format that can be played on a video player
• Then, the compressed and encoded assets are moved to the VOD servers
• After encoding, the assets are put into a video container
• The container is provided with essential information such as thumbnails and metadata
• On demand, the asset is encrypted and sent to the users’ devices
• Several protocols such as HLS or MPEG-DASH are used for this purpose
• Some VOD services also use CDNs or Content Delivery Networks
• Finally, the video content is decoded by the player, and you can see it

Keep in mind that the above explanation is a simplified overview of the entire VOD process. As you go deeper into VOD technology, things get even more complex when you throw user permissions, ABR technology, and monetization models into the mix.

Talking of monetization models, let’s take a look at how you can use VOD to generate revenue.

What are the Different Types of VOD Monetization Models?

VOD works great as a marketing and educational tool, but that’s not its only use. It can also be used to generate sizable monetary profit. Many businesses use VOD as their primary revenue generation source.

Here’s a list of the different revenue models that have emerged to monetize VOD.

Source: muvi.com

1. AVOD (Advertisement-based Video on Demand)

AVOD is the revenue model followed by YouTube. Here, revenue is generated from ads that are strategically inserted into the video content.

In the AVOD model, the user doesn’t have to pay anything to view the video. Here, the primary strategy is to draw as many viewers as possible to the videos and the ads. Social media sites such as Facebook, Dailymotion, and Twitch utilize this model.

The following is a list of the different kinds of ads you see in videos:

• Pre-roll-where the ads appear before the video begins
• Mid-roll-where the ads appear while the video is playing
• Post-roll-where the ads come after the video

Ads in the AVOD model can again be divided into skippable, semi-skippable (after a few seconds), and non-skippable.

2. SVOD (Subscription Video on Demand)

SVOD is, at present, the most popular model for VOD consumption. In this revenue model, the viewer or subscriber pays a monthly (often billed yearly) fee to access the VOD service provider’s content library.

Common examples of services that utilize this model are Hulu, Amazon Prime, and Netflix. Netflix is the service that popularized this model by offering multiple subscription plans with different facilities in each tier.

3. TVOD (Transactional Video On Demand)

The Transactional VOD or TVOD model uses a pay-per-view scheme. Here, the customer must pay for the video that they wish to view and that video only. In a way, it’s the reverse of SVOD, where you have to pay for access to the entire content library.

Again, TVOD can be broken down into two submodels:

• DTR, or Download to Rent
• DTO, or Download to Own

In the DTR model, the user cannot store the video on their device storage but needs to stream it. In the DTO model, the user can download and store the file on their device storage.

Popular platforms using TVOD are Apple iTunes, Google Play for Android, and Amazon Prime.

4. BVOD (Broadcaster Video on Demand)

BVOD or Broadcaster VOD is a sub-type of AVOD, where broadcasters stream on-demand catch-up TV shows alongside linear content offerings. Most of these services garner revenue based on subscription.

A notable exception, in this case, is BBC iPlayer in the United Kingdom, as licensing fees fund it.

5. HVOD (Hybrid Video on Demand)

The final VOD revenue model that I have to discuss is HVOD or Hybrid VOD. HVOD is a combination of two or more of the abovementioned revenue models. It follows a freemium subscription scheme, where users can upgrade from AVOD to SVOD with a fee.

Notable services using HVOD are Vimeo and YouTube Premium, where upgrading can allow viewers to unlock special features and content.

Advantages of VOD

Video has always been the most popular mode of information consumption and entertainment. From TV and DVR to YouTube and beyond, VOD has come a long way, and with good reason. Here are a few advantages of VOD listed in brief.

Source: fortunebusinessinsights.com

1. Not Limited by Fixed Schedules

The ability to reach audiences when they are most likely to resonate with your content is the prime benefit of VOD. Unlike regular broadcast services such as cable TV, VOD lets users view content as, when, and where they want.

This way, not only do viewers get the ability to choose their viewing times, but content creators can also leverage this feature to reach audiences at their convenience. It’s a win-win situation for all stakeholders.

2. Extremely Convenient

The next significant advantage of VOD is its extreme convenience. You don’t have to record anything, buy any special hardware or even make a trip to pick up a video disc. All that’s needed is to press “Play,” and you’re ready to view.

If you’ve enabled autoplay, then you don’t even have to do that much. VOD doesn’t require you to download anything and take up space on your device storage, either. And you can play the video across all of your devices.

All of the above conveniences reduce the friction involved in getting viewers to consume your content. This is undoubtedly as big an advantage for viewers as it is for the content creators and providers.

3. Low-Budget Setup

Unlike satellite or cable TV, which require massive infrastructural investments, VOD is relatively easy to set up and use. All you need is recording equipment, a steady, high-speed internet connection, and a VOD hosting platform.

The low-cost entry barrier makes it easy for businesses and individual content makers to break into the VOD industry. It also means that users can consume VOD content with very little investment in equipment.

4. Worldwide Reach

Since most VOD services are available on smartphones, VOD’s reach is massive. Such a vast network translates to a worldwide audience base that is reachable with a few clicks and taps.

5. In-Depth Analytics and Targeted Content Delivery

One of the differences between traditional video consumption and VOD is that viewers almost always access VOD content from a personal device. This means, as the service provider, you can get access to massive amounts of data about your viewers.

This allows better audience segmentation, targeting, and content delivery. With detailed data about how customers interact with your content and their demographic data points, you can fine-tune your VOD model for delivering tailored content to the viewers.

You can even provide curated viewing lists for subscribers, such as those offered by Netflix. Most VOD services today use AI-based recommender systems for suggesting watches to audiences.

6. Better Conversion

All of the above advantages finally culminate into the most significant one of them all: better conversions. Instead of just broadcasting content and hoping that audiences will tune in, VOD providers can use analytics and related metrics to ensure conversions.

Disadvantages of VOD

Compared to the advantages, the disadvantages of VOD can be considered negligible. However, it’s best to take a look at them to ensure you don’t fall for any of these on your VOD journey.

Here’s a quick list of the few disadvantages of VOD:

• Many parts of the world suffer from low bandwidth
• Large number of competitors
• Too much content can lead to content-fatigue
• Multiple pricing plans cause confusion

As direct (and often indirect) results of these advantages and disadvantages combine, viewers today have found themselves with more content than they can consume. Such a situation can be viewed both as a bane and a boon, whichever way you look at it.

How Businesses Can Leverage VOD

When discussing VOD, it’s easy to get sucked into the world of entertainment. But fast forward to today, and businesses are also reaping the benefits of VOD functionality. From better marketing to sales and customer outreach, VOD has taken roots in corporations.

Source: businesswire.com

Here are some ways for businesses to leverage VOD:

• For efficient digital marketing
• Effective data feedback
• Gaining a better understanding of customer behavior

In this situation, VOD tutorials and training videos are coming in handy for businesses. Many companies are using VOD for onboarding new employees and even training the existing workforce.

There are no limits to the advantages businesses can glean from using VOD. All that’s needed is a clear strategy for using the technology.

How Can You Select the Right VOD Services for Your Business?

It’s easy to understand why VOD is an essential tool for businesses. The main problem that most corporations face here is selecting the right VOD services. I recommend keeping three crucial factors in mind when choosing the right VOD platform for your business.

1. Privacy and Security

A VOD platform for enterprises (also called an EVP-Enterprise Video Platform) will most likely handle sensitive business information. Such information needs to be protected against unauthorized access and downloads.

That’s why, when selecting an EVP, businesses should ensure that these platforms offer enterprise-grade encryption and DRM. Fine-grained access control and SSO can allow you to control the access to video resources in a better way.

2. Reliability

For businesses, a VOD platform needs to be reliable and accessible when needed. To guarantee this, make sure that the provider you’re using has effective CDNs and Adaptive Bitrate Streaming. These ensure that your videos can be viewed anywhere, anytime.

3. Feature Flexibility

Finally, any VOD platform for businesses needs to be flexible enough to adapt to the needs of that business. It should also be customizable enough to offer a fully branded experience to the target audiences.

Wrap Up.

Video on demand may not be a new concept, but the ubiquity which modern internet technology has given it is undoubtedly revolutionary. The ability to consume video content at your convenience has changed the content landscape forever.

No wonder then that businesses are scrambling to take advantage of it. However, VOD is still evolving, and there’s no telling where the growth will lead to. With increasing personalization and tailor-made content, the race for VOD supremacy is heating up.

One thing is for sure: both audiences and VOD providers have lots of benefits to reap from the technology. Don’t wait for the trend to peak; be an early entrant into the VOD space and reap the first-mover advantage.

Last Updated on February 20, 2023 by Adam Enfroy

Adam Enfroy

Adam Enfroy is a full-time blogger and affiliate marketing expert. Join Adam and 500,000 monthly readers on AdamEnfroy.com to learn how to scale your influence at startup speed. Before starting this blog, Adam managed digital marketing teams for large SaaS startups and reviews the best software to run your online business. He has been featured in over 100 publications, including Forbes, Business Insider, and Entrepreneur.