Roku is a huge business opportunity for video publishers and media companies in 2020. Nearly ⅓ of all Connected TV users in the US are on Roku, and that number is projected to keep on rising. But the question for many businesses remains: What is the best way to create a Roku channel, and how do you make money with a Roku channel?
There are tons of OTT tools that can help you build and monetize Roku channels. At MAZ, we’ve spent nearly a decade helping video publishers liked Wired and FastCompany get on Roku and increase revenues. That’s why we wanted to put this guide together to help more businesses succeed on such an exciting TV streaming platform.
So let’s start with the basics: How do you make money with a Roku channel? There are two ways to do it:
Ad-Based (AVOD) vs. Subscription-Based (SVOD).
Ad-based Video on Demand (AVOD) are channels that sell ads to make money. This is the most traditional TV route, with everything from cable TV to YouTube having ads before, in-between or after content. These ads can take many shapes, from typical pre or mid-roll ads to sponsored content, banner images, infomercials, direct sponsorships, etc.
Subscription Video on Demand (SVOD) are channels that charge users a monthly or annual fee to access content. Think Netflix, Hulu, and other major “cord-cutting” services. This is a more recent development in video but has already become wildly popular, especially among businesses with high-quality content and loyal audiences.
If you’re interested in learning more about building AVOD or SVOD streaming apps, get in touch with us here.
Pros and Cons of Going Ad-Based.
Generally speaking, selling ads is a more accessible route. There are plenty of instant-monetization tools that can help channels of any size start running ads and making money. But most of these tools come with a price.
If you’re a US-based channel that published using Roku’s Direct Publisher tool, you can easily opt in to their Roku Audience Network to start making money. This lets Roku sell and run ads on your behalf, no development or work needed from you. The tradeoff, however, is that Roku takes 40% of revenue earned. Plus, you don’t have control over what ads get chosen or when they run.
Video Advertising Networks (or VANs) are a similar third-party option. With a VAN, monetizing is as simple as signing up and dropping their code into your channel. However, you may run into some of the same drawbacks with this approach: You can’t control what ads run or when they run, most services only fill 40-60% of available ad breaks (leaving money on the table), and they end up taking a percentage of every ad published.
Lastly, you can develop a custom ad server and take control of your own ads. Here, you get to decide when and where you want to serve ads. You also get to reach out to potential advertisers directly and set your own prices. The drawbacks here are obviously that this is much more work for you, both on the development side and the business side. However, using an OTT app creator like MAZ can significantly reduce your time and cost of development.
Pros and Cons of Going Subscription-Based.
Many video businesses, magazines, newspapers and blogs are instituting paywalls over ads. This is for a few reasons: First, ads can interrupt and annoy users. Also, ads require thousands of impressions to even begin driving any revenue. Subscriptions allow you to make exponentially more money per viewer, so you can build a strong business model with a smaller, more concentrated audience.
But to succeed as a subscription-based business, you’ll first need to build a loyal fanbase. With so much free content in the world, viewers are hesitant to pay for content they don’t need. In our experience, finding a niche is a more effective method for driving loyalty than trying to please everyone with every type of content (even Netflix is shifting towards more original content while dropping franchises like Friends and The Office).
Another challenge is that subscription-based app features aren’t as easy to find as ads. Publishers like Roku Direct and other free providers do not offer subscription features. Product suites like MAZ, however, offer a full range of subscription features including paywalls, freemium content, time or content-based metering, personalized user profiles, etc. If you’re a new business or looking to revitalize an existing app, MAZ can be a strong partner.
There are also businesses like Hulu which institute both ad-based and subscription-based revenue models. This can be a “best of both worlds” solution for your business, if you’re able to balance it out properly!
Other Ways to Monetize? Get Creative.
Just like in any industry, sometimes the best way to make money on Roku is to think outside the box.
For many nonprofit and religious organizations on Roku, donations are an important part of how they stay afloat. Or if you’re producing original content, in-video sponsorships or product placement can be another excellent source of revenue.
And while Roku may not have a great solution for it just yet, e-commerce is another big route you could take. If you have a dedicated fanbase, selling apparel and swag could be just as effective as monetizing the content itself. The only trouble here is that you’ll likely have to encourage users to visit your website or shop outside of Roku.
Looking at the big picture.
At the end of the day, the most important step in monetizing a business on Roku is thinking about how your audience operates.
If you have a fleeting, but large audience that loves binging through content, AVOD (ads) can be an excellent way to profit off of the momentum. On the other hand, if you have a smaller but more dedicated fanbase, setting up a subscription or SVOD style channel could be a huge win.
And lastly, if neither of these two seem to fit your needs, perhaps it’s time to consult an expert. If you’re serious about building a successful channel on Roku and OTT, or just want some guidance on the video business at large, get in contact with our team at MAZ. We love helping businesses of all sizes create powerful strategies and app solutions on OTT.