What is AVOD?

AVOD stands for Advertising-based Video On Demand. AVOD exhibitors offer free access to content for viewers but require them to watch advertisements before and during the video. Generally speaking, you earn revenue based on the number of ad impressions during your content’s playback.

Some AVOD exhibitors like Tubi operate exclusively based on ad revenue. Other exhibitors—like Amazon, Hulu and Netflix—are introducing ad-supported revenue streams to bolster their subscription models. The increasing prevalence of ad-supported streaming makes it essential to understand how AVOD licenses work and how your film or show earns money.

How are AVOD Earnings Calculated?

It’s a little bit complicated, so we’ll explain this at a few different levels.

The simple version:

The more ads watched, while watching your content, the more money you make. Simple, right?

The slightly complicated version:

Each time a viewer sees an ad while viewing your title, it’s called an impression. Exhibitors pay you based on a rate called CPM (cost per mile): the amount you get paid for a thousand impressions. A simple equation can be used to calculate your earnings:

(Ad impressions X CPM) / 1,000 = Earnings

So, lets say your title gets 100,000 impressions at a CPM of $10.

(100,000 x 10) / 1,000 = $1,000

Or, say your film is 90 minutes long and has eight ad breaks with four 30-second ads in each. A single viewer would generate 32 impressions if they watched your whole film.

(32 x 10) / 1,000 = $.32

You can also use a simple formulat to calculate how much you earn per ad impression:

CPM/1000 = Earning per ad impression.

For example, a $10 CPM means you earn one cent for each ad impression:

$10/1000 = $.01

It’s not the whole story, but these basic concepts are the foundation of how AVOD exhibitors calculate earnings.

The complicated, but real version:

Time to add a a few more complicating variables.

Dynamic CPMs:

• In reality, every ad is sold at a different rate. Certain audiences are more desirable for advertisers who may be willing to pay a higher rate. There is an incredibly complex behind the scenes ad market where exhibitors auction advertising inventory to the highest bidders. CPMs fluctuate by time of day, region, time of year, genre and just about every other variable imaginable. Some exhibitors track exactly how much your film earns on each ad, while others create an average.

Ad fill rate:

• Viewers may not see an ad every time they reach an ad break. AVOD channels generate more advertising inventory than they can fill with paying ads. So that means, sometimes, a viewer may get an ad break with no ad. The title doesn’t earn anything in that case. The percentage of ad breaks that can be filled by an exhibitor is called the ad fill rate. Some channels have higher ad fill rates than others, effecting how much money your title can earn on that platform.

Tracking vs. Pooling:

• With all of these intricacies there is an immense amount of ad data that exhibitors have to track. While exhibitors with better technology track and pay based on the individual impressions for your title, some other channels don’t have that capability. They pool all of their revenue and allocate it based on how much your title was viewed compared to other titles.

Combining the basic formulas above with these more advanced concepts, you can understand how AVOD exhibitors calculate your earnings.

The Takeaways

• The more minutes watched, the more you earn.

• You may earn less on an individual viewer than you would through a movie ticket or digital rental. But, without a paid transaction there is a lower barrier to entry to get someone to start watching.

• Earning money on AVOD isn’t about a single transaction. Viewers have to click on your title and stay engaged.

• Not all AVOD exhibitors are created equal. Ad fill rates and CPMs vary wildly and are the biggest determinants to your earnings.