SVOD is a 'natural extension' of online video offerings, Vimeo says, but will it outshine other OTT models?

Samantha Bookman, FierceOnlineVideo

SVOD. It's an acronym that industry players are dropping with alarming frequency these days. And with HBO and CBS announcing their own premium-content subscription video on demand services, it's no surprise that YouTube may be considering its own subscription service.

Collecting monthly subscription fees to provide better-quality online video to viewers is a solid model: just look to Netflix (NASDAQ: NFLX) for a shining example of how to dominate this market segment. And with online video ads still making up just a small percentage of the overall advertising dollars spent, ad-supported OTT isn't as lucrative as it could be--yet.

Will ad-supported VOD be outclassed by subscription VOD? Of course not. Transactional VOD isn't under threat, either. But Vimeo, like YouTube, feels that subscription VOD is something more online video providers will include in their portfolio.

"While for now Vimeo is bullish on the success it's seeing with TVOD, Vimeo does see SVOD as a natural extension and something it's started working on," a Vimeo spokesperson told FierceOnlineVideo, adding that CEO Kerry Trainor is on record saying Vimeo will begin selling SVOD in 2015.

While the provider does not yet have specifics on its SVOD offering, the spokesperson said that adding subscription services "will continue to empower creators by giving them complete control over their content (particularly with windowing and other distribution strategies in mind)."

With YouTube CEO Susan Wojcicki hinting that the Google (NASDAQ: GOOG)-owned provider may offer a subscription-based service in addition to its ad-supported streaming, consumers may soon find themselves faced with more subscription options than ever before.

Of course, Hulu has offered both ad-supported and SVOD services, through Hulu Plus, for several years.

But part of the reason other large-scale online video providers have stuck with one model is the complexity involved in trying to do both. Subscription video on demand isn't incredibly difficult to implement, but shoehorning its business model into an existing ad-supported model can be problematic in many ways, such as meeting technical and licensing requirements. As Hulu grew, it struggled with content licensing and distribution issues as broadcasters began to circle the wagons around their TV shows. Hulu Plus, launched in 2010, took months to develop and was integrated into just a few devices at the start, most notably the Xbox platform.

On a positive note, Hulu has outlasted the doomsayers' predictions that its service just couldn't last. This week it announced an expanded relationship with Viacom to bring more of Viacom's shows to its service. But although it is one of the Big Three SVOD providers, it lags far behind Netflix in subscribers, with just over 6 million taking Hulu Plus as of this spring.

Vimeo CTO Andrew Pile spoke with CNET recently about the technical challenges the company faces on a routine basis. Video compression standards, mobile app requirements, digital rights management, and constant developments in the online video industry keep the VOD service on its toes.

Mobile is a big focus for Vimeo at the moment, Pile told CNET. The company is retooling its mobile website, with a planned relaunch at the end of the year.

It's looking into implementing DRM, which would enable Vimeo to offer premium video--more important as HBO and CBS jump forward with a la carte offerings. And the provider is "working on" adaptive bitrate streaming, something Pile said YouTube does very well.

"YouTube's implementation is really spectacular. But they have the browser and they write their own video compression standard. They're able to do a tight loop so they can do this awesome implementation. It's a requirement for them operating at the scale they're operating at. We want to get to that place, too."

Looks like SVOD will continue to be a gleaming goal for OTT providers.--Sam