Return of the Movie Night? Analyzing the Impact of Netflix Subscriptions on Offline Movie Spending

The subscription-based business model is disruptive in the copyright industries. More than a digitalized distribution channel, it fundamentally transforms both supply and demand sides by offering new forms of content creation, provision, and consumption. However, the effects of these business models on the local offline industry are less well understood, especially in the case of the motion picture industry. This study investigates the impact of the subscription-based business model on offline activity consumption in the motion picture industry. Leveraging a unique data set with individuals’ every transaction record and a difference-in-differences approach, we show that Netflix subscription interestingly increases offline movie consumption. Based on the argument that individuals have unmet social and hedonic demands that are imperfectly met by subscription-based services, like Netflix, we show that offline movie consumption actually increases postsubscription, accompanied by social and hedonic activities, like dining and entertainment spending. We also provide evidence that the identified positive effect on offline movie consumption is more pronounced for individuals with higher social and hedonic needs (i.e., lower-income people and younger people). Our work provides clear implications for managers and policymakers who are involved in both subscription-based platforms, like Netflix, and the traditional offline movie industry. In addition, we provide theoretical implications for the study of subscription-based platforms, the imperfect substitution of channels, and the role of social and hedonic value in technology-supported platforms.

History: Karthik Kannan, Senior Editor; Xitong Li, Associate Editor.

Funding: This research is supported by the Ministry of Education, Singapore, under its Academic Research Fund Tier 1 [RG105/22].

Supplemental Material: The online appendix is available at https://doi.org/10.1287/isre.2022.0530.