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

The subscription-based business model is disruptive in the copy-right industries. More than a digitalized distribution channel, it fundamentally transforms both supply and demand sides. However, there is scant evidence about how and why it affects the local traditional industry. This study investigates the impact of the subscription-based business model on offline activity consumption in the motion picture industry. Leveraging a unique dataset with individuals' every transaction record and a difference-in-differences estimation, we conclude that video streaming subscription increases offline movie consumption. We support the underlying mechanism that individuals have unmet social and hedonic demands with the imperfect disruptive technology. They, therefore, attend more social activities (i.e., movie, dining, and entertainment) to satisfy social and hedonic needs. In addition, the identified effect is more pronounced for individuals with more social (i.e., lower-income, female, and residents of smaller towns) and hedonic needs (i.e., young people). Theoretical and practical implications are discussed.