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

Abstract

The advent of streaming services, like Netflix and Prime Video by Amazon, has led to the expectation that demand for offline movie consumption is likely to die (i.e., consumers will simply stop going to the movies). We study this question in our work, and instead, we find that although streaming services provide value to customers in terms of comfort, convenience, and price, they do not lead to a reduction in offline movie consumption. Instead, we show that the offline movie consumption actually increases because streaming services do not fully substitute for the social aspects of going to the movies or the pleasure that is received from watching movies on the “big screen.” Our work thus speaks to the policies implemented in some countries where streaming platforms have been restricted given the concerns about disruption of the offline movie industry. We believe that these policies are potentially misguided because they assume perfect substitution between the two services. Our work also helps inform managers of movie theaters and streaming platforms by providing arguments for the specific types of service offerings that are more likely to be enjoyed at home versus at the movie theater. As we show in the paper, social and hedonic needs are more likely to be met at the movie theater rather than through streaming services. We reiterate the sentiments expressed by Steven Spielberg from 2019: “I hope all of us really continue to believe that the greatest contributions we can make as filmmakers are to give audiences the motion picture theatrical experience. I am a firm believer that movie theaters need to be around forever.”