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Information Systems Research (2025) AI Processed Human Approved
Return of the Movie Night? Analyzing the Impact of Netflix Subscriptions on Offline Movie Spending
This study investigates how acquiring a subscription to a video streaming service like Netflix affects an individual's offline movie theater spending and consumption habits. Using transaction records from a popular mobile wallet app in South Korea, the authors apply coarsened exact matching and difference-in-differences analyses to estimate causal effects.
Problem
Although digital subscription models are widely believed to cannibalize physical consumption in copyright industries, it remains unclear whether streaming services substitute for offline movie theaters. Because traditional cinema provides distinct social and hedonic value that personal-device streaming cannot fully replicate, there is a need to examine whether these channels act as substitutes or complements.
Outcome
- Subscribing to Netflix leads to a statistically significant increase in subsequent offline movie ticket spending and viewing frequency.\n- Post-subscription offline moviegoing is frequently accompanied by increased spending on complementary social and hedonic activities such as dining out and entertainment.\n- The positive treatment effect is more pronounced among younger and lower-income individuals who exhibit higher ex-ante social and hedonic needs.\n- Subscribers to premium Netflix plans show a higher post-subscription increase in offline cinema consumption, supporting expectation disconfirmation theory.
What it means for you
- CIO / IT Executive: On Monday morning, initiate a review of our current digital content delivery infrastructure to identify potential synergies and opportunities to bundle or cross-promote offline entertainment experiences with our streaming service offerings, especially targeting younger and lower-income demographics.
- IT Manager: On Monday morning, analyze user engagement data for our streaming platform, specifically looking for patterns of usage among younger and lower-income users, and investigate if there are any integrations or notification systems we can implement to suggest local cinema showtimes or associated dining deals as complementary activities.
- Business Strategist: On Monday morning, schedule a meeting with the marketing and partnerships teams to explore co-marketing opportunities with local cinemas and restaurants, focusing on developing bundled packages or loyalty programs that incentivize a 'Netflix and then Out' experience, particularly targeting younger demographics and those with perceived higher hedonic needs.
- Researcher: On Monday morning, begin designing a follow-up study that specifically quantifies the causal impact of premium streaming plan subscriptions on offline movie spending and complementary hedonic spending, utilizing a controlled experiment or a refined difference-in-differences approach to test expectation disconfirmation theory more rigorously.
- Policymaker: On Monday morning, begin drafting a policy brief that examines the potential for digital entertainment subscriptions to indirectly stimulate local economies through increased spending on complementary offline social and hedonic activities, and explore incentives for businesses to create integrated entertainment packages.
Transcript
Host: Welcome to A.I.S. Insights — powered by Living Knowledge. I'm Anna Ivy Summers. Today we're exploring a fascinating question that every media executive and movie lover has wondered about: when someone signs up for a streaming service like Netflix, do they stop going out to the movie theater? We're diving into a landmark study titled "Return of the Movie Night? Analyzing the Impact of Netflix Subscriptions on Offline Movie Spending." Joining me to break it down is our lead analyst, Alex Ian Sutherland. Welcome, Alex!
Expert: Thanks, Anna. It's great to be here. This study tackles a major debate in business strategy by looking at actual individual spending habits in South Korea to see whether digital streaming cannibalizes or actually boosts offline theater attendance.
Host: In industries like music or publishing, digital platforms obviously crushed physical formats—like Spotify replacing CDs or Kindle replacing print books. So the assumption was that streaming platforms would do the exact same thing to movie theaters, right?
Expert: That was the prevailing fear. However, the authors of this study argue that movies are fundamentally different. Going to the cinema isn't just about accessing video content; it's a sensory, hedonic, and social experience. You get a massive screen, state-of-the-art sound, and a shared outing with friends or a partner. Watching content alone on a laptop or smartphone simply can't replicate those social and emotional values. The core problem the study addresses is whether digital streaming acts as a substitute for traditional cinema or if the two channels can actually complement each other.
Host: That makes intuitive sense, but how did the researchers prove it empirically without relying on simple survey answers or aggregate box office numbers?
Expert: They used a unique dataset provided by a popular mobile wallet app in South Korea from 2018 to 2019. This gave them visibility into over twenty-seven thousand individuals and nearly fifty-nine million transaction records. They tracked exact spending on Netflix subscriptions as well as offline cinema tickets, dining, and entertainment. To establish a true causal relationship, they used Coarsened Exact Matching to pair Netflix subscribers with similar non-subscribers, and then ran a Difference-in-Differences model with individual and time fixed effects.
Host: So what did the data actually reveal once people signed up for Netflix? Did they stay home on the couch?
Expert: Remarkably, no. The study found that acquiring a Netflix subscription led to a statistically significant increase in both offline movie ticket spending and viewing frequency.
Host: That sounds completely counterintuitive! Why would paying for unlimited movies at home lead someone to spend more money at the movie theater?
Expert: The authors explain this through Expectation Disconfirmation Theory. When people subscribe to Netflix, they expect high-quality entertainment. But because streaming is mostly consumed alone on small screens, it fails to deliver on key social and hedonic dimensions. This unmet demand makes the missing attributes—the thrill of the big screen and the joy of a shared social outing—even more salient. As a result, consumers actively seek out live cinema trips to satisfy those lingering needs.
Host: That's a fascinating psychological driver. Did the researchers find evidence of this social aspect in other spending behavior?
Expert: Yes, absolutely. The post-subscription increase in moviegoing was strongly accompanied by higher spending on dining out and entertainment on the exact same day. It reinforced the classic "dinner and a movie" social outing. Furthermore, this positive boost was most pronounced among younger and lower-income consumers, who naturally have higher baseline demands for social and hedonic activities. Intriguingly, subscribers on premium Netflix plans—who likely had higher initial expectations for visual and social features—showed an even greater surge in offline cinema spending.
Host: This completely reframes the narrative around digital disruption. What are the key takeaways here for business leaders and policymakers?
Expert: For cinema managers, the takeaway is clear: don't try to compete with streaming platforms purely on price or content convenience. Double down on what streaming cannot deliver—the high-end theatrical event, immersive technologies like IMAX, upgraded food and beverage menus, and social lounge spaces. For streaming platforms and studios, it shows that the digital and offline worlds are not zero-sum. Joint promotions, theatrical event windows, and cross-channel partnerships can expand the entire entertainment market rather than destroy existing value.
Host: It's encouraging to hear that digital convenience and real-world social experiences can thrive together. Alex, thank you for sharing these insights with us today.
Expert: My pleasure, Anna.
Host: And thank you all for listening to A.I.S. Insights — powered by Living Knowledge. If you enjoyed today's episode, be sure to subscribe and share. Until next time, stay curious!
Expert: Thanks, Anna. It's great to be here. This study tackles a major debate in business strategy by looking at actual individual spending habits in South Korea to see whether digital streaming cannibalizes or actually boosts offline theater attendance.
Host: In industries like music or publishing, digital platforms obviously crushed physical formats—like Spotify replacing CDs or Kindle replacing print books. So the assumption was that streaming platforms would do the exact same thing to movie theaters, right?
Expert: That was the prevailing fear. However, the authors of this study argue that movies are fundamentally different. Going to the cinema isn't just about accessing video content; it's a sensory, hedonic, and social experience. You get a massive screen, state-of-the-art sound, and a shared outing with friends or a partner. Watching content alone on a laptop or smartphone simply can't replicate those social and emotional values. The core problem the study addresses is whether digital streaming acts as a substitute for traditional cinema or if the two channels can actually complement each other.
Host: That makes intuitive sense, but how did the researchers prove it empirically without relying on simple survey answers or aggregate box office numbers?
Expert: They used a unique dataset provided by a popular mobile wallet app in South Korea from 2018 to 2019. This gave them visibility into over twenty-seven thousand individuals and nearly fifty-nine million transaction records. They tracked exact spending on Netflix subscriptions as well as offline cinema tickets, dining, and entertainment. To establish a true causal relationship, they used Coarsened Exact Matching to pair Netflix subscribers with similar non-subscribers, and then ran a Difference-in-Differences model with individual and time fixed effects.
Host: So what did the data actually reveal once people signed up for Netflix? Did they stay home on the couch?
Expert: Remarkably, no. The study found that acquiring a Netflix subscription led to a statistically significant increase in both offline movie ticket spending and viewing frequency.
Host: That sounds completely counterintuitive! Why would paying for unlimited movies at home lead someone to spend more money at the movie theater?
Expert: The authors explain this through Expectation Disconfirmation Theory. When people subscribe to Netflix, they expect high-quality entertainment. But because streaming is mostly consumed alone on small screens, it fails to deliver on key social and hedonic dimensions. This unmet demand makes the missing attributes—the thrill of the big screen and the joy of a shared social outing—even more salient. As a result, consumers actively seek out live cinema trips to satisfy those lingering needs.
Host: That's a fascinating psychological driver. Did the researchers find evidence of this social aspect in other spending behavior?
Expert: Yes, absolutely. The post-subscription increase in moviegoing was strongly accompanied by higher spending on dining out and entertainment on the exact same day. It reinforced the classic "dinner and a movie" social outing. Furthermore, this positive boost was most pronounced among younger and lower-income consumers, who naturally have higher baseline demands for social and hedonic activities. Intriguingly, subscribers on premium Netflix plans—who likely had higher initial expectations for visual and social features—showed an even greater surge in offline cinema spending.
Host: This completely reframes the narrative around digital disruption. What are the key takeaways here for business leaders and policymakers?
Expert: For cinema managers, the takeaway is clear: don't try to compete with streaming platforms purely on price or content convenience. Double down on what streaming cannot deliver—the high-end theatrical event, immersive technologies like IMAX, upgraded food and beverage menus, and social lounge spaces. For streaming platforms and studios, it shows that the digital and offline worlds are not zero-sum. Joint promotions, theatrical event windows, and cross-channel partnerships can expand the entire entertainment market rather than destroy existing value.
Host: It's encouraging to hear that digital convenience and real-world social experiences can thrive together. Alex, thank you for sharing these insights with us today.
Expert: My pleasure, Anna.
Host: And thank you all for listening to A.I.S. Insights — powered by Living Knowledge. If you enjoyed today's episode, be sure to subscribe and share. Until next time, stay curious!