Netflix and chilling effect? The impact of streaming video licenses on paid digital downloads

Digital distribution has expanded monetization opportunities for media firms, but it also introduces complex tradeoffs across channels. A central challenge for studios and networks is negotiating fixed-fee licensing deals with bundled subscription video-on-demand (SVOD) platforms like Netflix, whose flat-rate access model may cannibalize à la carte sales on transactional platforms such as iTunes.We exploit the natural experiment of Netflix’s launch in Australia to estimate the causal effect of licensing a film to the service on its digital sales. On average, licensing reduces à la carte downloads by 52.5%, with effects that persist even after titles are removed from Netflix – evidence that temporary bundling can have durable effects on competing transactional channels.Crucially, we show that this treatment effect is heterogeneous: the direction and magnitude of the effect vary systematically with a film’s à la carte price and its latent demand. Lower-priced titles exhibit positive treatment effects following Netflix inclusion, while higher-priced titles experience substantial declines. Though prices are not exogenously assigned, these patterns are consistent with theoretical models in which exposure on an SVOD platform can generate promotional spillovers, sampling, or word-of-mouth for lower-cost titles.Our findings offer rare revealed-preference evidence on how SVOD bundling interacts with underlying demand, addressing classic questions in industrial organization around bundling and channel conflict.