I've done this activity a lot with my classes and I have observed a number of benefits and uses to adding subtitles to videos.
1. Listening practice
Your students will have to listen to the video a number of times. My students get very involved in the subtitle process and say they spent literally hours listening to the video in order to get the subtitles correct. It is, of course, very challenging but with the help of the other group members, you'll find that the students can be very accurate. That said, you will have to help them at times.
The students will be able to see and subtitle real grammar in use. Depending on what the video is about, and who has been interviewed, the learners will be able to hear a number of grammatical constructs, which they may have studied in the class. Alternatively, you may like to create a grammar activity, ask the students to ask each other questions based on the grammar, and then add subtitles to it.
3. Understanding Spoken Language
When my students are lucky enough to interview English speakers, L1 or L2, it gives them a chance to see how messy spoken English is. Often, written language is taught as spoken, so learners may be under the impression that they shouldn't make any mistakes. However, when your learners add subtitles to people with English as a first or second language, they will quickly see that both make plenty of false starts, and a number of grammatical mistakes. I think this helps students to realise that making mistakes is okay.
4. The Challenge
Some learners love a challenge, and adding subtitles is a challenge. It can be stressful and take a lot of time, but at the end of the process the learners will get a sense of satisfaction to the project's completion. Remember to show the videos in a class film festival, or ask other learners to comment on each group's video.
The video below will explain how you or your learners can add subtitles to their videos. It's easy and difficult at the same time. Once you watch the video you'll see what I mean
Here's another subtitle activity. YouTubers often post their content and leave the subtitle section as open access. This means that members of the public can click on a video and add subtitles to it. So, if you teach in Spain, for example, you could ask your students to find an English YouTube video and then add Spanish subtitles. Alternatively, your students could find an English video and add Spanish subtitles. The video below explains how you can do it.