28 CFR Part 36 Nondiscrimination on the Basis of Disability by Public Accommodations - Movie Theaters; Movie Captioning and Audio Description Final Rule

3. Costs—Summary of Likely Economic Impact

This section presents the calculations used to estimate the total costs resulting from the amendments to the title III regulation, which require movie theaters to provide closed movie captioning and audio description when exhibiting digital movies equipped with such features. As previously mentioned, total costs to movie theaters subject to the rulemaking include the following components:

• Acquisition costs for captioning hardware;

• Acquisition costs for audio description hardware;

• Acquisition costs for captioning devices;

• Acquisition costs for audio description devices;

• Installation costs for captioning and audio description equipment;

• Replacement costs for captioning and audio description equipment;

• Staff training costs for the provision of captioning and audio description equipment; and

• Maintenance and administrative costs.

Key Assumptions

Because movie theater complexes vary greatly by the number of auditoriums, and the overall cost of this rule varies in direct relation to the number of auditoriums exhibiting digital movies within a movie theater, the Final RA breaks the movie exhibition industry into four venue types based on size:

• Megaplex (16+ auditoriums);

• Multiplex (8-15 auditoriums);

• Miniplex (2-7 auditoriums); and

• Single-Auditorium movie theaters.

Additionally, uncertainty exists regarding the extent to which movie theaters would offer closed movie captioning and audio description if the Department had not undertaken this rulemaking. Therefore, the Final RA estimates costs against three different baseline scenarios, which are described in greater detail in section 3.2 of the Final RA. The primary analysis incorporates the Medium Accessibility baseline, which is based on data available in NATO's 2015 Accessibility Survey. As shown in Table 1, under this baseline around 72 percent of auditoriums operated in megaplex, multiplex, and miniplex theaters are assumed to be equipped to provide closed movie captioning. Similarly, approximately 71 percent of auditoriums in these movie theaters are assumed to be equipped to provide audio description. The analysis assumes that no single-auditorium movie theater is already equipped to provide closed movie captioning or audio description.

Table 1—Medium Accessibility Baseline by Venue Type-Captioning and Audio Description

Venue type	Captioning Medium Accessibility Baseline %	Audio Description Medium Accessibility Baseline %
Megaplex	72	71
Multiplex	72	71
Miniplex	72	71
Single-Auditorium	0	0

Section 2.1.3 and section 3.2 of the Final RA explain in detail the methodology and data that provide the basis for the Department's assumptions regarding the number of movie theater auditoriums currently equipped to provide closed movie captioning and audio description.

The assumptions regarding the total number of auditoriums and the distribution of these auditoriums by venue type (megaplex, multiplex, miniplex, or single-auditorium) are further detailed in section 3.1 of the Final RA. Finally, section 3.1.3 of the Final RA describes the assumptions made in the analysis regarding the growth of auditoriums and venue types, and section 3.3 of the Final RA provides detailed assumptions and information regarding the scoping requirements by venue type.

Costs Determined To Be De Minimis

The Department has determined that there are a few cost components associated with this rulemaking that are de minimis and therefore have not been estimated in the Final RA's total costs estimation. These include repair costs and costs to comply with the final rule's notice requirement. Repair costs are expected to be de minimis because manufacturers, movie theaters, and the Department's independent research indicate that repair of the captioning and audio description equipment is rare. If equipment breaks down, the answer is replacement rather than repair, and such costs are captured by the hardware and device replacement costs. Additionally, costs associated with the cleaning or occasional maintenance of the devices are captured by the ongoing maintenance and administrative costs. Any additional repair costs for captioning and audio description equipment are thus expected to be de minimis.

The Department has further determined that the costs associated with the notice requirement will be de minimis. Based on comments received and the Department's independent research, the movie exhibition industry has largely moved away from print advertising in favor of digital advertising, and as one commenter indicated, digital advertising allows movie theaters to add information concerning the availability of captioning and audio description without much difficulty. Currently, movie theaters routinely use “CC” and “AD” or “DV” to indicate the availability of closed movie captioning and audio description in their communications, and the Department's research indicates that the inclusion of such abbreviations does not increase the cost of advertisements. Therefore, the additional time and cost it will take a movie theater to add such information is negligible.

Upfront Costs

The upfront costs of this rulemaking include the costs to acquire and install the necessary captioning and audio description equipment. Movie theaters incur the majority of the upfront costs during the first 2 years of the analysis, as movie theaters with auditoriums currently exhibiting digital movies will purchase and install the necessary equipment throughout 2016 and 2017 in accordance with the 18-month compliance date. However, the cost estimation also includes the costs incurred by new auditoriums opening after the 18-month compliance date. As a result, equipment acquisition and installation costs are incurred over the entire 15-year analysis period in the primary analysis. Table 2 shows the total equipment acquisition and installation costs incurred over the 15-year period of analysis by venue type. Overall, the upfront costs to movie theaters are expected to total $34.2 million when discounted at 7 percent.

Table 2—Total Upfront Costs by Venue Type in Primary Analysis, Discounted at 7 Percent

[$ Millions]

Venue type	Captioning hardware acquisition costs	Audio hardware acquisition costs	Captioning device acquisition costs	Audio device acquisition costs	Installation costs	Total upfront costs
Megaplex	$5.0	$0.1	$4.8	$0.8	$0.3	$11.0
Multiplex	7.9	0.2	7.6	1.3	0.5	17.5
Miniplex	0.9	0.0	2.0	0.2	0.1	3.3
Single-Auditorium	0.8	0.2	1.3	0.1	0.1	2.5
Total	14.6	0.5	15.7	2.4	1.0	34.2

 * Totals may differ due to rounding.

Section 2.3 of the Final RA provides greater detail as to the Department's methodology and assumptions for estimating the upfront costs of this rulemaking. The data and research providing the basis for these estimates are presented in section 3.3 through section 3.5 of the Final RA.

Ongoing Costs

In addition to the upfront costs, movie theaters will incur ongoing costs as a direct result of this rulemaking. The ongoing costs quantified in the cost estimation include captioning and audio description equipment replacement costs, staff training costs, and maintenance and administrative costs. Table 3 shows the total ongoing costs by venue type. Overall, the ongoing annual costs amount to $54.3 million over the 15-year period of analysis when discounted at 7 percent.

Table 3—Total Ongoing Costs by Venue Type in Primary Analysis, Discounted at 7 Percent

[$ millions]

Venue type	Replacement costs	Training costs	Maintenance and administrative costs	Total ongoing costs
Megaplex	$11.6	$3.5	$2.7	$17.8
Multiplex	18.4	5.6	4.3	28.2
Miniplex	4.0	0.7	0.8	5.5
Single-Auditorium	2.2	0.1	0.5	2.8
Total	36.1	9.9	8.2	54.3

* Totals may differ due to rounding.

Replacement costs are expected to be $36.1 million over the 15-year period of analysis when discounted at 7 percent. Replacement costs include the costs to replace all equipment necessary to provide closed movie captioning and audio description, including the captioning and audio description devices as well as the captioning and audio description hardware. Table 4-6 of the Final RA shows the estimated replacement costs associated with each type of equipment. The data and assumptions used to estimate the replacement costs are discussed in greater detail in section 2.4.1 and section 3.6 of the Final RA.

Staff training is expected to cost approximately $9.9 million over the 15-year period of analysis when discounted at 7 percent. The rule requires staff to be available to provide patrons with captioning and audio description devices and to direct patrons on the devices' use. This requirement can most easily be met by expanding the already existing training for those employees who will be on-site to manage or oversee overall operations or the exhibition of the movies. Because the operational requirements of this rulemaking apply to all movie theaters subject to the rulemaking, including those with auditoriums that currently provide closed movie captioning and audio description, the Department has estimated the staff training costs for all movie theaters exhibiting digital movies. Section 2.4.2 and section 3.7 of the Final RA explain the data and assumptions used to estimate the staff training costs.

Finally, maintenance and administrative costs are expected to be $8.2 million over the 15-year period of analysis when discounted at 7 percent. These costs include, but are not limited to, the periodic ongoing maintenance, system testing, and cleaning of devices and other additional administrative costs. The data and assumptions used to estimate the maintenance and administrative costs are discussed in greater detail in section 2.4.3 and section 3.8 of the Final RA.

Total Costs

The total costs in the primary analysis are calculated based on the data and assumptions presented in chapters 2 and 3 of the Final RA. As described in section 3.2.2 of the Final RA, the primary analysis incorporates the Medium Accessibility baseline, which is based on data available in NATO's 2015 Accessibility Survey. Table 4 below shows the total costs in the primary analysis by cost category. The total cost impact of the rulemaking over the 15-year period of analysis is $88.5 million when discounted at 7 percent, and $113.4 million when discounted at 3 percent.

Table 4—Total Costs by Cost Category in Primary Analysis Over 15 Years

[$ millions]

Cost category	Primary analysis 7% discounted	Primary analysis 3% discounted
Captioning Hardware Acquisition Costs	$14.6	$17.2
Audio Hardware Acquisition Costs	0.5	0.5
Captioning Device Acquisition Costs	15.7	17.6
Audio Device Acquisition Costs	2.4	2.8
Installation Costs	1.0	1.1
Replacement Costs	36.1	49.9
Training Costs	9.9	13.1
Maintenance and Administrative Costs	8.2	11.1
Total Costs	88.5	113.4

 * Totals may differ due to rounding.

The total costs are broken down by venue type in table 5. Auditoriums in multiplex movie theaters account for more than half of the total costs ($45.7 million) over the 15-year period of analysis, which is consistent with the fact that multiplex movie theaters operate approximately 52 percent of all auditoriums. The costs to single-auditorium movie theaters over the 15-year period of analysis are approximately $5.3 million when discounted at 7 percent, and $6.3 million when discounted at 3 percent. As detailed in section 3.2.3 of the Final RA, the primary analysis assumes that no single-auditorium movie theater is already equipped to provide closed movie captioning or audio description. As a result, it is assumed that all single-auditorium movie theaters subject to this rulemaking would need to purchase the necessary captioning and audio description equipment.

Table 5—Total Costs by Venue Type in Primary Analysis Over 15 Years

[$ millions]

Venue type	Primary analysis 7% discounted	Primary analysis 3% discounted
Megaplex (16+ auditoriums)	$28.7	$37.2
Multiplex (8-15 auditoriums)	45.7	59.1
Miniplex (2-7 auditoriums)	8.8	10.8
Single-Auditorium	5.3	6.3
Total Costs	88.5	113.4

* Totals may differ due to rounding.

In table 6 below, the annualized costs are presented by venue type using 7-percent and 3-percent discount rates. Overall, the annualized cost to the entire movie exhibition industry is $9.7 million when using a 7-percent discount rate, and $9.5 million when using a 3-percent discount rate.

Table 6—Annualized Costs by Venue Type in Primary Analysis

[$ millions]

Venue type	Annualized costs 7% discounted	Annualized costs 3% discounted
Megaplex (16+ auditoriums)	$3.2	$3.1
Multiplex (8-15 auditoriums)	5.0	5.0
Miniplex (2-7 auditoriums)	1.0	0.9
Single-Auditorium	0.6	0.5
Total	9.7	9.5

* Totals may differ due to rounding. 

Sensitivity Analyses

Sensitivity analysis is an essential consideration for policy makers in evaluating the rule due to the uncertainty associated with certain key variables used in the cost estimation. The Department was able to find robust data regarding the costs of purchasing captioning and audio description equipment, the number of auditoriums in the country, and several other critical variables. However, there are some input variables that carry uncertainty. No substantive comments with data on these inputs were received in the public comments on the 2014 NPRM.

The sensitivity analyses estimate the costs of this rulemaking when using the following inputs:

• Low Accessibility and High Accessibility baselines;

• Alternate Medium Accessibility baseline;

• Alternate captioning and audio description device replacement rates;

• Increased staff training frequency;

• Single-auditorium unit cost estimates including Sony's technology;

• Increased maintenance and administrative costs; and

• Zero growth after five years.

Detailed information and data regarding these sensitivity analyses can be found in section 4.2 of the Final RA.