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

D. Costs to Impacted Small Entities

Annual revenue data from the SUSB program is used, together with information regarding likely per-theater upfront and ongoing annual costs (section 4.1.4 of the Final RA), to estimate the impact of this rulemaking on small entities relative to their resources. As described in section 2.1.4 of the Final RA, movie theater complexes vary greatly by the number of auditoriums that they contain, and the per-theater cost varies according to the number of auditoriums within a theater exhibiting digital movies. Therefore, 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.

The FRFA uses the estimated number of movie theaters by venue type to determine the cost impact per firm. Table 10 presents estimates of the percentage of movie theaters by venue type, calculated from the 2015 distribution of auditoriums by venue type (table 3-3 of the Final RA) and the average number of auditoriums per venue type.^[31] The table indicates that approximately 40 percent of movie theater establishments are multiplex theaters, and 43 percent are either miniplex (22 percent) or single-auditorium theaters (21 percent), with the remaining 17 percent being megaplex theaters.

Table 10—Estimated Number of Movie Theaters by Venue Type

[2015]

Venue type	Number of auditoriums exhibiting digital movies (2015)	÷	Average number of auditoriums by venue type	=	Estimated number of movie theaters by venue type (2015)	Percentage of movie theaters by venue type (2015)
Megaplex	12,812	÷	18	=	712	17
Multiplex	20,322	÷	12	=	1,693	40
Miniplex	4,666	÷	5	=	933	22
Single-Auditorium	889	÷	1	=	889	21
Total	38,688	÷		=	4,227	100

As previously discussed, movie theaters, including small movie theaters, will incur upfront costs as well as ongoing costs to comply with the requirements of this rulemaking. Table 11 below presents the undiscounted upfront costs incurred by the average movie theater within each venue type.

Table 11—Average per Movie Theater Upfront Costs by Venue Type in Primary Analysis, Undiscounted

[$]

Venue type	Captioning hardware acquisition	Audio description hardware acquisition	Captioning device acquisition	Audio description device acquisition	Installation costs	Total upfront costs
Megaplex	$16,158	$205	$8,728	$1,470	$797	$27,358
Multiplex	10,772	205	5,819	980	533	18,309
Miniplex	4,488	205	4,364	490	286	9,834
Single-Auditorium	1,097	308	1,864	190	104	3,562

 * Totals may differ due to rounding.

Because movie theaters will incur the highest costs to acquire the necessary equipment, tables 12 through 19 provide the data used to estimate these costs. Table 12 presents the average number of auditoriums by venue type and estimates the relevant number of captioning hardware units required by the scoping requirements using the one-unit-per-auditorium assumption discussed in section 3.3.1 of the Final RA. The average number of auditoriums across each venue type was provided by NATO in its public comment on the 2014 NPRM.

Table 12—Captioning Hardware Scoping Requirement per Venue Type

Venue type	Average number of auditoriums	Captioning hardware units required per venue type
Megaplex (16+ auditoriums)	18	18
Multiplex (8-15 auditoriums)	12	12
Miniplex (2-7 auditoriums)	5	5
Single-Auditorium	1	1

Similarly, table 13 presents the average number of auditoriums by venue type and estimates the relevant number of audio description hardware units required by the scoping requirements using the one-unit-per-movie-theater assumption discussed in section 3.3.2 of the Final RA. The average number of auditoriums across each venue type was provided by NATO in its public comment on the 2014 NPRM.

Table 13—Audio Description Hardware Scoping Requirements per Venue Type

Venue type	Average number of auditoriums	Audio description hardware units required per venue type
Megaplex (16+ auditoriums)	18	1
Multiplex (8-15 auditoriums)	12	1
Miniplex (2-7 auditoriums)	5	1
Single-Auditorium	1	1

Tables 14 and 15 below estimate the minimum number of captioning devices required per venue type. The Department emphasizes that these figures are merely estimates based on the average number of auditoriums across each venue type. The exact number of captioning and audio description devices required at a particular movie theater establishment depends on the number of auditoriums showing digital movies. 

Table 14—Captioning Device Scoping Requirements per Venue Type

[Estimated]

Venue type	Minimum number of captioning devices required per venue type
Megaplex (16+ auditoriums)	12
Multiplex (8-15 auditoriums)	8
Miniplex (2-7 auditoriums)	6
Single-Auditorium	4

 

Table 15—Audio Description Device Scoping Requirements per Venue Type

[Estimated]

Venue type	Average number of auditoriums	Minimum number of audio description devices required per venue type
Megaplex (16+ auditoriums)	18	9
Multiplex (8-15 auditoriums)	12	6
Miniplex (2-7 auditoriums)	5	3
Single-Auditorium	1	2

Finally, the unit costs for the necessary equipment are presented in table 16, Table 17, Table 18, and Table 19 below. This information was provided in NATO's public comment on the 2014 NPRM. For further detail regarding the unit costs used to develop the total equipment acquisition costs estimate, please see section 3.4 of the Final RA.

Table 16—Captioning Hardware Unit Costs

Technology	Cost per captioning hardware unit
Doremi Captiview	$864
USL	1,371
Sony	500
Average (Excluding Sony)	1,118
Average (All Technologies)	912

 

Table 17—Additional Cost for Audio Description Hardware

Technology	Cost per theater for audio description hardware
Doremi Captiview	$615
USL	0
Sony	0
Average (Excluding Sony)	308
Average (All Technologies)	205

 

Table 18—Captioning Device Unit Costs

Technology	Cost per captioning device
Doremi Captiview	$453
USL	479
Sony	1,250
Average (Excluding Sony)	466
Average (All Technologies)	727

 

Table 19—Audio Description Device Unit Costs

Technology	Cost per audio description device
Doremi Captiview	$121
USL	69
Sony	300
Average (Excluding Sony)	95
Average (All Technologies)	163

In addition to incurring upfront costs, movie theaters will also incur ongoing costs to comply with the final rule. Table 20 below presents the estimated total ongoing costs and the annual ongoing costs that the average movie theater within each venue type will incur over the 15-year period of analysis. More detailed information about how these costs were calculated can be found in section 3.6 (replacement costs), section 3.7 (training costs), and section 3.8 (maintenance and administrative costs) of the Final RA.

Table 20—Average per Movie Theater Ongoing Costs by Venue Type in Primary Analysis, Undiscounted

[$]

Venue type	Total replacement costs	Total staff training costs	Total maintenance and administrative costs	Total ongoing costs	Ongoing costs per year
Megaplex	$46,957	$7,058	$11,952	$65,968	$4,398
Multiplex	31,373	4,705	7,999	44,077	2,938
Miniplex	19,255	1,961	4,296	25,512	1,701
Single-Auditorium	7,566	392	1,556	9,514	634

* Totals may differ due to rounding. 

Table 21 summarizes the estimated per movie theater costs by venue type, as explained above and in further detail in section 4.1.4 of the Final RA. The first column in table 21 presents the average upfront costs (acquisition, installation) by venue type while the second column shows the average ongoing annual costs (replacement, training, and maintenance and administrative costs) by venue type. The rightmost column shows the total undiscounted cost to an average theater by venue type over the 15-year period of analysis.

Table 21—Average per Movie Theater Costs, Undiscounted

[$]

Venue type	Average per theater upfront costs (acquisition, installation)	Average annual per theater ongoing costs (replacement, training, maintenance and administrative)	Total per theater costs over period of analysis
Megaplex	$27,358	$4,398	$93,325
Multiplex	18,309	2,938	62,386
Miniplex	9,834	1,701	35,346
Single-Auditorium	3,562	634	13,076

The FRFA quantifies the impact on small entities by calculating the average upfront costs and the ongoing costs as a percentage of average annual revenue. As presented in the table above, the per movie theater costs are calculated by venue type. However, the SUSB program provides no information regarding the venue types operated by firms in each revenue category. As a result, the analysis uses the following information to estimate the venue types operated by firms in each revenue category:

• The average annual revenue per auditorium is approximately $200,000 to $250,000.^[32]

• Industry research indicates that the firms with the largest annual revenue operate most megaplex and multiplex movie theaters, whereas the firms with smaller annual revenues operate most miniplex and single-auditorium movie theaters.

Based on this information, the FRFA makes the following assumptions regarding the venue types operated by firms in each revenue category:

• Firms with less than $499,999 in annual revenue operate single-auditorium movie theaters.^[33] As presented in table 9, firms with less than $100,000 in annual revenue have an average annual revenue of $54,065 per theater; firms with $100,000 to $499,999 in annual revenue have an average annual revenue of $251,651 per theater. These average revenue figures are close to or below NATO's estimated annual revenue per auditorium.

• Firms with annual revenues from $500,000 to $999,999 operate miniplex movie theaters (2-7 auditoriums). The average annual revenue in this category is $714,762, which is equivalent to the revenue generated by approximately three auditoriums according to NATO's estimated annual revenue per auditorium.

• Firms with annual revenues between $1 million and $2.5 million operate miniplex and multiplex movie theaters. Costs to firms with annual revenues between $1 million and $2.5 million are an average of the costs to miniplex and multiplex movie theaters.

• Firms with annual revenues between $2.5 million and $40 million operate multiplex and megaplex movie theaters. Costs to firms with revenues between $2.5 million and $40 million are estimated using a weighted average ^[34] of the costs to multiplex and megaplex movie theaters based on the number of movie theaters presented in table 10.

Using the above assumptions, table 22 presents the estimated upfront and ongoing annual costs for small entity movie theater firms, grouped into four revenue categories.

Table 22—Venue Type, Upfront Costs, and Ongoing Costs by Revenue Category in FRFA

Firms with annual revenue of	Venue type used to estimate costs to firms	Estimated upfront costs to average movie theater establishment	Estimated annual ongoing costs to average movie theater establishment
Less than $499,999	Single-Screen	$3,562	$634
$500,000 to $999,999	Miniplex	9,834	1,701
$1,000,000 to $2,499,999	Miniplex/Multiplex	* 14,071	* 2,320
$2,500,000 to $39,999,999	Multiplex/Megaplex	** 20,987	** 3,370

* Average of Miniplex/Multiplex costs.

** Weighted Average of Multiplex and Megaplex costs based on number of theaters (table 10).

Table 23 below shows the upfront costs as a percentage of annual revenue for firms by revenue category. The average costs per firm are derived from the average number of establishments per firm (first column) and the average upfront costs per theater for each revenue category (second column). As the table shows, the upfront costs make up less than 1.5 percent of annual revenue for all firms except those with revenues of less than $100,000. For all firms with revenues of $2,500,000 or greater, the upfront cost was less than 1 percent of annual revenues.

As discussed previously, the data from the 2012 SUSB that is provided in this section also includes data from movie theaters operating auditoriums that exhibit analog movies exclusively, which are not subject to the requirements of this rulemaking. Based on its own independent research and analysis, the Department believes that most firms with annual revenue less than $100,000 are not subject to the requirements of this rule. Although the FRFA calculates the costs as a percent of annual revenue for this category of firms, the information available to the Department supports its view that most of these firms are likely operating single auditoriums that exhibit analog movies exclusively and are therefore not subject to the requirements of this rule. First, according to industry experts, the average annual revenue per auditorium is approximately $200,000 to $250,000, thus making it reasonable to assume that firms with annual revenue less than $100,000 operate single-auditorium movie theaters. Second, the Department received information from industry experts that the majority of single-auditorium movie theaters still use analog projection systems. Third, commenters indicated that the remaining movie theaters with analog projection systems have not converted to digital projection systems because they cannot afford the high cost to do so ($60,000 to $150,000 per auditorium ^[35] ). Therefore, it is reasonable to assume that most of the movie theater firms with less than $100,000 in annual revenue operate movie theaters with analog auditoriums that are not subject to this rulemaking. In addition, all movie theaters with auditoriums exhibiting digital movies—including any firms with less than $100,000 in annual revenue—continue to have available to them the individualized and fact-specific undue burden limitation specified in § 36.303(a).

Table 23—Average Upfront Costs as a Percentage of Annual Revenue per Firm, by Revenue Category, Undiscounted

[2015 $]

Revenue category	Establish-ments per firm	Average upfront costs per establish-ment	Average upfront costs per firm	Average revenue per firm	Upfront costs as a percentage of revenue
Less than $100,000 *	1.01	$3,562	$3,591	$54,508	6.6
$100,000 to $499,999	1.02	3,562	3,631	256,537	1.4
$500,000 to $999,999	1.06	9,834	10,456	714,762	1.5
$1,000,000 to $2,499,999	1.15	14,071	16,223	1,542,318	1.1
$2,500,000 to $4,999,999	1.51	20,987	31,732	3,394,864	0.9
$5,000,000 to $7,499,999	1.89	20,987	39,575	5,497,029	0.7
$7,500,000 to $9,999,999	2.58	20,987	54,124	7,697,211	0.7
$10,000,000 to $14,999,999	4.12	20,987	86,368	12,013,115	0.7
$15,000,000 to $19,999,999	4.56	20,987	95,606	14,200,444	0.7
$20,000,000 to $24,999,999	6.00	20,987	125,920	14,314,600	0.9
$25,000,000 to $29,999,999	11.00	20,987	230,853	22,734,000	1.0
$30,000,000 to $34,999,999	16.50	20,987	346,280	** n/a	** n/a
$35,000,000 to $39,999,999	8.00	20,987	167,893	27,514,000	0.6

* Likely firms operating single-auditorium movie theaters that exhibit analog movies exclusively, and therefore not subject to this rulemaking.

** Annual revenue data withheld and value set to 0 to avoid disclosing information of individual businesses.

Table 24 presents the average annual ongoing cost as a percentage of average annual revenue for firms in each revenue category. For all firms, except those with annual revenues of $100,000 or less, annual ongoing costs make up less than 0.3 percent of annual revenue.

Table 24—Average Annual Ongoing Costs as a Percentage of Annual Revenue per Firm, by Revenue Category, Undiscounted

[2015 $]

Revenue category	Establish-ment/firm	Average ongoing costs per establish-ment	Average annual ongoing cost per firm	Average revenue per firm	Annual ongoing cost as a percentage of revenue
Less than $100,000 *	1.01	$634	$639	$54,508	1.2
$100,000 to $499,999	1.02	634	647	256,537	0.3
$500,000 to $999,999	1.06	1,701	1,808	714,762	0.3
$1,000,000 to $2,499,999	1.15	2,320	2,674	1,542,318	0.2
$2,500,000 to $4,999,999	1.51	3,370	5,096	3,394,864	0.2
$5,000,000 to $7,499,999	1.89	3,370	6,356	5,497,029	0.1
$7,500,000 to $9,999,999	2.58	3,370	8,692	7,697,211	0.1
$10,000,000 to $14,999,999	4.12	3,370	13,870	12,013,115	0.1
$15,000,000 to $19,999,999	4.56	3,370	15,354	14,200,444	0.1
$20,000,000 to $24,999,999	6.00	3,370	20,222	14,314,600	0.1
$25,000,000 to $29,999,999	11.00	3,370	37,074	22,734,000	0.2
$30,000,000 to $34,999,999	16.50	3,370	55,611	** n/a	** n/a
$35,000,000 to $39,999,999	8.00	3,370	26,963	27,514,000	0.1

* Likely firms operating single-auditorium movie theaters that exhibit analog movies exclusively, and therefore not subject to this rulemaking.

** Annual revenue data withheld and value set to 0 to avoid disclosing information of individual businesses.

 

31. See NATO, Statement of Position on RIN 1190-AA63, CRT Docket No. 126, Nondiscrimination on the Basis of Disability by Public Accommodations—Movie Theaters; Movie Captioning and Audio Description 22, available at http://www.regulations.gov/​contentStreamer?​documentId=​DOJ-CRT-2014-0004-0401&​attachmentNumber=​4&​disposition=​attachment&​contentType=​pdf (last visited Sept. 12, 2016).

32. NATO, Attachment A, Spring 2014 Accessibility Survey Results, submitted in RIN 1190-AA63, CRT Docket No. 126, Nondiscrimination on the Basis of Disability by Public Accommodations—Movie Theaters; Movie Captioning and Audio Description, available at https://www.regulations.gov/​contentStreamer?​documentId=​DOJ-CRT-2014-0004-0401&​attachmentNumber=​3&​disposition=​attachment&​contentType=​pdf (last visited Sept. 12, 2016).

33. According to the 2012 SUSB, firms with less than $499,999 in annual revenue operated 19.3 percent of all establishments in 2012. See U.S. Census Bureau, Statistics of U.S. Businesses, available at http://www.census.gov/​econ/​susb/​ (see Data by Enterprise Receipt Size, U.S., 6-digit NAICS) (last visited Sept. 12, 2016). The information is available in an Excel file which lists all information by NAICS Code. The relevant NAICS Code for Motion Picture Theaters (except Drive-Ins) is 512131. This figure is slightly less than the estimate in table 10, which finds that 21 percent of all movie theaters are single-auditorium.

34. According to table 10, there are approximately 2,405 megaplex and multiplex theaters, of which 712 are megaplexes and 1,693 are multiplexes. The weighted average assumes that 30 percent of the movie theaters in this revenue category are megaplex movie theaters (712/2,405) and 70 percent are multiplex movie theaters (1,693/2,405).

35. See Helen Alexander & Rhys Blakely, The Triumph of Digital Will Be the Death of Many Movies, New Republic (Sep. 12, 2014), available at http://www.newrepublic.com/​article/​119431/​how-digital-cinema-took-over-35mm-film (last visited Sept. 12, 2016).