28 CFR Parts 35 and 36, Nondiscrimination on the Basis of Disability by Public Accommodations - Movie Theaters; Movie Captioning and Audio Description (NPRM)

g.  Discussion of Significant Regulatory Alternatives That Minimize Impact on Small Entities

In crafting this proposed regulation for movie captioning and audio description, the Department has taken care to propose requirements that temper effectiveness with cost considerations.  That is, while the Department believes this regulatory action is required to support and enforce the ADA’s effective communication mandate, the proposed requirements also are intended to regulate in a manner that is cost-efficient, easily understood by the movie exhibition industry, and—to the greatest extent possible—minimizes the economic impact on small entities.

As detailed earlier in this preamble (see section IV, Section–by–Section Analysis, “Movie Captioning—Coverage, supra), the Department is proposing that all movie theaters covered by the rule, regardless of size, location, or type of movies exhibited, must exhibit captioned or audio-described movies (when available) for all screenings absent a showing of undue burden.  Only such an across-the-board requirement fulfills the effective communication objective by permitting individuals who are deaf or hard of hearing or blind or have low vision disabilities to fully and equally participate in one of the most quintessential forms of American entertainment—going out to the movies—in the same manner as the rest of the movie going public.

Yet, while the proposed regulation imposes captioning and audio description requirements on all movie theaters irrespective of size, there are nonetheless several provisions that serve to ameliorate their relative economic impact on small entities.  For example, the Department’s regulatory proposal:

• Proposes two alternatives for theaters with analog screens: a four-year delayed compliance date (Option 1), or deferral of the requirements of this proposed rule for analog screens (Option 2);
• Establishes performance (rather than design) standards that enable small entities (as well as other movie theaters) to meet their captioning requirements in a flexible and cost-effective manner (§ 36.303(g)(2)(i));
• Specifies scoping requirements for individual captioning devices that are proportional to a theater’s total seat count (i.e., fewer seats means fewer devices are required), thereby ensuring that small theaters have reduced device costs (§ 36.303(g)(2)(iii)(A), (g)(3)(ii));
• Specifies a minimal number of individual audio-description listening devices that must be provided by a theater and permits “overlap” of scoping for audio-description listening devices and assistive listening headsets so long as such headsets are capable of receiving both types of audio signals (§ 36.303(g)(3)(ii)).

Moreover, while not expressly referenced in the text of proposed § 36.303(g), the Department has reiterated—at several points in this preamble—that those movie theaters that find that it is a significant difficulty or expense to comply with the requirements of this regulation will be able to assert the “undue burden defense” (see section II.B.2 supra, for an explanation of the factors that should be considered in asserting the defense).  Throughout the last two decades, even without this regulation, movie theaters have been able to assert this defense when facing litigation alleging failure to provide effective communication to patrons with disabilities.  Thus, while a large movie theater trade association suggested that many—if not most—small theaters would be forced out of business unless exempted entirely from any captioning requirements, the Department believes that such dire predictions are misplaced.⁵⁷  The “undue burden” defense serves as a limit should there be regulatory compliance costs that under particular circumstances would impose significant difficulty or expense.  Where the costs of screening closed-captioned or audio-described movies in compliance with the proposed regulation are sufficiently burdensome as to place a small theater at financial risk, then such costs would—by definition—pose an “undue burden.”  Such a movie theater would then be entitled to provide alternate compliance measures for auxiliary aids or services (if any) that were affordable in light of its particular circumstances.

Taken together, the foregoing considerations demonstrate the Department’s sensitivity to the potential economic (cost) impact of the proposed regulation on small theaters (such as Miniplexes and Single Screen Theaters) and—to the extent consistent with the ADA—mitigate potential compliance costs.

In addition, the Department considered multiple alternatives for this rulemaking with a focus on choosing the alternative that best balances the requirements of the ADA with the potential costs to small business movie theaters.  Among those alternatives weighed most heavily for the proposed rule are the two discussed below. 

Requiring only 50 percent of screens to have closed captioning and audio description.  The Department considered a proposal limiting the requirement for closed captioning and audio description to only 50 percent of movie screens.  This alternative was discussed in the July 26, 2010, ANPRM.  The ADA requires places of public accommodation “to ensure that no individual with a disability is excluded, denied services, segregated or otherwise treated differently than other individuals because of the absence of auxiliary aids and services, unless the entity can demonstrate that taking such steps would fundamentally alter the nature of the good, service, facility, privilege, advantage, or accommodation being offered or would result in an undue burden.”  42 U.S.C. 12182(b)(2)(A)(iii).  After considering public comment and additional research, the Department has determined that it is not possible for movie theaters to meet their ADA obligation to provide equally effective communication to patrons with hearing and vision disabilities unless they have the capacity to show the movies that are available with captions and audio description at all showings when those same movies are available to patrons without disabilities; to only require access to 50 percent of movies being shown would be inappropriate.  Unless a movie theater showed every movie on two screens in comparable auditoriums at all times—one screen showing the captioned and audio-described version and the other showing the same movie without captions and audio description—the Department is concerned that a 50 percent requirement would regularly lead to the circumstance where a movie theater would have a captioned or audio described movie, but would have no screen available on which to show it because all the appropriately equipped auditoriums were otherwise in use. 

The Department considered whether it would be possible for movie theaters to meet their effective communication obligations by switching movies into auditoriums equipped to show movies with closed captions and audio description when a patron with a hearing or vision disability needed those accessibility features.  But, the Department’s research indicated that the business agreements regarding movie exhibitions limit this type of flexibility.  Movie theaters regularly negotiate with film distributors regarding which auditoriums in a theater with more than one screen will show which films.  Generally, if a film is expected to be very popular, it will open in the largest auditorium or in several auditoriums within the same complex.  As the popularity decreases, the film will be moved from larger auditoriums to smaller auditoriums and from multiple auditoriums to a single auditorium.  The timing of such moves will vary from theater to theater and from film to film.

Those theaters that do have the flexibility to switch auditoriums upon request to provide closed captioning or audio description would have other added costs associated with changing the auditoriums for showings.  Costs could include the additional employee time and resources needed to physically switch the movie from one auditorium to another, as well as potential lost ticket sales if a more popular movie is displaced into a much smaller theater that sells out faster.  Additionally, switching auditoriums to allow use of captioning or audio description equipment may result in auditorium changes for other patrons after they had purchased tickets and are possibly already seated.  This would result in an inconvenience to many patrons, including the possibility that the switch would result in a different viewing experience than expected when purchasing a ticket due to differing auditorium sizes and comfort levels. 

The Department also believes that this alternative would carry a much higher litigation risk.  Patrons with disabilities would not have any way of assessing whether the failure to show a particular movie with closed captions and audio description was because the theater was failing to comply with its obligations under the regulation to provide these auxiliary aids and services or because that particular movie was not available with closed captions or audio description.  Whether a theater had the capacity to move a film to accommodate a patron with a disability and should have done so upon request, or whether the theater did everything to meet its obligations under the regulation, would become murky and create confusion that could result in an increased risk of litigation.

Finally, this alternative favors larger movie theaters and disadvantages single screen theaters, which are more likely to be small businesses.  Under a 50 percent requirement, at least one auditorium at every theater must have closed captioning and audio description capabilities.  Thus, single screen theaters would see no reduction in costs under this alternative. 

As such, the Department has rejected this alternative due to concerns that requiring only 50 percent of screens to have closed captioning and audio description capabilities would not comply with the ADA itself, that this approach would require substantial changes to the movie theater business model, that the initial perceptions that this approach would have substantially lower total costs are actually misleading, and that this approach would not address in any meaningful way the concerns for small business single screen theaters.

Compliance by analog theaters required in two years.  The Department considered providing theaters with analog screens two years after the rule’s publication date to become compliant, as opposed to the six-month compliance date provided for digital screens.  This delay was considered for analog movie screens because such a large number of theaters are in the midst of transitioning to digital cinema, that additional time might be necessary.  In addition, the delayed compliance date would have allowed small theaters that remain analog more time to obtain the necessary resources to purchase the equipment to provide closed captioning and audio description.  The 15-year, discounted costs for this alternative range from $189.4 million to $237.5 million under a 7 percent discount rate, which are higher than the total costs for the proposed rule. 

Upon review of the higher cost burden for firms still using analog projection, and with consultation from the Small Business Administration’s Office of Advocacy, and as previously discussed, the Department is considering two alternative options for theaters with analog screens: (1) a four-year compliance date for theaters with analog screens (Option 1); or (2) deferring application of the requirements to analog screens until a later date (Option 2).  In making the decision, the Department also took into consideration the fact that those movie theaters that have not yet made the transition to digital systems are more likely to be small businesses than those movie theaters that are already exhibiting in digital format.  The Department also considered publicly available information that movie studios are in the process of phasing out analog film, and it is anticipated that by 2015, studios will not be producing analog prints of first run films.  On the basis of this information, it appears likely that movie theaters that rely on first-run films for revenue will either convert to digital or go out of business before the four-year compliance date (sometime in 2018 or 2019), and thus there will actually be many fewer analog theaters that will need to comply with the rule if the Department proceeds under Option 1.   If the Department proceeds under Option 2, there will be fewer small business theaters affected by the rule, because it will only apply to small business digital theaters.

Question 21a: Significant Alternatives for Small Analog Theaters under the RFA 
Is the four-year compliance date in Option1 reasonable for those screens that will remain analog?  If not, why not?  Should the Department adopt Option 2 and defer requiring theaters with analog screens to comply with the specific requirements of this rule?  (See Questions 6 and 8).  

Question 21b: Significant Alternatives for Small Digital Theaters under the RFA
Is the proposed six-month compliance date for digital screens a reasonable timeframe to comply with the rule?  Is six months enough time to order, install, and gain familiarity with the necessary equipment; train staff so that they can meaningfully assist patrons; and meet the notice requirement of the proposed rule?  If the proposed six-month date is not reasonable, what should the compliance date be and why?  (See Question 7). 

Question 21c: Other Significant Alternatives for Small Theaters under the RFA
The Department invites comment on ways to tailor this regulation to reduce unnecessary regulatory burdens on small businesses.⁵⁸  For example: Should the Department have a different compliance schedule for digital or analog theaters that have annual receipts below a certain threshold?  If so, what should the financial threshold be?  (See Question 6).  The Department is also interested in receiving comment and data on the use of the undue burden defense by small businesses.

57. While the number of public comments received in response to the 2010 ANPRM was extraordinary, there were relatively few comments that specifically addressed the impact of captioning requirements on small theaters.  No comments were received from representatives of independent movie theaters or from individual small (indoor) movie theater operators other than representatives of drive-in theaters (which are not covered by this rule).  The referenced comment from the movie theater trade association is the only comment by representatives of the theatrical or movie exhibition industry to address the potential impact of the captioning regulation on small theaters affected by this rule.

58. See Memorandum for the Heads of Executive Departments and Agencies, Regulatory Flexibility, Small Business, and Job Creation, 76 FR 3827 (Jan. 18, 2011).