28 CFR Parts 35 and 36, Nondiscrimination on the Basis of Disability by Public Accommodations - Movie Theaters; Movie Captioning and Audio Description (NPRM)
Costs and Benefits
With respect to the costs and benefits of this rule, the Department has prepared an Initial Regulatory Assessment (Initial RA). The Initial RA assesses the likely costs and benefits of the proposed rule. Expected benefits are discussed and likely costs are estimated for all theaters over the projected life of the rule (15 years), as well as for “small businesses” in the movie exhibition industry as part of an Initial Regulatory Flexibility Analysis (IRFA), included therein.
The Initial RA provides estimates of the total costs for two options. Option 1 assumes a compliance date for digital theaters of six months from the publication of the final rule and a compliance date for analog theaters of four years from the publication date of the final rule. Option 2 assumes that the rule will only apply to digital theaters and that application of the rule’s requirements to analog theaters will be deferred. For Option 1, the total cost for all theaters over the 15-year period following publication of this rule in final form will likely range from $177.8 million to $225.9 million when using a 7 percent discount rate, and from $219.0 million to $275.7 million when using a 3 percent discount rate, depending on which baseline is used regarding the extent to which theaters are or will soon be providing movie captioning and audio description as proposed in this rule, but independently of this rulemaking.1 Under Option 1, the annualized costs range from $19.5 million to $24.8 million when using a 7 percent discount rate, and from $18.3 million to $23.1 million when using a 3 percent discount rate. For Option 2, total costs for all theaters with digital screens over the 15-year period following publication of this rule in final form will likely range from $138.1 million to $186.2 million when using a 7 percent discount rate, and from $169.3 million to $226.0 million when using a 3 percent discount rate, depending on which baseline is used regarding the extent to which theaters are or will soon be providing movie captioning and audio description as proposed in this rule, but independently of this rulemaking.2 When annualized, these costs range from $15.2 million to $20.4 million when using a 7 percent discount rate, and from $14.2 million to 18.9 million when using a 3 percent discount rate. In either case, the Initial RA shows that estimated annual costs for this proposed rule would not exceed $100 million in any year (under any of the three baseline scenarios).
Table ES-1: Annualized Costs and Benefits of Proposed Rule (2015 Dollars, 15-year Time Horizon)
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Because movie theater complexes vary greatly by number of screens, which significantly impacts overall costs per facility, the Initial RA breaks the movie exhibition industry into four theater types based on size—Megaplexes (16 or more screens), Multiplexes (8-15 screens), Miniplexes (2-7 screens), and Single Screen Theaters—and for Option 1, by digital or analog system. The average capital cost for digital Megaplex theaters in the first year is estimated to total $38,547, while the average capital cost for digital single screen theaters in the first year is estimated to total $3,198. Should the Department proceed under Option 1 and cover analog screens in the final rule, though with a four-year delayed compliance date, per theater costs for analog theaters would be higher than those for digital theaters for each type or size. The first year capital cost for analog single screen theaters is estimated to total $8,172. The first year capital costs for digital single screen theaters would average $3,198.
The individuals who will directly benefit from this rule are those persons with hearing or vision disabilities who, as a result of this rule, would be able for the first time to attend movies with closed captioning or audio description in theaters across the country on a consistent basis. Individuals who will indirectly benefit from this rule are the family and friends of persons with hearing and vision disabilities who would be able to share the movie-going experience more fully with their friends or loved ones with hearing and vision disabilities.
The benefits of this rule are difficult to quantify for multiple reasons. The Department has not been able to locate robust data on the rate at which persons with disabilities currently go to movies shown in movie theaters. In addition, as a result of this rule, the following number of persons will change by an unknown amount: (1) the number of persons with disabilities who will newly go to movies, (2) the number of persons with disabilities who will go to movies more often, (3) the number of persons who will go to the movies as part of a larger group that includes a person with a disability, and (4) the number of persons with disabilities who would have gone to the movies anyway but under the rule will have a fuller and more pleasant experience. In addition, the Department does not know precisely how many movie screens currently screen movies with closed captioning and audio description, or how many people with hearing or vision disabilities currently have consistent access to movie theaters that provide closed captioning and audio description. Finally, the Department is not aware of any peer-reviewed academic or professional studies that monetize or quantify the societal benefit of providing closed captioning and audio description at movie theaters.
Data on movie-going patterns of persons who are deaf or hard of hearing or are blind or have low vision is very limited, making estimations of demand very difficult. However, numerous public comments suggest that many persons who are deaf or hard of hearing or are blind or have low vision do not go to the movies at all or attend movies well below the national average of 4.1 annual admissions per person because of the lack of auxiliary aids and services that would allow them to understand and enjoy the movie.
Though we cannot confidently estimate the likely number of people who would directly benefit from this proposed rule, we have reviewed data on the number of people with hearing or vision disabilities in the United States. The Census Bureau estimates that 3.3 percent of the U.S. population has difficulty seeing, which translates into a little more than eight million individuals in 2010, and a little more than two million of those had “severe” difficulty seeing.3 At the same time, the Census Bureau estimates that 3.1 percent of people had difficulty hearing, which was a little more than 7.5 million individuals in 2010, and approximately one million of them having “severe” difficulty hearing. Not all of these people would benefit from this proposed rule. For example, some people’s hearing or vision disability may not be such that they would need closed captioning or audio description. Some people with hearing or visions disabilities may not want to use the equipment for a variety of reasons. Others would not attend public screenings of movies even if theaters provided closed captioning and audio description simply because they do not enjoy going out to the movies—just as is the case among persons without disabilities.4 Some people with hearing or vision disabilities may already have consistent access to theaters that screen movies with closed captioning and audio description. And some theaters may not provide closed captioning and audio description for all their movies because it would be an undue burden under the ADA to do so.
In addition to the direct beneficiaries of the proposed rule discussed above, others may be indirect beneficiaries of this rule. Family and friends of persons with these disabilities who wish to go to the movies as a shared social experience will now have greater opportunities to do so. The Department received numerous comments from individuals who are deaf or hard of hearing or are blind or have low vision in response to its 2010 Advance Notice of Proposed Rulemaking on Movie Captioning and Video Description in Movie Theaters describing how they were unable to take part in the movie-going experience with their friends and family because of the unavailability of captioning or audio description. Many individuals felt that this not only affected their ability to socialize and fully take part in family and social outings, but also deprived them of the opportunity to meaningfully engage in the discourse that often surrounds movie attendance. (See the Initial RA, Section 5 (Benefits) for more details and description of the potential benefits of this proposed rule.) Of perhaps greater significance to the discussion of the benefits of this rule, however, are issues relating to fairness, equity, and equal access, all of which are extremely difficult to monetize, and the Department has not been able to effectively quantify and place a dollar value on those benefits. Regardless, the Department believes the non-quantifiable benefits justify the costs of requiring captioning and audio description at movie theaters nationwide.
In keeping with the Regulatory Flexibility Act (RFA), the Initial RA examined the economic impact of the proposed rule on small businesses in the movie exhibition industry. The current size standard for a small movie theater business is $35.5 million dollars in annual revenue. In 2007, the latest year for which detailed breakouts by industry and annual revenue are available, approximately 98 percent of movie theater firms met the standard for small business, and these firms managed approximately 53 percent of movie theater establishments.5 The IRFA estimates the average initial capital costs per-firm for firms that display digital or analog movies under Option 1 and for firms that display digital movies under Option 2. The average costs for small firms (which have a proportionately higher number of Single Screens and Miniplexes) were between approximately 0.7 percent to 2.1 percent of their average annual receipts for firms with digital theaters, and between approximately 2.0 percent to 5.7 percent of average annual receipts for firms with analog theaters. The Department has determined that this proposed rule will have a significant economic impact on a substantial number of small businesses.
The Department has used the IRFA to examine other ways, if possible, to accomplish the Department’s goals with fewer burdens on small businesses. Based on its assessment, the Department has decided to seek public comment on two options: one that would adopt a four-year compliance date for theaters’ analog screens (Option 1), and the other that would defer application of the rule’s requirements to movie theaters’ analog screens and consider additional rulemaking at a later date (Option 2).
1. Baseline 1 (only one screen already has the necessary equipment); Baseline 2 (all theaters of those companies affected by recent litigation/settlement agreements already have the necessary equipment); Baseline 3 (all digital theaters estimated by the National Association of Theater Owners (NATO) in 2013 as having captioning capabilities (53 percent) have done so independently of the proposed rule’s requirements). See Initial RA for further details on Baseline estimations.
2. Baseline 1 (only one screen already has the necessary equipment); Baseline 2 (all theaters of those companies affected by recent litigation/settlement agreements already have the necessary equipment); Baseline 3 (all digital theaters estimated by NATO in 2013 as having captioning capabilities (53 percent) have done so independently of the proposed rule’s requirements). See Initial RA for further details on Baseline estimations.
3. The Census defines difficulty seeing as “experiencing blindness or having difficulty seeing words or letters in ordinary newsprint even when normally wearing glasses or contact lenses.” It defines difficulty hearing as “experiencing deafness or having difficulty hearing a normal conversation, even when wearing a hearing aid.” See U.S. Census Bureau, U.S. Department of Commerce, P70-131, Americans with Disabilities: 2010 Household Economic Studies at 8 (2012), available at http://www.census.gov/prod/2012pubs/p70-131.pdf (last visited July 14, 2014).
4. In 2012, a little more than two thirds (68 percent) of the U.S. and Canadian population over two years old went to a movie at a movie theater at least once that year. See Motion Picture Association of America, Theatrical Market Statistics (2012), available from Movie Picture Association of America, http://www.mpaa.org/wp-content/uploads/2014/03/2012-Theatrical-Market-Statistics-Report.pdf (last visited July 14, 2014).
5. The size standard of $35.5 million can be found in U.S. Small Business Administration , Table of Small Business Size Standards Matched to North American Industry Classification System Codes, available at http://www.sba.gov/sites/default/files/files/Size_Standards_Table.pdf (last visited July 14, 2014).
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