Final Regulatory Assessment and Final Regulatory Flexibility Analysis Final Rule - Nondiscrimination on the Basis of Disability by Public Accommodations - Movie Theaters; Movie Captioning and Audio Description

This section details the general assumptions used in the cost estimation in the primary analysis.  First, the parameters of the analysis are covered.  Next, the assumptions regarding the “compliance year,” which is a construct for this analysis, and baseline are presented.  The final subsection explains the distinction among venue types and its relevance to the cost estimation.

The Final RA uses a 15-year time frame for the cost analysis, which is a time frame similar to that used in the Regulatory Impact Analysis of the Final Revised Regulations Implementing Titles II and III of the ADA (Sept. 15, 2010).  This time frame is the Department’s current best estimate of the impact of this rule before it is replaced by a revised regulation.  For the purposes of this cost analysis, the Final RA assumes that all movie theaters in the industry exhibiting digital movies will fully comply with the requirements of this rule even though some movie theaters may not comply because full compliance would constitute an undue burden or a fundamental alteration.  The results of the cost estimation are presented with 7- and 3- percent discount rates, with costs discounted to the year 2015.  The first year of the analysis is 2016, and costs are projected through 2030.

Under the final rule, movie theaters will have 18 months to purchase the necessary captioning and audio description equipment to comply with the rule.  The analysis begins in mid-2016, the expected publication date of the rulemaking.  With an 18 month compliance period, the Final RA assumes that all auditoriums will be equipped to provide closed movie captioning and audio description by the end of 2017, the “compliance year.” 

Movie theaters are assumed to purchase equipment throughout the 18 months leading up to the compliance date.  For the primary analysis, it is assumed that 33 percent of movie theaters with auditoriums not already equipped to provide closed movie captioning and audio description will purchase the required equipment in 2016, and the remaining 67 percent will purchase equipment in 2017.  This assumption is determined by the amount of time movie theaters will have to purchase the equipment in each year, relevant to the 18-month compliance date (i.e., six months in 2016 and 12 months in 2017).

The purpose of the RA is to capture the incremental costs of the rulemaking.  As a result, the Final RA only includes the costs that movie theaters will incur as a direct result of this rulemaking.  The analysis assumes that movie theaters with auditoriums currently equipped to provide closed movie captioning and audio description would also operate and maintain this equipment in the absence of this rule.  The costs associated with providing closed movie captioning and audio description in such auditoriums are not included in the analysis unless specifically noted (see Section 2.4.2) because these relevant movie theaters acquired the necessary equipment prior to the rulemaking.  Therefore, the costs incurred by these theaters are not a direct result of the rulemaking.

To estimate the incremental cost impact, the total costs are measured against a baseline.  The baseline represents the Department’s best assessment of the state of the movie exhibition industry.  The baseline is the estimated number of movie theater auditoriums already equipped to provide closed movie captioning and audio description, and the number of captioning and audio description devices already available for patrons in those auditoriums.  In this way, the resulting net costs appropriately reflect the incremental economic impact of the final rule. 

There is uncertainty regarding the number of auditoriums already equipped to provide closed movie captioning and audio description and the extent to which movie theaters would offer closed movie captioning and audio description if the Department had not undertaken this rulemaking process.  Therefore, the Final RA estimates costs against three different baseline scenarios, which are described in greater detail in Section 3.2.

In the movie exhibition industry’s early days, movies were shown primarily in establishments that had a single auditorium with a single screen.  In recent years, a single movie theater establishment can have more than a dozen auditoriums, all showing movies at the same time.  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, this 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 total number of movie theater auditoriums exhibiting digital movies is distributed among these venue types in accordance with research-based assumptions.  These 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. 

The distinction between venue types determines the captioning and audio description equipment required at each movie theater complex.  The number of hardware units and individual devices required by the rulemaking are the building blocks of the cost estimation for the average movie theater of each venue type.  Detailed assumptions and information regarding the scoping requirements by venue type are provided in Section 3.3.

The analysis also accounts for growth (or contraction) over time in the movie exhibition industry by venue type.  The four venue types have very different average costs due to their differences in size and differences in growth/contraction rates.  The assumptions made in the analysis regarding the growth of auditoriums and venue types are provided in Section 3.1.3.