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

3. Data Overview

This section presents data on how the current number of auditoriums operating in the United States is distributed across venue types and estimates the number of auditoriums operating into the future for the purposes of the analysis.  It also estimates the number of auditoriums with digital projection systems.  The number of auditoriums by venue type and the projection systems they use provide the foundation of the cost estimation of the final rule.

Section 3.1.1 outlines the sources used for the current estimation of total U.S. auditoriums.  Section 3.1.2 distributes those auditoriums across the different venue types, and Section 3.1.3 explains how the number of auditoriums is projected into the future.  Section 3.1.4 specifies the movie projection system used by the auditoriums in each venue type.

The cost estimation begins with the estimated number of movie theater auditoriums or screens operating in the United States as of July 2015.  Table 3-1 presents a summary of this information.  The data is provided by Deluxe Technicolor Digital Cinema and United Drive-In Theatre Owners Association (UDITOA).

As explained in Section 2.1.4, movie theaters operating in the United States are categorized by venue type.  The final rule’s scoping requirements for captioning and audio description devices vary depending on the size of the venue (i.e., the number of auditoriums exhibiting digital movies within a movie theater complex).  Therefore, the analysis first breaks down the total number of indoor movie theater auditoriums (approximately 39,338 as presented above in Table 3-1) across the various venue types.  The Motion Picture Association of America’s (MPAA) Theatrical Market Statistics – 2009 contains statistics of the 2009 breakdown of movie theater auditoriums in the United States by four venue types:

• Megaplex (16+ auditoriums);

• Multiplex (8–­15 auditoriums);

• Miniplex (2–­7 auditoriums); and

• Single-Auditorium movie theaters.

There has been no update to this distribution since the 2009 MPAA report.¹³  Recently, however, the 2014 MPAA report provided the percentage of U.S. auditoriums across different venue size categories (i.e., eight or more auditoriums and seven or fewer auditoriums).¹⁴  This section shows how the distribution of auditoriums by venue type in 2015 is derived using data from the 2009 and 2014 MPAA reports.

Table 3-2 presents the percentage of auditoriums operated in each venue type, according to the 2009 MPAA report and the 2014 MPAA report.  According to the 2009 report (first column), the number of auditoriums in Megaplex and Multiplex movie theaters (venues with 8 or more auditoriums) accounted for about 75 percent of all auditoriums in the United States in 2009.  In the 2014 MPAA report (second column), approximately 84 percent of all auditoriums are operated in venues with eight or more auditoriums, up from 75 percent in 2009.  The final, rightmost column in Table 3-2 shows the estimated current distribution of auditoriums by venue type, using the data in the 2009 and 2014 MPAA reports. 

The period of analysis in the Final RA spans 15 years.  As a result, the cost estimation requires projecting the estimated number of auditoriums by venue type into the future.  The 2014 MPAA report provides statistics on the growth rate of auditoriums by the venue size categories.  Table 3-4 shows the average annual growth by such movie theaters from 2010 to 2014.  Between 2010 and 2014, the number of auditoriums in venues with eight or more auditoriums (Megaplex and Multiplex movie theaters) grew by an average of 2 percent each year.  The number of auditoriums in venues with seven or fewer auditoriums (Miniplex and Single-Auditorium movie theaters) has steadily declined since 2010, decreasing by an average of nearly 7 percent each year.

Finally, auditoriums are categorized based on the movie projection system utilized (digital vs. analog).  According to the data presented in Section 3.1.1, approximately 98 percent of all indoor auditoriums exhibit digital movies.¹⁶  Most of the large movie theaters are operated by the largest firms in the industry (Regal, AMC, Cinemark, etc.), and these firms have already converted their auditoriums to digital projection systems.  Therefore, the Final RA assumes that all auditoriums operated in Megaplex and Multiplex movie theaters have converted to digital projection systems and are exhibiting digital movies.  All remaining auditoriums exhibiting digital movies are assumed to be distributed proportionally across Miniplex and Single-Auditorium movie theaters.  

As a result, the Final RA assumes that 90 percent of indoor auditoriums operated in Miniplex and Single-Auditorium movie theaters exhibit digital movies.  Table 3-6 shows how this percentage is applied to the number of indoor auditoriums in 2015 (Section 3.1.1) to calculate the number of auditoriums exhibiting digital movies by venue type in 2015.  All indoor auditoriums exhibiting digital movies are subject to the rulemaking, and their costs are estimated in the Final RA.  The potential costs to indoor auditoriums exhibiting analog movies exclusively¹⁷ are analyzed separately in an analysis in Section 6.3 as part of a discussion concerning regulatory alternatives the Department decided not to pursue.

Table 3-6 : Calculation of Number of Indoor Auditoriums Exhibiting Digital Movies

*Totals may differ due to rounding

All new auditoriums opening after the 18-month compliance date are assumed to exhibit digital movies.  The Final RA assumes that new auditoriums will purchase the necessary captioning and audio description equipment in the first year of operation.  Auditoriums that close during the analysis period are assumed to be proportionally distributed among auditoriums that exhibit digital movies and auditoriums that exhibit analog movies.

Figure 3-2 shows how the percentage of auditoriums exhibiting digital movies increases over the period of analysis. In 2016, approximately 98.3 percent of all auditoriums exhibit digital movies.  By 2030, the final year of the analysis, nearly all auditoriums (99.5 percent) are assumed to exhibit digital movies.  This is consistent with the industry trend as very few new movie releases are available in analog film format.

In the Final RA, the baseline is defined as the current number of auditoriums equipped to provide closed movie captioning and audio description.  As explained in Section 2.1.3, any auditoriums that are already equipped to provide closed movie captioning and audio description prior to the rulemaking are not included in the cost estimation.

Until recently, few movie theaters actually provided auxiliary aids and services for movie patrons who are deaf or hard of hearing, or blind or have low vision, despite the increasing availability of movies produced with captions and audio description.  The Department recognizes that this has started to change.  The industry as a whole is seeing an increasing number of movie theaters with auditoriums equipped to provide closed movie captioning and audio description.

However, there is uncertainty regarding the precise number of auditoriums equipped to provide these services. Because this estimate has a significant impact on the cost estimation of the final rule, the Final RA estimates costs against three different baselines.  A Medium Accessibility baseline is used in the primary analysis, and Low Accessibility and High Accessibility baselines are used in sensitivity analyses.  The three baselines are derived from the 2015 Accessibility Survey conducted by NATO.¹⁸ 

Section 3.2.1 provides an overview and presents the results of the 2015 NATO Accessibility Survey.  Section 3.2.2 explains that the results of the survey are not definitive and demonstrates the need for analyzing multiple baselines.  This section also provides an overview of how the Low Accessibility, Medium Accessibility, and High Accessibility baselines are calculated.  Section 3.2.3 shows how the number of auditoriums already equipped to provide closed movie captioning and audio description is distributed across the venue types in the primary analysis.

NATO is a trade association representing firms in the movie exhibition industry.  In 2015, NATO members in the United States operated approximately 32,499 of the 39,338 indoor movie auditoriums nationwide (82.6 percent).  In response to the 2014 NPRM, NATO conducted a survey (2015 survey) of its member companies regarding the number of auditoriums already equipped to provide closed movie captioning and audio description.¹⁹  NATO members responded via email during the spring and summer of 2015, providing information on the total number of auditoriums they operated and the proportion of those auditoriums that were equipped to provide closed movie captioning or audio description.

NATO received survey responses from 116 companies operating 24,739 auditoriums in the United States.  A quick overview of the 2015 survey results is provided in Table 3-7 below.  According to the 2015 survey, 22,836 auditoriums are equipped to provide closed movie captioning and 22,673 auditoriums are equipped to provide audio description.

The 2015 survey is representative of a portion of the total number of auditoriums operating in the United States.  The Final RA uses three possible baselines (Low Accessibility, Medium Accessibility, and High Accessibility) that differ depending on the assumptions concerning the prevalence of auditoriums already equipped to provide closed movie captioning or audio description amongst movie theaters that were not surveyed or that failed to respond to the 2015 survey.  The primary analysis uses the Medium Accessibility baseline while the Low Accessibility and High Accessibility baselines are estimated separately as sensitivity analyses in Sections 4.2.1 and 4.2.2.  The assumptions used to calculate the baselines are outlined in the sections below.

The Low Accessibility baseline is the most conservative of the three baselines developed for the cost estimation.  The Low Accessibility baseline assumes that:

• The auditoriums equipped to provide closed movie captioning or audio description as reported in the 2015 survey are the only indoor auditoriums exhibiting digital movies in the United States that are equipped to provide closed movie captioning or audio description.

The calculation for the Low Accessibility baseline is presented in Table 3-8.  The Low Accessibility baseline is calculated by dividing the number of auditoriums equipped to provide closed movie captioning or audio description, as reported in the 2015 survey (Table 3-7), by the total number of indoor auditoriums operating in the United States (Table 3-1 in Section 3.1.1).

The Medium Accessibility baseline is used in the cost estimation for the primary analysis presented in Section 4.1.  The Medium Accessibility baseline assumes that:

• The percentage of auditoriums equipped to provide closed movie captioning or audio description amongst auditoriums operated by all NATO members is true for all indoor auditoriums exhibiting digital movies in the United States.

As previously discussed in Section 3.2.1, NATO member companies operate approximately 32,499 auditoriums.  The Medium Accessibility baseline assumes that the percentage of auditoriums equipped to provide closed movie captioning or audio description amongst auditoriums operated by NATO members is true for the entire industry.  This differs from the Low Accessibility baseline, which assumes that no auditoriums outside of those included in the 2015 survey are equipped to provide closed movie captioning or audio description.  The Medium Accessibility baseline is calculated by dividing the number of auditoriums equipped to provide closed movie captioning or audio description, as reported in the 2015 survey, by the total number of auditoriums operated by NATO members, as shown in Table 3-9.

The High Accessibility baseline is the least conservative of the three baselines.  The High Accessibility baseline assumes that:

• The percentage of auditoriums equipped to provide closed movie captioning or audio description amongst auditoriums operated by surveyed NATO members is true for all indoor auditoriums exhibiting digital movies in the United States.

As shown in Table 3-7, the NATO members responding to the survey operated 24,739 auditoriums.  The High Accessibility baseline assumes that the percentage of auditoriums equipped to provide closed movie captioning or audio description amongst the total number of auditoriums operated by firms responding to the 2015 survey is true for the entire industry.  The High Accessibility baseline is calculated by dividing the total number of auditoriums equipped to provide closed movie captioning or audio description, as reported in the 2015 survey, by the total number of auditoriums operated by the 2015 survey respondents, as shown in Table 3-10.

The Low Accessibility, Medium Accessibility, and High Accessibility baselines are summarized in Table 3-11.  The primary analysis uses the Medium Accessibility baseline in the calculation of the estimated costs.  In the Medium Accessibility baseline, approximately 70 percent of auditoriums are equipped to provide closed movie captioning and approximately 70 percent are equipped to provide audio description.  The costs of the final rule using the Low Accessibility and High Accessibility baselines are estimated as sensitivity analyses in Sections 4.2.1 and 4.2.2, respectively.

Table 3-12 : Medium Accessibility Baseline by Venue Type–Captioning and Audio Description

The Medium Accessibility baseline percentage by venue type above is then applied to the number of indoor auditoriums exhibiting digital movies in the compliance year, presented in Table 3-9.  Table 3-13 below shows the calculation used to determine the Department’s assumption regarding the number of auditoriums subject to the rulemaking that are and are not equipped to provide closed movie captioning or audio description.  As the table shows, the Department assumes that 9,561 of the auditoriums at Megaplex movie theaters are equipped to provide closed movie captioning, while 3,778 are assumed to not be equipped to provide closed movie captioning.

Table 3-13 : Calculation of Auditoriums That Are Equipped to Provide Captioning by Venue Type

*Percentage of all auditoriums equipped to provide captioning

The same methodology is used to calculate the number of auditoriums subject to the rulemaking that are and are not equipped to provide audio description.

Table 3-14: Calculation of Auditoriums That Are Equipped to Provide Audio Description by Venue Type

*Percentage of all auditoriums equipped to provide audio description

As shown in Section 2.3.1 and Section 2.3.2, the number of indoor digital auditoriums that are and are not equipped to provide closed movie captioning or audio description in the compliance year provides the basis of estimating how many units of equipment will be purchased as a result of the rulemaking.

This section outlines the estimated number of hardware units and individual devices required for each venue type.  As previously explained in Section 2.3, four types of equipment are necessary to provide closed movie captioning and audio description:

• Captioning Hardware

• Audio Description Hardware

• Captioning Devices

• Audio Description Devices

The final rule’s scoping requirements for captioning and audio description devices are based on industry research and recommendations proposed by NATO and multiple disability rights groups.  Because each movie theater will have to purchase the requisite equipment, all scoping is presented on a per venue type basis.

According to industry research, a single unit of captioning hardware is required for each auditorium within a movie theater (Section 2.3). Therefore, the number of captioning hardware units a movie theater would need to purchase varies depending on the number of auditoriums operated in that movie theater.  For purposes of the cost estimation, the average number of auditoriums per venue type is used to calculate the number of hardware units required per movie theater.²⁰  Table 3-15 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.

Unlike closed movie captioning hardware, one unit of audio description hardware per auditorium is not necessary to provide audio description.  For some manufacturers, the captioning hardware includes audio description capabilities.  Other manufacturers require a single audio description programming station, which is sufficient to provide audio description in an entire movie theater establishment, regardless of the number of auditoriums.  Information regarding the characteristics of the captioning and audio description equipment from the primary manufacturers is described in further detail in Section 3.4.2.  For purposes of the cost estimation, the Final RA assumes that one unit of audio description hardware is required per movie theater.  Table 3-16 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.

In response to the 2014 NPRM, NATO and four advocacy groups representing persons who are deaf and hard of hearing²¹ submitted a joint comment (Joint Comment), which included a variety of specific recommendations regarding closed movie captioning and the Department’s proposed scoping requirements for captioning devices. The Joint Comment suggested that movie theaters maintain a minimum number of captioning devices based on the number of auditoriums displaying digital movies within a movie theater, or by venue type.  The Department has adopted the minimum captioning device scoping suggested in the Joint Comment, and the Final RA uses these scoping requirements for the estimation of costs.  The minimum number of captioning devices required per venue type is presented in Table 3-17 below.

For audio description devices, NATO in its public comments suggested that movie theaters maintain one audio description device for every two auditoriums, with a minimum of two devices per movie theater.  The Department has adopted the scoping requirements for audio description devices as recommended in NATO’s public comments.  Table 3-18 shows the scoping requirements for audio description devices used in the cost estimation of the final rule.  Because the number of audio description devices per movie theater will vary depending on the number of auditoriums displaying digital movies in the movie theater, the scoping below represents the average number of audio description devices required per movie theater, based on the average number of auditoriums by venue type.

This section outlines the unit costs for the hardware and the individual devices necessary to provide closed movie captioning and audio description in auditoriums exhibiting digital movies.  The unit costs from the three main manufacturers of the equipment (Doremi Captiview, USL, and Sony) are taken directly from NATO’s public comments, which are based on its interviews with these companies.²³

In the Initial RA, the Department estimated the hardware and device costs by averaging the retail prices for the systems provided by Doremi Captiview and USL.  The Initial RA also noted that an additional captioning technology was commercially available, Sony’s Entertainment Access Glasses.  Because this was a relatively new and expensive technology, the Department excluded it from the average unit cost estimates in the Initial RA.  However, many commenters on the 2014 NPRM, including NATO, argued that Sony’s technology should be included in the unit cost estimates because the industry uses the technology—most notably, Regal Cinemas, the largest U.S. movie theater chain, uses this technology.

In response to comments, the Department has included Sony’s technology in the average unit cost estimates.  However, it is unlikely that the smallest movie theaters will purchase the Sony technology when less costly alternatives are available.²⁴  Therefore, Sony is now included in the average unit cost estimates in the Final RA but only for Miniplex, Multiplex, and Megaplex movie theaters.  The average unit cost estimate methodology for Single-Auditorium movie theaters remains the same and is calculated by averaging the retail prices of the Doremi Captiview and USL systems.

Section 3.4.1 through Section 3.4.4 outline the unit costs for all equipment necessary to provide closed movie captioning and audio description by manufacturer.  Section 3.4.5 presents the Department’s methodology for determining the average unit cost estimates used in the primary analysis.

The Initial RA estimated the costs of captioning and audio description hardware separately.  However, industry research indicates that if a movie theater is required to provide both closed movie captioning and audio description, it would likely purchase a hardware bundle currently offered by manufacturers. These hardware bundles provide hardware with the capability to provide both closed movie captioning and audio description at a lower cost than when purchasing the hardware separately.  The unit costs for all commercially-available captioning hardware systems are presented in Table 3-19.

Table 3-19 :  Captioning Hardware Unit Costs

Source: 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 23, available at http://www.regulations.gov/contentStreamer?documentId=DOJ-CRT-2014-0004-0401&attachmentNumber=4&disposition=attachment&contentType=pdf (last visited Sept. 12, 2016).

*This figure represents an average of the cost for movie theaters with Doremi servers ($822) and the cost for movie theaters without Doremi servers ($906).

The captioning hardware offered by Sony and USL also includes audio description functionality. Although Doremi Captiview hardware does not include this dual capability, it offers hardware transmitters for captioning and audio description in a bundled set at a discounted price.  Doremi offers the bundled hardware at two different prices depending on whether the movie theater uses Doremi servers for their projection system.  The $864 unit cost displayed in Table 3-19 is an average of the bundled hardware cost for movie theaters with Doremi servers ($822) and the bundled hardware cost for movie theaters without Doremi servers ($906).

As previously mentioned, it is unlikely that Single-Auditorium movie theaters with limited budgets would opt to purchase the Sony Entertainment Access system given the availability of cheaper alternatives.  Although the captioning hardware offered by Sony is less expensive than the other available hardware units, the captioning devices (Sony Entertainment Access Glasses) cost more than the captioning devices offered by other manufacturers (Section 3.4.3).  Therefore, the cost estimation assumes that the average captioning hardware unit cost is $1,118 for Single-Auditorium movie theaters and $912 for all other venue types (Section 3.4.5).

According to industry research, there are no additional audio description hardware costs for movie theaters purchasing USL or Sony’s captioning hardware.  As discussed in Section 3.4.1, these manufacturers’ captioning hardware units also have the capability to transmit audio description to movie patrons.  However, the Doremi Captiview audio description system (Fidelio) requires a programming station in addition to the bundled hardware. Generally, one programming station per movie theater complex is sufficient to provide audio description to patrons throughout the movie theater and costs $615.  The unit costs for all commercially-available audio description hardware systems are presented in Table 3-20.

Table 3-20 :  Additional Cost for Audio Description Hardware

Source: 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 23, available at http://www.regulations.gov/contentStreamer?documentId=DOJ-CRT-2014-0004-0401&attachmentNumber=4&disposition=attachment&contentType=pdf (last visited Sept. 12, 2016).

The unit costs in the table have been averaged to develop an estimate of the average audio description hardware unit cost per movie theater based on all available technology.  Because there are no additional audio description hardware costs if a movie theater purchases the USL or Sony system, the average audio description hardware unit cost for Single-Auditorium movie theaters is $308, and it is $205 for all other venue types.

The unit costs for captioning devices are presented in Table 3-21. The price of the captioning devices varies depending on the manufacturer and the device type.  Some manufacturers offer units that fit into movie theater seat cup holders, and others offer glasses worn by the patron.  Because USL offers both devices, the captioning device unit cost for USL is an average of the two devices offered: a cup holder device ($443) and the captioning glasses ($514).  For the Sony system, each captioning device requires both a receiver ($300) and a pair of glasses ($950) in order for the captions to appear on the glasses.

Table 3-21 : Captioning Device Unit Costs

Source: 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 23, available at http://www.regulations.gov/contentStreamer?documentId=DOJ-CRT-2014-0004-0401&attachmentNumber=4&disposition=attachment&contentType=pdf (last visited Sept. 12, 2016).

Although Sony has less expensive hardware costs, Table 24 demonstrates that the cost of a single Sony captioning device is more than double that of the other manufacturers.  Because the final rule’s captioning device scoping requirements require a Single-Auditorium movie theater to maintain four captioning devices, the difference in price between installing the Sony captioning system and installing another captioning system is significant.  The average captioning device unit cost when excluding Sony’s captioning device is $466 per individual device, and the Department uses this estimate as the average captioning device unit cost for Single-Auditorium movie theaters in the primary analysis.  The primary analysis assumes an average captioning device unit cost of $727 for Megaplex, Multiplex, and Miniplex movie theaters.

The individual devices required for audio description typically consist of a headset or headphones with a receiver that picks up the descriptive audio from a transmitting or programming station. Often, patrons can bring their own headphones that they are comfortable wearing. Under the final rule, however, movie theaters are required to provide headsets capable of receiving audio description for patrons’ use. The unit costs for all commercially-available audio description devices are presented in Table 3-22. The primary analysis assumes that the average unit cost for audio description devices is $95 for Single-Auditorium movie theaters and $163 for all other venue types.

Table 3-22 : Audio Description Device Unit Costs

Source: 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 23, available at http://www.regulations.gov/contentStreamer?documentId=DOJ-CRT-2014-0004-0401&attachmentNumber=4&disposition=attachment&contentType=pdf (last visited Sept. 12, 2016).

As previously mentioned, there are three main manufacturers of the captioning and audio description equipment (Doremi Captiview, USL, Sony).  The Final RA estimates the average unit costs of the hardware and the devices based on the retail prices of all currently-available equipment from the three manufacturers. Sony’s technology is primarily deployed by movie theaters operated by Regal Cinemas, the largest movie theater chain in the United Stated, and Sony’s technology is generally more expensive than that of the other manufacturers.  Therefore, the Final RA assumes that Single-Auditorium movie theaters operating on a limited budget will elect to purchase equipment from one of the less expensive manufacturers, such as USL or Doremi Captiview.  Larger venues (Megaplex, Multiplex and Miniplex movie theaters) are assumed to purchase from all technology providers.  The unit costs for all required equipment discussed in Section 3.4.1 through Section 3.4.4 are summarized by venue type in Table 3-23 below.

Table 3-23 : Summary of Equipment Unit Costs by Venue Type

Public comments and Department research suggest that there are installation costs associated with providing closed movie captioning and audio description in movie theater auditoriums that exhibit digital movies.  Although the Initial RA factored the relevant installation costs into the estimated device costs, the Final RA includes a separate estimation of installation costs.  For purposes of the cost estimation, the Department assumes that installation costs are 3 percent of total equipment acquisition costs.  The installation costs are included as an upfront cost that a movie theater incurs once.  The primary analysis assumes that movie theaters incur installation costs in the same year in which a theater purchases the necessary captioning and audio description equipment.

Given the assumed 15-year term of the final rule, captioning and audio description equipment will require replacement one or more times during this period.  The analysis estimates replacement costs for movie theaters purchasing new equipment as a direct result of the rulemaking.  The replacement costs that movie theaters incur for equipment purchased prior to this rulemaking cannot be directly attributed to this rule and have not been included in the cost estimation in the Final RA. 

As shown in Section 3.1.3, the number of auditoriums operated in Miniplex and Single-Auditorium movie theaters is expected to decline over the period of analysis in contrast to the positive growth rates projected for auditoriums in Megaplex and Multiplex movie theaters.  The replacement cost calculations are adjusted for movie theaters that may close during the analysis period because such movie theaters have no need for replacements.

Section 3.6.1 explains the replacement schedule that is used to estimate the time and extent of hardware replacement over the analysis period.  Section 3.6.2 discusses the assumptions and research regarding the rate of device replacement.

Public comments on the 2014 NPRM, as well as information provided by manufacturers, suggest that captioning and audio description hardware is expected to last about 10 years.  The Final RA uses a “replacement schedule” for captioning and audio description hardware in the cost estimation.  The Final RA assumes that all hardware will be replaced 9-11 years after the initial installment.  Within this replacement schedule, it is likely that more equipment will need replacement near the mid-point of the replacement time frame (as opposed to “earlier” or “later” years).  Thus, the cost estimation employs weighted percentages in the respective rolling replacement schedules for captioning and audio description hardware, as shown in Table 3-24.

Table 3-24 : Captioning and Audio Description Hardware Replacement Schedule

In practice, the replacement schedules for captioning and audio description hardware mean that in any given regulatory year after the ninth year, some proportion of hardware is being replaced.  Hardware replaced in any particular year simply follows a consistent pattern depending on the year in which the equipment was originally purchased.  For instance, for movie theaters purchasing and installing hardware in 2017, 15 percent would be replaced in 2026, 70 percent in 2027, and 15 percent in 2028.  The estimation of the hardware replacements costs in the primary analysis is presented in Section 4.1.3.

Because patrons will handle the captioning and audio description devices on a regular basis, the devices will require replacement more often than the hardware.  According to movie theaters, approximately 2.5 to 15 percent of devices need to be replaced each year due to mishandling, breakage, and patrons’ failure to return the devices.²⁵  Additionally, this estimate does not account for the fact that the individual devices eventually become unusable and need to be replaced over time.  As Department research indicates, individual devices have an average lifespan of four to seven years.

To account for the ongoing costs associated with the replacement of devices prior to the end of their lifespan and the replacement of these devices at the end of their lifespan, the primary analysis assumes that 20 percent of captioning and audio description devices acquired as a result of the rulemaking are replaced annually.  As previously discussed, the replacement costs incurred for devices purchased prior to the rulemaking cannot be directly attributed to this rulemaking.

As a result of the final rule’s requirements, movie theaters may need to develop additional staff training programs and reinforce this training on a regular basis to ensure that staff members know how to turn on the captions, to operate the devices, and are able to assist patrons in the equipment’s use.  According to a movie theater’s public comment on the 2014 NPRM, training employees to distribute and operate captioning and audio description equipment will take approximately 15 minutes.²⁶  To quantify this cost, time spent on training is monetized using the average hourly wage of movie theater employees. 

The analysis assumes that staff training occurs twice a year for all employees at all movie theaters exhibiting digital movies.  Unlike the other costs in the analysis, the training costs also include the costs to movie theaters with auditoriums that were already equipped to provide closed movie captioning or audio description prior to the rulemaking, as all movie theaters with auditoriums exhibiting digital movies will be required to comply with the rule’s operational requirements.  The Department notes that although the operational requirements only require a movie theater to have one employee on location to assist patrons with the captioning and audio description equipment whenever a digital movie with captioning and audio description is shown, the Department has estimated the associated training costs assuming that movie theaters will train all employees.  Without reliable data on the actual number of employees who will be trained as a result of this rulemaking, the Department believes that this is the best approach.

Table 3-26 shows the calculation of the number of employees per movie theater auditorium in the industry.  According to May 2014 Bureau of Labor Statistics (BLS) estimates, there were approximately 131,040 persons employed by the movie industry.  Applying this figure to the total number of auditoriums in the United States (including drive-in movie theaters to account for drive-in movie theater employees included in the 2014 BLS estimate) suggests that there are approximately 3.3 employees per auditorium.

Table 3-26 : Employees Per Movie Auditorium Calculation

*Source: BLS, Occupational Employment Statistics, National Industry-Specific Occupational Employment and Wage Estimates, NAICS 512130 – Motion Picture and Video Exhibition (May 2014), available at http://www.bls.gov/oes/current/naics5_512130.htm (last visited Sept. 12, 2016).

** Source: Data from UDITOA and Deluxe Technicolor provided by NATO (Section 3.1)

The additional time spent on training as a result of this rulemaking is monetized using the average hourly wage rate of movie theater employees and a wage-to-employment cost factor.  This calculation is summarized in Table 3-27 and shows the hourly cost of a movie theater employee assumed for cost estimation purposes.  This hourly cost is used to monetize the time spent on training staff members.

Table 3-27 : Hourly Employment Cost Calculation

*Source: BLS, Occupational Employment Statistics, National Industry-Specific Occupational Employment and Wage Estimates, NAICS 512130 – Motion Picture and Video Exhibition (May 2014), available at http://www.bls.gov/oes/current/naics5_512130.htm (last visited Sept. 12, 2016).
**Source: Press Release, BLS, Employer Costs for Employee Compensation – September 2015 (Dec. 9, 2015), available at http://www.bls.gov/news.release/ecec.nr0.htm (last visited Sept. 12, 2016).

As discussed above, the primary analysis assumes that staff training will take 15 minutes and will be conducted twice a year.  Thus, each employee will spend approximately 0.5 hours a year on training related to the operational requirements of this rule.  The total training costs to the industry as a result of this rulemaking can be calculated by multiplying the number of auditoriums exhibiting digital movies, the average number of movie theater employees per auditorium, the hourly employment cost of movie theater employees, and the hours spent per year on training.  The estimated staff training costs in the primary analysis are presented in Section 4.1.3.  An additional sensitivity analysis with increased staff training frequency is presented in Section 4.2.6.

The cost estimation also quantifies any additional maintenance and administrative costs associated with the rulemaking.  This cost differs from the installation costs outlined in Section 3.5.  It also differs from the equipment replacement and staff training costs outlined in Sections 3.6 and 3.7, respectively.  As explained in Section 2.4.3, the operation and maintenance costs include:

• Periodic ongoing maintenance, system testing, and cleaning of devices: Under heavy use from patrons, movie theaters explain that the maintenance of individual devices is necessary in between uses to ensure that the devices are clean and fully operational upon request.  Depending on the technology, movie theaters may need to periodically replace the batteries in the devices.  This also includes any additional costs associated with troubleshooting, system testing, and software upgrades.

• Other additional administrative costs: These administrative costs include time spent providing and collecting captioning and audio description devices and demonstrating their use, if needed.  This also includes any costs associated with researching available systems to implement, in addition to any other administrative costs.

The RA uses a value equivalent to 3 percent of the total captioning and audio description equipment acquisition costs incurred by the movie theater to capture the additional costs associated with these items.  These costs are ongoing and occur annually in the analysis.  Sensitivity analyses conducted using a factor of 5 and 10 percent are presented in Section 4.2.7.