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

Sensitivity analysis is an essential consideration for policy makers in evaluating the rule due to the uncertainty associated with certain key variables used in the cost estimation.  The Department was able to find robust data regarding the costs of purchasing captioning and audio description equipment, the number of auditoriums in the country, and several other critical variables.  However, there are some input variables that carry uncertainty.  No substantive comments with data on these inputs were received in the public comments to the 2014 NPRM. 
The sensitivity analyses estimate the costs of this rulemaking when using the following inputs:

• Low Accessibility and High Accessibility baselines;

• Alternate Medium Accessibility baseline;

• Alternate captioning and audio description device replacement rates;

• Increased staff training frequency;

• Single-Auditorium unit cost estimates including Sony’s technology;

• Increased maintenance and administrative costs; and

• Zero growth after five years.

The primary analysis estimates the costs to movie theaters using the Medium Accessibility baseline.  As described in Section 3.2.2.1, one of the alternative baselines is the Low Accessibility baseline, which is the most conservative option.  This baseline assumes that the auditoriums already equipped to provide closed movie captioning and audio description, as reported in NATO’s 2015 Accessibility Survey, are the only auditoriums with such capabilities in the United States.  Because fewer auditoriums are assumed to be equipped to provide closed movie captioning or audio description in the Low Accessibility baseline, the overall costs are higher than in the primary analysis.

Table 4-10 summarizes the cost impact of using the Low Accessibility baseline in the analysis.  The total costs over the 15-year analysis period increase by 12 percent to $99.5 million when discounted by 7 percent.  Under the Low Accessibility baseline, the analysis assumes that there are fewer auditoriums already equipped to provide closed movie captioning or audio description before the rulemaking.  As a result, the incremental cost impact is higher than in the primary analysis, which uses the Medium Accessibility baseline.  However, even when using the Low Accessibility baseline—the most conservative baseline analyzed—costs still do not exceed $100 million in any given year.  For further detail, the annual costs by cost category for the Low Accessibility baseline are presented in Table 8-2 of Section 8.1 of the Appendices.

The incremental cost impact of the rulemaking is also analyzed using the High Accessibility baseline, previously described in Section 3.2.2.3.  The High Accessibility baseline is the least conservative of the baselines derived from NATO’s 2015 Accessibility Survey.  The costs under the High Accessibility baseline are lower than in the primary analysis because more auditoriums are assumed to be equipped to provide closed movie captioning or audio description before the rule goes into effect.  Thus, fewer movie theaters are purchasing equipment as a result of the rulemaking.  The total costs over the 15-year analysis period under the High Accessibility baseline are $68.8 million when discounted at 7 percent, which is 22 percent lower than the total costs estimated in the primary analysis.  For further detail, the annual costs by cost category for the High Accessibility baseline are presented in Table 8-3 of Section 8.1 of the Appendices.

In addition to the uncertainty regarding the actual number of auditoriums already equipped to provide closed movie captioning or audio description (the baseline), there is also uncertainty regarding the distribution of these auditoriums across the various venue types.  The 2015 NATO Accessibility survey provides information supporting the Department’s estimate of the current number of auditoriums already equipped to provide closed movie captioning or audio description; however, there is no information on whether those auditoriums are primarily in Megaplex, Multiplex, Miniplex, or Single-Auditorium movie theaters. 

The baseline distribution in the primary analysis (discussed in Section 3.2.3) assumes that auditoriums already equipped to provide closed movie captioning or audio description are evenly distributed amongst Megaplex, Multiplex, and Miniplex movie theaters.  No auditorium already equipped to provide such features is assumed to be located in a Single-Auditorium movie theater in the primary analysis.  The alternate distribution under the Medium Accessibility baseline assumes that the largest venues are more likely to have auditoriums already equipped to provide closed movie captioning or audio description than smaller venues.  Industry research suggests that the largest movie exhibitor firms have made efforts to provide closed movie captioning and audio description in their movie theaters.  Additionally, industry research also suggests that the largest movie theater chains are more likely to operate Megaplex and Multiplex venues than are smaller businesses.  Therefore, the Department has developed an alternate distribution of the Medium Accessibility baseline based on this information.   

The distribution of the Medium Accessibility baseline by venue type used in the primary analysis and the alternate distribution used in the sensitivity analysis are summarized in Table 4-12 below.  The alternate Medium Accessibility baseline distribution assumes that a greater number of auditoriums already equipped to provide closed movie captioning or audio description are located in Megaplex movie theaters.  However, this alternate distribution also assumes that fewer auditoriums already equipped to provide these features are located in Multiplex and Miniplex movie theaters.  Because the Medium Accessibility baseline drives the analysis in both estimates, the total number of auditoriums already equipped to provide closed movie captioning or audio description is the same, but the distribution of those auditoriums across the various venue types differs.

The primary analysis assumes that Single-Auditorium movie theaters will not purchase Sony’s technology because there are less expensive alternatives available (Section 3.4.5).  This sensitivity analysis observes the impact to the cost estimation if Sony’s technology is included in the average unit cost estimates for Single-Auditorium movie theaters.  Table 4-14 compares the average unit costs for all equipment types with and without Sony’s technology.  The cost per captioning device increases from $466 to $727 when including Sony’s technology in the average unit cost estimate.

Table 4-14 : Average Unit Costs by Equipment Type, Including and Excluding Sony ($)

The average upfront costs for a Single-Auditorium movie theater are estimated using the scoping requirements, average unit cost estimates, and installation costs.  Table 4-15 below shows an estimate of how the per movie theater upfront costs increase when Sony’s technology is included in the average unit costs.  Overall, the undiscounted upfront costs per Single-Auditorium movie theater increase by 25 percent when including Sony’s technology in the average unit cost estimates.

Table 4-15 : Single-Auditorium Per Movie Theater Upfront Costs, Including and Excluding Sony

The impact of including Sony’s technology in the average unit costs for Single-Auditorium movie theaters on the total costs estimation is summarized in Table 4-16 below. The total costs over the 15-year period of analysis are approximately $1.9 million higher ($90.4 million) when including Sony’s technology in the unit cost estimates for all venue types, an increase of 2 percent compared to the primary analysis ($88.5 million).  

Table 4-16 : Single-Auditorium Unit Cost Sensitivity Analysis, Discounted at 7 percent ($ millions)

As discussed in Section 3.6.2, captioning and audio description devices will likely need to be replaced on a regular basis because they will be under heavy use from patrons.  However, uncertainty exists as to how many devices will need to be replaced each year.  The primary analysis assumes that 20 percent of captioning and audio description devices will need to be replaced annually.  Annual device replacement rates of 15 percent and 25 percent are analyzed as sensitivity analyses in this section.

Table 4-17 summarizes the impact on the total cost estimation if the captioning and audio description device replacement rate is lowered from 20 percent to 15 percent.  Under an annual device replacement rate of 15 percent, the replacement costs decrease by 21 percent over the 15-year period of the analysis, and the total costs decrease to $80.8 million.

According to public comments on the 2014 NPRM, the additional time necessary to train staff as a result of this rulemaking is approximately 15 minutes.  The methodology used to quantify the costs of additional staff training is presented in Section 3.7.  The primary analysis assumes that the training would be conducted biannually over the period of analysis.  This sensitivity analysis observes the impact on the total cost estimation if the training were instead conducted four times per year as presented in Table 4-19 below.  Training costs over the 15-year analysis period increase to $19.9 million, increasing the total costs of the rulemaking to $98.5 million.  This is an increase of 11 percent compared to the primary analysis.

Table 4-19 : Increased Staff Training Sensitivity Analysis, Discounted at 7 Percent ($ millions)

The costs covered by the maintenance and administrative costs in the Final RA are discussed in Section 4.2.7.  Due to the high level of uncertainty surrounding these costs, additional sensitivity analyses are conducted regarding the percentage used to calculate maintenance and administrative costs.  The primary analysis assumes annually recurring maintenance and administrative costs equal to 3 percent of equipment acquisition costs.  The sensitivity analysis shows the impact on the total cost estimation if values of 5 and 10 percent are used.

Table 4-20 shows the total costs if the maintenance and administrative costs are increased to 5 percent, instead of 3 percent in the primary analysis.  The maintenance and administrative costs would increase to $13.7 million over the 15-year analysis period, resulting in a 6 percent increase in the rulemaking’s total costs.

Table 4-20 : Maintenance and Administrative Costs 5 Percent Sensitivity Analysis, Discounted at 7 Percent ($ millions)

Table 4-21 shows the total costs if the maintenance and administrative costs are increased to 10 percent, instead of three percent in the primary analysis.  The maintenance and administrative costs would increase to $27.4 million over the 15-year analysis period, resulting in a 22 percent increase in the rulemaking’s total costs.

Table 4-21 : Maintenance and Administrative Costs 10 Percent Sensitivity Analysis, Discounted at 7 Percent ($ millions)

The projected growth rate of the number of auditoriums within each venue type is discussed in Section 3.1.3.  However, it may not be realistic to assume that the growth rates from the previous five years continue throughout the entire analysis period.  The movie industry has undergone significant changes in recent years as a result of the digital conversion, which has had an impact on the number of auditoriums opening and closing.  This sensitivity analysis assumes that the projected growth rates will continue for the first five years of the analysis, but after year five, the number of auditoriums will remain constant for the remainder of the analysis.

Table 4-22 shows the impact of altering the assumed growth rates.  Overall, the costs decrease because no new auditoriums are opening and purchasing equipment after the fifth year of the analysis.  The total costs over the 15-year period of analysis decrease to $79.9 million, a 10 percent decrease compared to the primary analysis.

Table 4-22 : Zero Growth After Five Years Sensitivity Analysis, Discounted at 7 Percent, ($ millions)